Q2 2025 Navitas Semiconductor Corp Earnings Call
Thank you for standing by and welcome to the Navitas semiconductor q25 earnings call.
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 would like to ask a question this time, simply press star followed by the number 1 on your telephone keypad. And if you would like to return your question, press star 1 again.
Now, I would like to turn the call over to Lori Parker, investor relations Lori. Please go ahead.
Good afternoon, everyone. I'm Lori. Barker investor relations for Navajo. Thank you for joining Natasha. Semiconductor second quarter, 2025 results conference call.
I'm joined today by Jean Sheridan, our President and CEO and co-founder, and Todd Glickman, CFO.
A replay of this webcast will be available on our website, approximately 1 hour, following this conference call.
And available for 30 days, 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 reconciliation of this non-gaap financial measures, with the most directly comparable. Gaap measures are included in our second quarter earnings release and also posted on our website in the investor relations section.
Non-gaap expenses and operating margin excludes stock-based, compensation, amortization of intangible assets and other non-recurring items.
In this conference call, we will make four forward-looking statements about future events or about the future financial performance of Navitas. You can identify these statements by words like "we expect," "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 materially from expectations expressed in our forward-looking statements.
Important factors that can affect an Avatar's 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 risks faster sections in our most recent 10K and 10 Q.
Our estimates or other forward-looking statements may change in avatars 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 and now over to Gene Sheridan CEO.
Thanks Lori and thanks to all of you for joining our Q2 2025 earnings call.
I'm pleased to announce Q2 revenues of 14.5 million which are in line with our guidance, despite the number of headwinds that continue to challenge near-term results.
Our industry is in a classic semiconductor downturn with a Slowdown in projections for solar industrial and Evie sectors.
The continued impact of care conflicts. And now the removal of tax credits, for the solar and EV industry.
Despite these short-term industry. Headwinds Q2 is a very strategic quarter for our company.
We've decided to more aggressively transition and invest in a leadership position for aid data centers.
AI data centers represents an extraordinary opportunity, and 1 that Natasha's uniquely positioned to capitalize on.
In Q2 we now, sit Nvidia has selected. No costs to support their vision for Next Generation. 800 volt data centers.
We also raised nearly 100 million of new capital in the quarter, providing additional cash flow to support our plans for growth, including Investments needed to execute on development. Milestones over the coming, quarters to support, a significant ramp expected in late 26,
Furthermore in Q2 we announced our new Gan Foundry partner power check, which is enabling our next Generation agents low-cost manufacturing platform to support our cost and capacity goals for this expanded AI data center opportunity.
For existing high voltage can supplier as tsmc which is utilizing 6 inch wafers.
Over the next q plus years, we expect our high voltage customers to transition to power chips. 8 inch Factory, which can produce nearly 80% more chips, per wafer, compared to 6 inch for little incremental cost.
We expect this will yield more attractive price points for our customers and higher gross. Margins for novellas
We are already planning to ramp our medium voltage. 80 to 200, volt can from Power chips, 8 in line.
Last we made the decision to sharpen our focus on the high-end performance, applications of the mobile consumer, and Appliance sectors.
Stream. Price-sensitive applications in these sectors.
We expect this transition will allow Navitas to maintain its spending discipline, with operating expenses at or below current levels, while shifting significant customer acquisition in our new investments to next-generation AI data centers and the related and critically needed energy infrastructure markets.
With that in mind, I'd like to share much more detail around the opportunities that we are targeting with this increased focus.
AI is about to transform everything in our lives and on our planet.
The impact will be felt in all sectors, but it starts with the cloud.
The world's most powerful AI processors are rapidly being developed and deployed in the cloud and with this massive processing capability.
We are also seeing an explosion in power requirements that has never been seen before.
While we now have ai processors that are rapidly approaching the intelligence of a human brain.
We should also consider that the energy consumption of the human brain is believed to be less than 20 watts.
While AI processors may require over 1 billion watts to generate a similar level of intelligence.
