Q3 2024 Navitas Semiconductor Corp Earnings Call
Hello and thank you for standing by. At this time, I would like to welcome you to the Division of the San Vicoddoctor of Q324 Ernest Conference call.
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Speaker Change: I would now like to turn to conference over at Stephen Oliver, VP of Investor Relations. Please go answer.
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Good afternoon everyone, I'm Stephen Oliver, Vice President of Investor Relations.
Thank you for joining Navitas Semikonduct's third quarter 2024 results conference call. I'm joined today by Gene Sheridan, our chairman, president, CEO and co-founder and Todd Glickman, SPFO.
A replay of this web will be available on our website approximately one hour following this conference call and available for approximately 30 days.
Additional information related to our business is also posted on the Investor Relations section of our website.
Our earnings release includes non-gap financial measures.
Reconciliation of these non-gap financial measures, with the most directly comparable gap measures, are included in our third quarter earnings release and also posted on our website in the Investor Relations section.
Non-Gap Expenses, an operating margin, exclude, stop-based compensation, amortization of the global assets and other non-recurrent items.
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.
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 materialy from expectations expressed in our forward-looking statements.
Important factors that can affect Navitast business, including factors that could cause actual results to differ from our forward living statements, are described in our earnings release.
Please also refer to the rickfactor sections in our most recent 10K and 10Ks.
Speaker Change: Our estimates are 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 may occur, except as required by law.
Speaker Change: and now over to Eugene Sheridan CEO.
Eugene Sheridan: Thanks Steve, and thanks to all of you for joining us today. Our Q3 revenue was 21.7 million within prior guidance and also a record quarter for again shipments.
Eugene Sheridan: I'm excited to announce a major new technology launch, several very important customer wins and two new significant corporate announcements.
Eugene Sheridan: Novotoss is the pioneer and leader in GAN technology, releasing the world's first GAN parisies in driving the world's first mainstream GAN adoption in mobile fast chargers starting back in 2018.
Eugene Sheridan: Now, with TASC GANIC, he's continued to be generations ahead of our competitors. RIC said new industry standards for integration, efficiency, performance, reliability and ease of use.
Eugene Sheridan: Now we're expanding power capabilities into AI data centers, EV Chargers, and next generation solar microinverters, including our latest GANSA family, the world's most protected and reliable again power platform.
Eugene Sheridan: Today, we're proud to announce a new, low-voltage, gain technology optimized for 48-volt systems, giving Novotos more content and complete solutions for AI data centers next generation EV platforms, as well as opening up new markets like AI-based robotics.
Rebelie this new 80-200 volt range creates an additional billion dollar market opportunity for Navitas in the coming years.
Eugene Sheridan: I'm also pleased to announce a strategic partnership with Athenian in which the two companies are creating common-gantz specifications, giving our customers dual sourcing options from our two companies.
Eugene Sheridan: With Novitas and Athenian aligning on fundamental elements such as packaging, pinout, footprint and intellectual property, customers will have increased confidence to accelerate Janet option into new high volume mainstream applications.
Eugene Sheridan: This low voltage gain platform is another significant step in Navatoss's pure-play technology roadmap of next-gen integrated gain in leading edge so-and-carbide with proprietary trench-assisted plane or technology for no compromise high efficiency high-power density solutions.
Eugene Sheridan: Continued innovation across a broad range of platforms has now increased Novotaz's portfolio to over 300 patents, granted or pending, expanding another key element of our significant competitive advantages.
Eugene Sheridan: Next, let me turn to our progress in each of our target markets.
Eugene Sheridan: In AI and enterprise data centers, and in step with NVIDIA's rack power demands for the Hopper, Blackwell, Rubin GPU roadmap demanding up to 480 kilowatts per rack,
Eugene Sheridan: We've announced a new record-breaking 8.5 kilowatt AI PowerSupply design utilizing a winning combination of GAN-safe and Gen3-fast cell and carbide technology, as well as our new IntelliWeave architecture that achieves over 99% peak efficiency for data center PFC applications.
Speaker Change: Our high-voltage GaN-safe Power ICs and Gen3 fast-selling carbon devices are featured in over 60 active customer projects with direct customers like Delta, Great Wall, CompuWare, and Lideon supplying end-users like AWS, Azure, and Google.