So, this presents a very large-scale power problem for our industry.
In particular, total AI processor. Power consumption is projected to go from 7, gigawatts in 2023 to over 70. Gigawatts by 2030,
That 10x increase is creating a number of power challenges for our industry. Bubble also, generates significant commercial opportunities for the suppliers that deliver leading solutions to these major power problems.
In Power Electronics. When any system requires a significant increase in power capability, 1 of the most effective strategies is to increase the operating or System bus voltage.
Since power distribution, losses are inversely proportional to the square of the operating voltage of 4X increase in voltage translates into a 16x reduction in power loss, and a very dramatic Improvement in Energy Efficiency.
Before AI traditional data centers operated with the 12-volt bus, and achieved overall energy efficiencies in the 70% range.
In the last 2 years. With the deployment of the first AI chips that data center industry has quickly transitioned to a 48 volt bus architecture, reducing power distribution losses, by up to 16x and targeting overall efficiencies in the 80% range.
These 48, volt data centers, are also supporting a major upgrade from 10 to 20. Kilowatts in a traditional server rack to 100 to 200 kilowatt Rack, in a 48, volt Data Center,
While such a change is dramatic, it is far from adequate to handle the exponential growth in AI power requirements.
Thankfully Nvidia has announced their intention to enable 800 volt data centers in the future.
With a 15x increase in operating voltage. Overall data center efficiency should improve significantly while targeting rack power that can achieve 1 megawatt or more.
This is an important step and vision for the data center industry. But also poses significant challenges and opportunities for the power electronics Industry and semiconductor suppliers such as novice.
For initial 12-volt data centers, there was moderate power, semiconductor content, and little or no demand for the ultra-efficient gallium nitride and silicon carbide technology that Navitas is producing.
The near-term move to 48 volts has increased that star semiconductor content to around 10 to 20 million dollars per gigawatt of power demand.
Which may represent over 1 billion dollars per year. Power semiconductor Market opportunity globally over the next 5 years, but Gan and selling carbide will be required only selectively in these lower voltage and lower Power Systems.
However, as we look at 800 volt systems, these supercharged data centers will require 3 different stages of power conversion.
All of which we believe will need a combination of gallium nitride and silicon carbide technologies to meet their power efficiency and density requirements.
As a result, we expect power semiconductor content of AI data centers to expand to 30 to 50 million dollars per gigawatt of power delivered with the majority demanding gallium nitride or selling carbide.
When combining this growing content with the 10x increase in AI power projected in the future, we believe this could translate into a $2.6 billion per year opportunity by 2030 for gallium, nitrate, salt, and carbide.
Let me break down this opportunity further and explain Avitas' capability and plans.
There are 3, power conversion applications or stages for the 800 volt data center opportunity.
The first stage starts with the power grid itself, which is not well prepared to handle this significant surge in energy demand.
Existing grid was designed over 100 years ago and it's Antiquated inefficient and lets the stability needed to Electrify our planet.
The existing grid is built on low frequency Transformers or lfts, which have no semiconductor content and don't offer. Good flexibility to deal with the growing instability of the grid itself and the fast charging power requirements of data centers and our planet.
The answer is in solid state Transformers, or ssts.
Sfts enable up to 75% reduction in size, and weight. And offer an inherent robust, ability to efficiently deliver more power under a wide range of operating conditions.
SFTs require the most efficient power semiconductors, like silicon carbide, which can withstand ultra-high voltages to interface directly with the grid that operates at 10,000 volts or higher.
Our Genesis Tech technology is a leader in ultra-high voltage (UHV) silicon carbide technologies with voltage ratings up to 6.5 kV.
This position is now the tossed to support this Mega Trend to upgrade the grid with robust efficient solid state Transformers in the process. We expect to participate in creating a brand new billion-dollar per year Market opportunity for an avatar.
We have completed initial sample evaluations with positive customer results.
We are now developing engineering samples initially at 2.3 KB and 3.3 KB in our new sick pack package, optimized for these ultra-high voltages and designed for very high reliability. We expect to deliver these final samples to customers in Q4 this year.
Our Target customers include major power system, integrators such as Schneider Eaton versus among others.
We expect first test customers will create system designs during 2026 with many targeting 2027 for mass production ramp up.
We currently see limited competition in the exciting New Market, and we are aggressively investing in expanding our technology league and forging strategic relationships with the early leaders that are creating these ssts.
These SSDs convert the grid power from over 10,000 volts down to 800 volts, which is needed for next-generation data centers.
We estimate this stage requires about 8 million of power semis per gigawatt of power delivered, which translates to about a half, a billion per year opportunity for our selling garbage technology in the next 5 years?
But this is only the estimate for a grid, powered data centers.
We see the same trends and opportunities to upgrade the grid to connect with large-scale renewable energy and storage systems, and also to try the rest of our increasingly electrified planet.
in total, we estimate sfts, and grid power reflects well over a billion dollars per year total market for an avatar sells and carbon technology by 2030
This takes us to the second stage, which converts that incoming 800 volts from the grid down to 48 volts.
This second stage regards, 800 volt to 48, volt DC to DC converters that are integrated directly onto the Server Motherboard, where real estate is at a premium and thermal management is critical.
as a result, this second stage will require the highest frequency, efficiency and density Technologies, which can and silicon carbide can offer
While the agent of a volt input of this stage can utilize high voltage gain or silicon carbide, the 48-volt output of this stage is a perfect fit for our new mid-voltage 80 to 200-volt scan, which we expect to introduce beginning later this year.
Our Target customers for this stage include threats, light on and Delta among others.
Similar to the first stage initial, engineering samples have been evaluated by our early customers with positive results. We are now developing final engineering samples for lead customers in Q4 and supporting them to finalize their system design and supplier selections in advance of early production. Ramps are expected to start in late 2026.
We are 1 of only 2 suppliers that can offer the full range of high voltage Gan. High voltage solar garbage and the mid voltage Gan for this application and we believe we offer the best performance versions of each.
We estimate this application represents a billion dollars per year tan given 15 million of power semis per gigawatt delivery.
And finally, we come to the third stage, which takes the 48 volts from the second stage and converts it down to 12 volts or less to eventually power, the AI processor itself.
This 48 volt DC to DC converter has the most critical demands for high efficiency density and reliability. Given it is the closest to the AI processor on the motherboard.
Initial customer evaluations are complete, with positive results.
As with the other stages, we plan to deliver final engineering samples in Q4 and expect customers to finalize their system design and supplier Selections in advance of early production, ramps and late 2026.
We estimate this stage represents, the largest of the 3 stages with a 1.2 billion per year Tam given 20 million of power semis per gigawatt of power delivered.
In aggregate, we believe the AI Data Center and related energy. Infrastructure opportunities represents a very sizeable, 2.6 billion per year Market opportunity for our industry, and for our company,
We are pleased that our years of collaboration with industry leaders like NVIDIA have led Navitas to be recognized among this sector's key ecosystem partners.
We are excited that the positive initial customer evaluations and look forward to developing the final technology for each of the 3 stages. I described
we believe we're at the right time and the right place with the right Leading Edge technology to establish a leadership position in this fast, emerging AI Data Center and energy infrastructure Market,
While some of the market headwinds entered decision to sharpen our Focus within the mobile and consumer segments will constrain our near-term financial performance. We believe we're making the important decisions and Investments to capitalize on this exciting opportunity.
We recognize a lot of important information and updates have been shared today.
To assist investors in better understanding Navajo's plans and opportunities for AI data centers and related energy infrastructure, we're posting a short PowerPoint on our investor website today that further explains many of the opportunities I just covered. In addition, we will be holding a live presentation and Q&A event open to the public later in the week.
Now, let me turn it over to Todd to explain further on the financial implications of the strategies and initiatives that I have described.