Speaker Change: Our data center revenues started in Q3, as expected, and will continue ramping this quarter and throughout 2025.
Speaker Change: The new low-voltage GaN technology announced today is a perfect complement to our existing high-voltage GaN. In particular, for AI data centers, this allows Navitas to deliver end-to-end solutions, from high-voltage AC-to-DC converters with our existing GaN and solid-carbide technologies to low-voltage DC-to-DC converters using these new 80- to 200-volt GaN devices.
Speaker Change: These technologies are a critical element for the recent exponential demands in AI power requirements to boost energy efficiencies and power densities in order to target a doubling of rack power every year for many years to come.
Speaker Change: Sampling of the new low-voltage GaN will start this quarter for 48-volt data centers and other markets with first customer designs expected to ramp in the second half of 2025.
Speaker Change: In electric vehicles, based on our silicon carbide best-in-class in-circuit performance, we have won another six designs in Q3, including both onboard chargers and roadside chargers, for 2025 and 2026 revenue ramps.
Speaker Change: In addition to these performance benefits, our trench-assisted planar Genesik devices are fully qualified to industry AEC-Q101 grade, and we're extending those tests well beyond AEC standards for best-in-class reliability.
Speaker Change: EV continues to be the largest segment in our customer pipeline with over 200 active projects. In addition, our new low-voltage GAN technology will be a perfect fit for 48 volt battery EV applications in the future.
Speaker Change: Novitas continues to drive excellence in the mobile and consumer market, with Ganslim ICs featured in another 26 design wins in Q3. Adding to the Samsung wins we announced in August, we now have another three Tier 1 OEM wins, which are expected to deliver multi-millions starting their ramp in Q2 of next year.
Speaker Change: In the appliance and industrial pipeline, 30 new design wins were achieved in Q3, ranging from vacuum cleaners and LED lighting to solid-state grid-connected circuit breakers, multi-kilowatt power supplies, and heat pumps.
Speaker Change: In solar and energy, we added another 10 designments, including a multi-million dollar win at Chenerac, which is scheduled to start production in the middle of next year.
Speaker Change: Next-gen GaN ICs, including Navitas' proprietary, industry-leading, bidirectional GaN ICs, continue to track for a significant mid-25 ramp in solar microinverters.
Speaker Change: Our new low-voltage GaN will also provide further opportunities in solar in the low-voltage panel side of these inverters as a perfect complement to our high-voltage GaN and silicon carbide, doubling our content potential in these applications.
Speaker Change: Today we're also announcing some important changes to streamline our company and drive important efficiency gains with the goal of scaling our company to profitability.
Speaker Change: As Todd will further explain, we have reduced headcount and expenses, which will reduce our revenue threshold for positive EBITDA and accelerate our time to profitability.
Speaker Change: We've also increased our organizational focus on our three most strategic markets, AI data center, mobile, and EV.
Speaker Change: We believe these three markets, utilizing our industry-leading GaN and silicon carbide technology, along with complementary silicon controllers and isolators, will be our largest revenue drivers over the coming years.
Speaker Change: The technologies we create for these markets will have significant opportunities for cross-selling into industrial, appliance, consumer, solar, and energy storage markets.
Speaker Change: Looking forward, given continued softness in some of our end markets, combined with a couple of customer project delays, we anticipate a more muted outlook for the next couple of quarters.
Speaker Change: However, with the strength of our $1.6 billion plus customer pipeline and continued design wind momentum, we expect solid growth to resume later next year.
Speaker Change: In addition, today's announcements of our new low voltage GAN technology, a dual sourcing partnership with Infineon, and creation of a more efficient and focused organization all set Novitas on an improved path to growth and profitability. Now, over to Todd for our financial updates.
Todd Glickman: Thank you, Gene. I'm just as excited today to be talking to you all as I was in 2022. Novitas has proven world-class technology, strong secular trends driving gallium nitride and silicon carbide to replace silicon.
Todd Glickman: a seasoned leadership team with plenty of experience in semi-cycles and a fabulous model that provides important flexibility to navigate these chopping
Speaker Change: Waters.
Speaker Change: As we expand into new markets, we expect to further diversify our revenue stream from mobile chargers
Speaker Change: into multiple high growth markets with an increased focus on EV and AI data centers. I'll continue my comments today with a review of our third quarter financial results and then I'll walk you through our outlook for the fourth quarter.
Speaker Change: Revenue in the third quarter of 2024 was $21.7 million, essentially flat with prior year and a 6% sequential quarter increase. As Gene discussed, macroeconomics continue to impact a number of our end markets.
Speaker Change: However, our mobile business hit an all-time record in the third quarter.
Speaker Change: Before addressing expenses, I'd like to refer you to the Gap to Non-Gap Reconciliations in our press release earlier today.
Speaker Change: In the rest of my commentary, I will refer to non-GAAP expense measures.
Speaker Change: Gross margin in the third quarter was 40.1% compared to 42.1% in the third quarter of 2023 due to the strong mobile market mix. Sequentially, gross margin was relatively flat from 40.3% in the second quarter.
Speaker Change: While gross margin expanded in our mobile market and supply chain cost reductions are allowing us increased competitiveness with silicon, sequential product mix is offsetting that growth in gross margin.
Speaker Change: We held total operating expenses for the third quarter relatively flat, sequentially at $21.4 million, comprised of SG&A expenses of $9.9 million and R&D expenses of $11.6 million.
Speaker Change: demonstrating our ability to balance operating efficiency while investing in future product generations.
Speaker Change: Adding all this together, the third quarter 2024 loss from operations was $12.7 million.
Speaker Change: Our weighted average share count for the third quarter was 185 million shares.
Speaker Change: Turning to the balance sheet, it remains very strong with high levels of liquidity. Cash and cash equivalents at quarter end were $99 million and we continue to carry no debt.
Speaker Change: Although accounts receivable increased to $26 million compared to $23 million in the prior quarter, we made good progress on reducing inventory to $21 million from $25 million in the prior quarter.
Speaker Change: As we've discussed in past earnings calls, we are continuing to focus on working capital improvements.
Speaker Change: Moving on to guidance for the fourth quarter. We currently expect revenues in the range of 18 to 20 million reflecting the dynamic nature and short lead times for mobile business as well as the customer project delays as Jean described.
Speaker Change: Gross margin for the fourth quarter is expected to be approximately the same as the third quarter with our guidance at 40% plus or minus 50 basis points, as our mix continues to lean toward the mobile market in the near term.
Speaker Change: We expect margin improvement will align with demand recovery in higher power markets.
Speaker Change: As Gene described, in Q4 we initiate a reduction in headcount and expenses, while streamlining our organization and increasing our focus on our most strategic revenue drivers.
Speaker Change: Headcount was reduced by about 14% or 45 employees, and we expect OPEX reduction of approximately $2 million per quarter that should be fully realized in the first half of 2025.
Speaker Change: Our non-GAAP operating expenses in the fourth quarter are expected to decline to approximately $20.5 million.
Speaker Change: For the fourth quarter of 2024, we expect our weighted average share count to be approximately 187 million shares.
Speaker Change: In closing, while we are excited about the growth opportunities in front of us, we are thoughtfully navigating near-term uncertainties that are impacting the entire semiconductor industry.
Speaker Change: Novitas is the only pure play next-generation power semiconductor company.
Speaker Change: And this provides us with advantages, opportunities, and benefits for significant expansion.
Speaker Change: Operator, let's begin the Q&A session.
Speaker Change: Thank you, and 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 queue. If you would like to withdraw your question, simply press star 1 again.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our first question comes from the line of Kevin Cassidy from Rosenblatt. Your line is now open.
Kevin Cassidy: Yes, thanks for taking my question. And yeah, very interesting on the dual source below voltage GAN platform agreement. Is there any IP licensing in this? And, you know, maybe another question I have is, is this driven by customer requests or is this more driven by...
Speaker Change: two companies, you and Infineon, saying that, you know, this would be a value add to our customers.
Speaker Change: Yeah, thanks Kevin, good question. So, yes, we have a cross-license. It's a broad-based, again, cross-license. So that gives us both the freedom to do a collaboration like this and gives our customers the confidence that this collaboration will be free of any sort of patent conflict between the two.