Thank you Gene in my comments today. I will take you through our second quarter 2025 Financial results and then I'll walk you through our outlook for the third quarter and explain further on the financial implications of some of the important Q2 achievements market dynamics and announcements that Gene has described.
Revenue in the second quarter of 2025 was at the midpoint of guidance at 14.5 million as expected, revenue, and the industry. Environment remained relatively static compared to the first quarter of 2025. The decline compared to a year ago, quarter was primarily the result of lower revenues in the China EV and Industrial markets as semiconductor customers. Wait for improved economic indicators.
Before addressing gross profit and expenses, I would like to refer you to the GAAP to non-GAAP reconciliations in our press release.
In the rest of my commentary, I will refer to non-gaap measures.
Gross margin in the second quarter was 38.5%, which was up sequentially compared to 38.1% in the first quarter primarily due to a slight variable change in product mix.
In the second quarter, we executed on further synergies and operational efficiencies associated with prior Acquisitions. As we reduced operating expenses sequentially from 17.2 million to 16.1 million
Operating expenses were comprised of sgna expenses of 6.9 million and R&D expenses of 9.2 million expenses were slightly higher than projected as we incurred. Additional second quarter, only R&D expenses related to our high-powered Gan development,
Consolidating, certain support groups and sites and further streamlining day-to-day functions has allowed us to significantly reduce sgna by 17% or 1.4 million from the first quarter while we continue investing in Next Generation, Gan and thick, technology platforms to serve the increasing power consumption across AI Data Center and energy infrastructure markets.
Adding all this together, the second quarter 2025 loss from operations improved sequentially to $10.6 million, down from $11.8 million in the first quarter of 2025, by leveraging SG&A cost reductions.
Our weighted average share count for the second quarter was 199 million shares approximately 20 million shares were issued yielding, net cash proceeds of 97 million through our at the market offerings that we can concluded during the quarter.
On U.S.-produced sick products, given the impact of the unstable tariff environment on our sales into China.
Ultimately, we believe our us manufacturing location for sick. Wafers will provide natas with a significant strategic Advantage with our us customers for our AI Data Center and energy infrastructure over time.
Our balance sheet remains very strong as we exit, Q2, 2025, with high levels of liquidity and an improved working capital position.
Cash and cash equivalents at quarter end were $161 million, and we continue to carry no debt.
Moving on to guidance for the third quarter, we currently expect revenue of 10 million plus or minus 500,000.
This expected Revenue reduction, reflects, both adverse impacts from China tariff risks, for our silicon carbide business and our strategic decision to de-prioritize lower margin China, mobile business. While we accelerate our investment and leadership in AI data centers and Associated new energy infrastructure.
These applications have ever increasing, power demands, ideally served with novitas differentiated Gan and sic technologies that we expect to yield strong growth potential and higher margins over time.
We believe this transition toward AI data center and energy infrastructure markets will take multiple quarters, and we have set up our balance sheet accordingly.
In addition to the completion of our $97 million net capital raise, we have reduced operating expenses by 25% from the second quarter of 2024. We believe we are well positioned with the resources and runway to execute on opportunities for our next wave of growth, driven by increased scale and profitability.
Gross margins for the third quarter are expected to be flat compared to the second quarter, with our guidance at 38.5% plus or minus 50 basis points, as our expected mix remains consistent in the near term.
Turning to operating expenses, we anticipate operating expenses of $15.5 million in the third quarter, down from $16.1 million in Q2 2025, as we continue to execute on our plan of focusing on fewer markets to drive capital efficiency across the business through the transition.
For the third quarter of 2025, we expect our weighted average share count to be approximately 214 million shares.
In closing, we are pleased with our Q2 results, particularly around the recognition of our technology and attracting fresh investment.
The announcement of strategic ecosystem partnerships and the acceleration of our focus and investment in data centers and energy infrastructure.