Speaker Change: And why do we do it? You know, I think two reasons. One...
Speaker Change: If you can do that with two credible, high-quality suppliers, with common specs, common footprints...
Speaker Change: Things can go a lot faster. This has been proven in the industry. It's been done many times.
Speaker Change: And I think it's going to work really well for us, and I think Infineon fits our reputation, strategy, and value-based pricing.
Speaker Change: I also think we're entering the low voltage gain market pretty recently, obviously, in our case. And the same thing for Infineon. That market already has a couple of suppliers, Innoscience and EPC. They actually follow a different common spec and footprint, but are embroiled in a patent lawsuit that...
Speaker Change: concerns customers and causes hesitation. So we wanna avoid that situation, give them the supply chain risk reduction assurance of two strong suppliers, and also know they're free of any patent issues to worry about.
Speaker Change: Okay, great, thanks for that explanation. And maybe almost counter that, but is there an opportunity for product differentiation for you? Some other aspects of the design, maybe it's support or?
Speaker Change: just any other angle you might be able to have to have an advantage in the market?
Speaker Change: Yeah, yeah definitely. Obviously we differentiate a lot on our system design and technical support. We have a data center.
Speaker Change: system design group that will be expanding into this DC to DC space giving a strong technical support close collaboration
Speaker Change: maybe in joint labs with customers.
Speaker Change: But also, I should say that while we have a broad-based GAN cross-license, it doesn't mean we're transferring the know-how. I think that's something where we can choose selectively. Where does the dual sourcing actually benefit customers and benefit both companies?
Speaker Change: But there'll be plenty of spaces where we'll continue to drive differentiation and offer sole-source benchmark solutions. So we'll kind of pick and choose where that dual-sourcing relationship makes sense.
Speaker Change: Okay, thank you. And by the way, I was going to give congratulations to Todd for taking the position of CFO.
Todd Glickman: Looking forward to working with you. Thanks Kevin, appreciate the message.
Todd Glickman: Thank you, Kevin.
Speaker Change: Our next question is from Quinn Fulton from Deedamid Company. Your line is now open.
Todd Glickman: Hey, this is Shadi McWally dialing in for Quinn Boland. Thanks for taking my questions.
Speaker Change: I'd like to start off on the Gross Margin Guide. Looks like you guys are guiding gross margins flat, even though revenue will be down a few million. Is this due to mix, or is there anything else contributing to the Gross Margin Guide?
Speaker Change: Yeah, that's a great question. You know, as revenue has gone down a little bit, mobile continues to be strong. And within mobile, we've had been able to expand our margins with that product.
Speaker Change: and so that's why we were able to keep margins flat even though some of our higher power markets have been more muted on the revenue growth.
Speaker Change: Thanks for that. And then my follow-up is on what Navitas is seeing in the automotive market. Some of the auto semi players have talked about strength and weaknesses in certain geographies and was curious if Navitas is seeing the same.
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Speaker Change: Yeah, we're certainly seeing some pickup that's encouraging. I think a year ago, when the slowdown started, we saw pickup with hybrids. I think that's continuing, but now I think we're seeing a pickup with pure EV. You know, we're mainly engaged on the OBC.
Speaker Change: We see some nice progress and design wins. We talked about six new design wins in Q3. I think that momentum is going to continue, not just OBC roadside chargers. I know that infrastructure is a little weak and building out slowly, but it's got to accelerate to get the full potential for battery EV.
Speaker Change: And we have a lot of really impressive designs going on on roadside chargers with our high-voltage silicon carbide.
Speaker Change: that'll, I think, be really instrumental to improving the speed at which you can get charged up with your car, the reliability of these chargers, and of course the frequency of getting more of them spread around. So I think that's all pretty encouraging, but it does take time to work through some of the short-term, you know, slower growth rates everybody's experiencing on EV.
Speaker Change: Yeah, that makes sense. Thanks for all the color.
Speaker Change: Our next question comes from Tristan Jarrah.
Speaker Change: Putbear
Speaker Change: Your line is now off. Yeah.