Looking forward while some industry headwinds continue and we will expect to further lessen, our Reliance on mobile revenues. We are confident these strategic moves position the company for its next wave of significant growth.
Operator, let's begin the Q&A session.
We will now begin the question and answer session. If you would like to ask a question, simply press star, followed by the number 1 on your telephone keypad.
And your first question comes from the line of or Seymour with Dosa Bank Ross, please go ahead.
Hi guys. Thanks for letting me ask a question. Uh, Gene in this transition. Uh, I guess let's get the bad news out of the way first. How do you expect the revenues to uh, behave between now and the time in? It sounds like second half of next year, where the bigger ramp will occur in the data center side, so as we drop down, first before we go back up on the other side, how should we think?
That shape looks.
Yeah, thanks Ross. You know, good question. The obvious question, right? So as we make the transition, we're going to both reduce dependency on mobile uh, as Todd. And I described which does involve reducing some revenues being more selective in that Market. At the same time, we're layering in all new design wins uh from other sectors and even the 48 volt data centers. So, I think those net out uh, to some softer quarters, um, over the next, uh, 1 or 2 quarters, but sets us up. Well, as we shift all of our investment or heavy investment into the AI data center. First 48 volt but much bigger as we described with the 800 volt. Uh, so it'll be a transitionary period with some software quarters in the near term but setting us up well for for big growth as we get into 26.
These ramps are late '26. So you're talking, you know, second half or fourth quarter, and then looking even further beyond that. What's the sort of margin structure you think this business could offer, especially in your gross margin line? It seems like it would have significantly less pressure from...
Competitors perhaps uh but inherently a more performance Centric market. So what sort of gross margin do you think that could deliver?
Yeah, let me so covering the first part. Uh recognizing the 800 volt data center is heavily at 2027. Play that that's in a pretty extraordinary 1 with really high content. We Believe again and some cry about it it costs those 3 stages we talked about 48 volts are still ramping right? We previously announced 70 customer projects over 40 wins, they're not as big, they're not as significant but those will be contributing and layering in to growth and help offset some of that reduced mobile dependency, we talked about throughout 26 so I think that's the dynamic for 26 on the top line. I think on margin. Uh we still uh have our same long-term margin model, uh north of 50 points. As you point out uh the AI Data Center and the energy infrastructure markets should be very high value markets, they're really driven around performance efficiency. Density cost is secondary even supply chain. I would put as a higher issue uh than cost and that's also obviously part of what we're doing with mobile and reducing that dependency being more selective. So I think all that sets us up. Well, I'd
That is another factor; which is a big announcement in the quarter: power chip, low-cost 8-inch. That's also going to be layering in over the next 12 to 24 months. That's going to drive great cost reduction for us, better price points in the market, better upside on growth, but also add to the incremental gross margin. As we go from, you know, high 30s, low 40s, and head towards that longer-term model of 50% and beyond.
Thank you.
Thanks Ross.
And your next question comes from the line of plain Curtis whichever is plain. Please go ahead.
Hey thanks. Uh for taking my question. I maybe just following up on Ross. I just want to understand the you know what portion of your mobile business historically, are you deeming that kind of lower gross margin business? You're walking away if you said to continue headwind I just trying to understand does the absolute amount per quarter. Go lower from here or is the remainder stuff you'll you'll stick with for a little bit longer.
Yeah, yeah, good, good questions, Blaine. And so we've often highlighted how the value of gain gain in Chargers and and other application goes up as you go up and power ultra fast Chargers, we've talked about in the past are really north of a 100 Watts. We've participated in things below that 45 Watts, 65 Watts, those are popular power levels even with silicon chargers. There's a lot of volume there, a lot of that volumes in China. Um, but we don't love love the price points. We don't love the margin profile and we don't love the the price um um kind of profile going forward. So we're going to really refocus on those Ultra, fast Chargers, 100 watt, and plus case in point, we just announced a 90
Watt xiaomi, aftermarket charger. Uh, that's a great 1 in, in China. That's with a great brand, and a great partner, and an incredible power density. It's, it's, it's the power, uh, that is on the upper end of most notebooks, but in the size of a typical 12, watt silicon charger. So, that's the kind of things we'll keep going with. We're going to let that margin profile better, but admittedly it's going to be less Revenue based the the mainstream where we're reducing is more China. More 65 and 45 watt, uh, and we see that being far more than offset as we start to ramp AI data centers. Uh, later in 26,
Thanks. And then I just was curious on the transition of power tip, um, I I guess, can you just walk us through in terms of your ability to, to get any kind of volumes? Um, before a power chip ramps? Is that, is there any impact from that transition? In your Revenue Outlook?
Yeah, and you can kind of break it into 2 pieces. We've actually got the what we call the mid voltage Gan, that's brand new 80 to 200 volts. That's a very important for 48. Volt data centers today and 800 volt data centers tomorrow. And this what I call the stage 3 that's starting out straight away from powerchip or any sampling that. Uh, next quarter from powerchip. That'll start, ramping production in early 26th, the high voltage Gan, we're already shipping today from tsmc, we'll start sampling that to customers. If not late this year, early next year that will start ramping in late 26. Uh and we expect a lot of our customers to migrate quite quickly from tsmc to powerchip given the big advantages and Technology.
Cost, uh, and capacity.
Okay, so I guess in short, there's no supply issue. This is more of, uh, the revenue headwind is purely because of where pricing and margin went mobile. Yeah, yeah, exactly, yeah. Thanks for clarifying. No, no supply at all. In fact, by bringing up 8-inch, that gets you 80% more diaper wave. We'll have a lot of capacity. Uh, no shortages or supply chain issues on our mobile decisions in the short term.
Thanks guys.
Thanks plane.
Cassidy withdrawals plan Securities. Kevin please go ahead.
Hi. Thanks for taking my questions uh and since the announcement from Nvidia. Uh have you seen any adoption increase just in the 48 volt uh, data centers today for moving to gallium nitride. It seemed they they were a little hesitant in the past. But is this uh did that help break a log Jam?
It's a good thought Kevin and I think it will. It's a little too early to call it fully but it brings up an important Point while we see Gan designs already underway for the 48 volt system of an 800 volt data center. That same. What I was calling stage 3 that 48 volt converter using Gan can also be used in 48 volt data centers. So we're hopeful that as we proved it out with an eye towards 800 volt, we could get some upsides next year, putting it in place even before the 800 volt ramp up with 48 volt data centers but it's a little too early to call it, um, and we'll sort of see how that plays out and obviously do what we can to support it.
Okay, I see. Um, and then also on the transition from tsmc, to power chip, should we expect to see inventory? Build, are you going to get a safety supply of tsmc? Uh, Wafers before making the transition?
Yeah, yeah. So TSMC's committed to at least a two-year supply through mid-2027. That might get extended, but even if it doesn't, we can do additional last-time buyers, as you're implying. So, you know, our message to our customers is that if it takes them a little bit longer to transition the power chip, we can supply them through all of 2027, probably even into 2028 if it's needed. I don't think it will take anybody that close, and there are so many big advantages on cost, capacity, and tech to make that move. But that gives us a nice cushion and a high confidence in the supply chain.
Okay, thank you.
Yeah, thanks. Kevin.
And your next question comes from the lineup. Jack again, we try to check with your research Jack. Please go ahead.
Great. Thanks for taking the questions. Um, so just on the near-term, uh, I was hoping you could kind of go through the drivers for the, the big sequential decline in September. So, you, I mean, you have a weaker, demand, environment, some tariff, headwinds, and then the narrowing of your product portfolio. So, how much did each of those kind of contribute to the guidance for September?