Speaker Change: Hi, this is Tyler on for Tristan. Thanks for taking the questions. Where are channel inventories today for silicon carbide and then maybe initially how are you looking at the silicon carbide market growth for next year?
Speaker Change: Thank you very much.
Speaker Change: Thanks, Tyler. Yeah, certainly with the slowdown, first last year in solar, earlier this year we talked about it with industrial and EV, anytime you get a change in growth rates, we do see pockets of channel inventory. It's not broad-based, but certainly there's some pockets that have to be worked through. I think the channel inventory numbers are coming down, so I think the trend is good.
Speaker Change: And I think they're all factored into the more muted outlook for Q4 and Q1, as well as our bullishness on returning to strong growth next year. So I think we're going to see that growth.
Speaker Change: come as silicon carbide market is recovering. We're winning, as I said, a bunch of designs in on-board chargers, off-board chargers, as well as industrial.
Speaker Change: and Solar. We talked about in my prepared remarks 10 new design wins in Solar. That's the biggest we've seen.
Speaker Change: this year. So these are good encouraging signs. A lot of those high power markets are still in carbon, as you know.
Speaker Change: And then we're going to layer in GAN for solar middle of next year, GAN for EV for the first time end of next year. And so those are all going to add together to give us a better outlook for next year.
Speaker Change: Yeah, great and that kind of touches on my next question. We're beginning to hear some higher voltage gained in protein on traditional silicon carbide applications. What are your views on this development and how would this affect Navitas as a supplier of both technologies?
Speaker Change: Yeah, yeah, it's definitely an interesting space. There's a lot of...
Speaker Change: alternate ways to go about it.
Speaker Change: But one is what's the reliability, what's the performance, but also what's the cost effectiveness. If you just do it by making the chip a lot bigger to handle that voltage.
Speaker Change: It'll look good, the specs might look good, but it may not be cost effective. So we're really taking our time.
Speaker Change: What's the right voltage?
Speaker Change: to make sure when we launch that higher voltage GAN, we really nail the right combination.
Speaker Change: commercial and technical competitiveness. So I do think high-voltage GaN
Speaker Change: basically a displacement of silicon carbide technology over time could make sense. I haven't seen anything announced now that I think is going to have a significant impact, but I do believe when Navitas approaches it we'll have the right approach in the coming years, but I think it's not a quick a quick solution.
Speaker Change: Very helpful. Thanks again for the questions. Yeah, thanks, Tyler.
Speaker Change: Our next question comes from Joe Moore with Morgan Stanley. The line is now open.
Joe Moore: Great, thank you. I wonder if you could talk about the restructuring that you're doing, anything, any end markets that you're pulling away from, or sort of what's the cost of losing that account that you're losing?
Speaker Change: Yeah, thanks Joe as Todd described about 14% headcount in aggregate about two million dollars of savings per quarter It'll take two or three quarters to kind of fully realize that
Speaker Change: Going forward, the restructuring and headcount reduction was reasonably broad-based. We were in pretty good balance, so there wasn't one major area from a geographic or functional.
Speaker Change: impact, but not just in cutting, tightening the belt and cutting the burn rate or headcount, but also in sharpening our focus. Todd and I both mentioned mobile, EV, and AI data centers. We're sort of elevating those. So in some cases we're promoting and increasing
Speaker Change: promoting people and increasing resources around those three areas. So, I think by sharpening our focus while reducing our burn rate, I don't think we'll have...
Speaker Change: financial impact on growth rate? I think it'll actually accelerate growth rate and certainly accelerate our time to profitability in the revenue threshold we need to get to to do it. So mobile innovators and AI data centers are the bigger focus. With that said, I think we've already proven we saw it in the mobile world, the mobile technology we developed.
Speaker Change: found really good homes into the broader-based appliance market, and so that continues to be a nice adjacent or secondary market for us.
Speaker Change: And I think we're going to see the same thing. The technologies we develop for mobile, EV, and AI data center will have high reuse in some of these secondary or adjacent markets, like I said, consumer, solar, energy storage, and industrial. So I think they'll all play together and we'll continue to update you and talk about growth and.
Speaker Change: design wins and pipeline in each of the segments.
Speaker Change: Okay, thank you. And then for a follow-up, you know, I'm just curious about pricing for new sockets right now. You've got European competitors with empty fabs, Chinese competitors with empty fabs. Do you see that having impact on like-for-like pricing for new design runs?
Speaker Change: Yeah, definitely. When the market softens, everybody gets a little more aggressive on price to try to keep the volumes going, keep the fabs full. The flip side of that is we've had tremendous success at renegotiating cost structures, both on the GAM side and the silicon carbide side. That's at the starting material level.
Speaker Change: at the Fab and Device Level Packaging and Assembly and Tests. So we didn't cite any numbers, but...
Speaker Change: We're really taking advantage of the weaker market with significantly improved cost structures which then gives us ability to keep pace with price reductions to have more purchasing leverage and even win business with incremental gross margins as things improve, especially in the higher power.
Speaker Change: more industrial markets. So I think that's how we see it playing out.
Speaker Change: Great, thank you. Thank you, Joe.
Speaker Change: Our next question comes from Jack Wiggin from Charter Equity Research. Your line is now open.
Speaker Change: Thank you for watching.
Jack Wiggin: Great, thanks guys. So for the low voltage GAN in the the 48 volt data center platform You know, I believe the market there for like intermediate bus converters is still Predominantly silicon. So is GAN making inroads there at your customers? I mean it seemed like the
Speaker Change: The focus is, you know, GAN has very good efficiency, but silicon is such so cost-effective that, you know, it's pretty tough to compete with. So are more data center customers really, you know, getting real about using GAN in those intermediate bus converters?
Speaker Change: Yeah, that's a really good summary Jack of the situation and that's kind of why we like our chances. I think if we were entering late and the market had already taken off again, you know, that could be a little bit problematic. But I think there's been a lot of work done, a lot of R&D, a lot of advanced research, some products going into production.
Speaker Change: But we see a tremendous potential to push the frequency and efficiency up with our low voltage GAN as we did with mobile chargers And really cross that barrier to showing significant value props compared to silicon. Also combine that with system design It's not just the transistor just like in the mobile chargers. We brought Magnetic capability planar magnetics will be really critical in these 48 volt DC to DC converters
Speaker Change: pushing the frequencies up from their traditional silicon levels in hundreds of kilohertz, so maybe a megahertz, pushing that to two megahertz, three megahertz, and higher. So I think we've got the skills. I think we've got the roadmap. I think we've got the technology that can really move it. Then you combine that, you know, with two strong suppliers, with Avitas and Finneon, some common specs and footprints.
Speaker Change: take care of supply chain risks or any IP risks. I think it's a powerful combination that will really show up at the right time and the right place as we're going from Blackwell to Blackwell Ultra to Rubin. There's some really big power challenges on the horizon and we need to get to work in solving those.
Speaker Change: Great, okay, that's helpful. And then I guess a good segue into my next question then. So I was curious about your general thoughts on liquid cooling in data centers and how it kind of impacts power content. I think there are arguments for both sides.
Speaker Change: That liquid cooling might reduce the need for more efficient power convergent semiconductors, but at the same time, the processor companies are going to use that liquid cooling to just keep pushing to higher and higher power levels. So as it relates to power content, how do you see liquid cooling? Is it a benefit for power semicompanies, or could it be kind of a bit of a headwind?
Speaker Change: I think I think you nailed it with your latter comments. I think it's like any
Speaker Change: budget we desperately need. As an industry, we desperately need a bigger power budget. If you don't go to liquid cooling, everybody's going to be limited in power, including the processors, and then they're going to be stuck, and then you're not going to be able to keep going down this exciting path of AI processors and capabilities. So I think liquid cooling is inevitable. I think it's necessary, and it just accelerates the ability of the whole industry.
Speaker Change: to get the full potential of AI and that's going to keep that power level going up and up and up and that the thirst for power for energy savings and power density are not going to slow down with liquid cooling. We need it to keep going.
Speaker Change: Great. Thanks, Gene.
Gene Sheridan: Thank you, Jack.
Speaker Change: Our next question comes from John Tan Wang-Tang from CJS Securities. The line is now open.
Speaker Change: Thank you for taking my questions. Gene, I wanted to clarify, will Infineon be manufacturing power technologies using your IP? And if so, how does that benefit you?
Eugene Sheridan: Yeah, we, um...
Speaker Change: Well, first of all, the benefits. So the biggest benefit, as I said, is people love the Novitas scan technology, love the NICs, but.
Speaker Change: would love to see two sources for this advanced scan technology. It really allows the customer to go much faster from sort of their initial niche adoption or first one or two.
Speaker Change: kind of high-performance platforms into the high-volume mainstream adoptions. That's where they really want to see.
Speaker Change: sources, two credible sources. So we're bringing them now to credible sources,
Speaker Change: low-voltage 48-volt GaN. With that said, our technologies are developed separately and the beauty of it is with the cross-licensing we can develop these products, common specs, common footprints, common sourcing for the customer, dual sourcing for the customer, but not have to worry about patent infringement between the two companies.
Speaker Change: That's the simplest way to describe it in terms of the benefit and how it'll work.
Speaker Change: Got it. So it's only a form factor that's shared as a partnership.
Speaker Change: You mentioned returning to strong growth versus near-term headwinds. I was wondering if you expect growth to remain negative heading into Q1, and if so, when does inflection occur as we get into next year?
Speaker Change: Yeah, I know there's a lot of debate and various opinions next year. I think the general consensus is we'll see decent market recovery throughout next year. We certainly feel bullish about all the design wins, the design momentum we've had for the last two or three quarters, the pipeline conversion that we're seeing, a lot of those kicking in as Q2 and Q3.
Speaker Change: next year. The two projects that pushed out from Q4, one is an EV one, another one is an industrial one, those are both two to three quarter push out, so instead of seeing multi-million dollar impacts in Q4, those are pushed to Q2 or Q3.
Speaker Change: So a lot of things point to that part of the year. With that said, Q1 is seasonally typically down, last year it was down 11%.
Speaker Change: We see that seasonality continuing or even getting magnified, so that's why I mentioned a couple of quarters when I'm formally guiding to Q1, but it's clear Q1 looks seasonally down and a bit soft, and then I would expect we're onto a strong recovery and growth thereafter.
Speaker Change: Got it. And then lastly, I didn't hear you mention the industrial and appliances business. Specifically the appliances. I'm wondering how that fits into the new equation where you're focusing on EV and data center and mobile.
Speaker Change: Yeah, it'll continue, and I did mention, it was a short comment, admittedly, Appliance and Industrial with 25 more design wins, which is great. It's got a nice long tail. They're not usually as big as we know, right, not 5 or 10 million dollar programs.
Speaker Change: but a nice long tail of small to medium-sized customers.
Speaker Change: 25 design wins, that's usually Gannon Appliance, Silicon Carbide, and Industrial.
Speaker Change: That's nice. Sorry, it was 30 in Q3. We had 25 in Q2.
Speaker Change: That's good, and as I mentioned earlier, even as we increase focus on mobile, EV, and AI data centers, the technology we develop for those markets will have high reuse into appliance, industrial, solar, energy storage, and consumers. So we'll continue to track and drive those, but with aid.
Speaker Change: greater emphasis on our biggest drivers, mobile, EV, and AI data center.
Speaker Change: Got it. Thank you.
Speaker Change: Thanks, John.
Speaker Change: Our next question comes from Kevin Cassidy from Rosenblatt.
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Kevin Cassidy: Thanks for taking my follow-up. You know, last week there was a smartphone supplier that said that there's a trend in
Kevin Cassidy: in smartphones, where they're shifting from mid-range phones to entry-level phones. First, are you seeing that? You know, they're kind of saying it's a barbell now of...
Speaker Change: high-end phones or entry-level phones. Are you seeing that and, you know, does that change anything in your market?
Speaker Change: I think a little bit, you know, what matters to us, of course, entry level can mean maybe more volume because they're going to hit better price points. Of course, the key for us is what's the charging power. If they're going to keep charging super slow to kind of minimize the cost but not maximize the consumer experience, you know, 20 watts.
Speaker Change: 15-watt chargers, then that's not going to be interesting to us, as you know.
Speaker Change: But what we're seeing is a lot of guys are going to mainstream chargers, and even you might call them entry-level chargers, but pushing that power level to 45 watts or higher, you know as we've always talked about, that's really the tipping point for GaN bringing a lot of value, bringing a much faster charging experience.
Speaker Change: So I'm not sure exactly of that announcement and don't know the specifics and don't know the charging. But as one relevant point, I didn't highlight it in the prepared remarks, but we're doing great work with Transient, and that's not a household name for smartphones, but they're the leaders in Africa and other third world regions.
Speaker Change: And we're making incredible progress in bringing cost-effective 45-watt, 65-watt chargers to those really low-cost...
Speaker Change: Phones.
Speaker Change: So that's been a pleasant surprise for us. It's adding to our numbers. We said GAN was at a mobile charger all-time high in Q3. They're part of that mix already. So that's one relevant, you know, customer example that shows me we can bring fast charging and GAN fast charging even into sort of entry-level and mainstream phones or let's say super price sensitive phones.
Speaker Change: Okay, great. That answers the question. Thanks. Yeah, thanks, Kevin.
Speaker Change: And if you would like to ask a question, please press star 1.
Speaker Change: Thank you.
Speaker Change: Well, thanks guys for getting me in on the call here. Apologize for jumping late on here and asking the question I'm sure has been discussed before, but let me ask Simple one just reading from the press release here is with a kind of refocusing on certain markets
Speaker Change: that don't include solar here. So I'm kind of curious what we're thinking about that space. Is this an area of continued development at all? Or I just want to get your read on this from that gene, please.
Speaker Change: Yeah, definitely. I think if you look at broad-based solar, it's a decent-sized market, but, you know, given where we're at as a smaller company, or silicon carbide being a smaller business, focus is pretty key. And so we'll continue to capture and win, I think, silicon carbide and broad-based
Speaker Change: solar applications with solid carbon. If you look at strategically, where can Navitas bring the most value? The combination of GAN
Speaker Change: And Silicon Carbide is super exciting, where we can bring our system design centers to bear. And you know we've got one in EV, we've got one in data centers, we've got one in mobile. So when you look at the combination of technologies, we can uniquely bring the deep system knowledge and system focus around mobile, EV, and data center.
Speaker Change: That's where we'll place our biggest bets.
Speaker Change: That doesn't mean there aren't going to be opportunities, and even niche. So even within the world of solar, I commented on solar and carbide.
Speaker Change: GAN is a emerging, really promising opportunity for solar microinverters in particular, not broad-based solar.
Speaker Change: So even there we'll find our niches, which can be sizable niches, and we'll continue the focus on those areas.
Speaker Change: Bidirectional GAN, as an example, into solar microinverters, I reiterated in my prepared remarks, is on track for a nice ramp-up in mid-25. So this focus on mobile EV and data centers will be very important, very strategic, but it won't be exclusive and ignoring some of these other opportunities in the other markets.
Speaker Change: Okay, fair enough. Thanks for that, Gina. Maybe just a quick follow-up here. We talked about a dual sourcing arrangement with Infineon for lower voltage products here. Obviously, this is the first announcement I've seen of this. I'll think if you alluded to it before, I am honestly not familiar with whether Infineon has announced any products in this general voltage area here. So maybe you can just discuss how this partnership came up, how you expected to ramp out here, you know, generally when do you expect to start to see some real revenue contributions from it.
Speaker Change: Yeah, it's certainly been in the works for months, obviously just being public today for the first time. I'm not sure about Infineon's timeline for their public announcements, but they're certainly aware of what we're announcing today, and I'm sure theirs will be coming.
Speaker Change: Coming soon, the dual sourcing is very focused on this particular family where we see a really hot opportunity in AI data centers in particular. There's a real need for it, but people will love dual sourcing, especially if they can get it with this advanced technology to solve the efficiency and
Speaker Change: density problems of data centers. We're going to start sampling the first low voltage scan actually this quarter, so in the coming weeks. That's coming quite quickly and we expect first production ramps late next year.
Speaker Change: Okay, wonderful. Thank you. That's all for you guys.
Speaker Change: There are no further questions at this time, and this concludes today's conference call. Thank you for joining, and you may now disconnect.