Jack and so it, they're almost equal weight. Uh, in the short term, you know, we knew silicon carbide, was a risk for us and China on the tariffs were 1 of the few guys that does US manufacturing. Um, and that's a risk, uh, that that is turning you into a reality. Um, that same risk, uh, of having us. Manufacturing, of course, becomes a great strength as we
Look at the data centers and energy infrastructure over time because our customers, which are heavily us-based. Love the idea of a US supply chain, but in the short term, that's caused us some impact. I think that's mostly a Q3 impact, maybe a little bit Q4. Uh, the other is the intention to be more selective and mobile reduce our dependency. That's going to be a multi-quarter effort as Todd applied. Um, and then, you know, we've not seen the ramp UPS of new design wins given the industry slowdowns continuing I think for a couple quarters more it's a little hard to predict even by our larger competitors. So I'd kind of give them equal weight on, uh, on driving some of the sequential decline in Q3.
Okay, thanks, that's helpful. Um and then on the on the data center side has the 800 volt announcements with Nvidia led to more engagement with other data center data center customers. And um I mean wouldn't know, avatars have the, you know, the design and support resources to handle those additional products or I mean, what Nvidia really just take the bulk of your focus for for the foreseeable future?
It's definitely open doors. We thought were well positioned already. Yeah. There's um a lot of these customers. We know very well uh around the world. Many of them are doing power supplies in markets, where we're already serving, whether it's no notebook or desktop or even early server, work that we've already done. So we know the customers. Well, but especially on SST, that's the newest field, solid state Transformer. So, we've had a lot of inbound uh, there, and it's opening up a lot of doors.
Which is exciting to your point about um, opening doors to, you know, we should mention nvidia's hugely influential and we're super excited about their Vision, you know. They're not the only guys looking to drive this move towards higher voltage, um, data centers, um, and those, those are opportunities that are also emerging um, nothing really to announce yet, um, but I think there's other players that are going to be pushing the same direction, uh, expanding the market opportunity.
Got it. Thank you.
Thanks Jack.
Please, go ahead. Great, thank you. Um I wonder if you could talk about the competition for these Nvidia products, I mean you've had 10 different companies.
Uh, you announced their participation in this partnership. Um, obviously, you guys have a wider range of wide-band gap products to address it with, but can you just talk about, you know, when you talk about that, Sam, your position within that?
Yeah, I definitely definitely Joe. Um and you touched on the first point, which is, this is a pretty extraordinary Challenge from grid power at tens of thousands of volts to step it all the way down to GPU power, its sub 1 volt and each of these 3 stages has a big demand on high efficiency and high density. So you're going to need the best high performance, High reliability and high efficiency technology in each stage, we feel like we're starting from a great place having it, not just having the range, but on the silicon carbide, what we call ultra high voltage, 2.3 kilovolt, all the way up to 6.5, kilovolt very few suppliers in that space. We have the best performance. The best reliability in our opinion, gives us a great starting point. And we're investing aggressively to expand that lead. Uh, generationally, uh, and in packages and portfolio, you go to that second stage of high voltage gain, you know, which companies have high voltage gain, high voltage, silicon carbide. And it may take a combination of those 2 in the second stage and of the output of that the mid voltage gain 80 to
200 volt very, very few. Even of the name suppliers that are participating. Have that combination and then that third stage is all mid voltage. Gan, 80 to 200 volt can for the 40 volt converter demanding, the highest efficiency highest density and part of our strategic decision to defocus and reduce. Some of our dependency on mobile is Shifting aggressively to accelerate that R&D, push that technology Advantage. Uh, push the focus, um, and increase the customer, um, intimacy. So I think those are all positives. Another big positive for us is our size while we're up against some big, guys. I think our small sizes are Advantage speed. Um, flexibility, Innovation, risk-taking, and focus. It all comes back to focus. And so, a lot of what you heard today is us really doubling down an increase in the focus in this critical fast moving, uh, Market
Great. Thank you.
Thanks Joe.
And your next question comes from the line of John Pan with CGS Securities. John, please go ahead.
Hi Jean. Thank you for taking my question. I was wondering um, since there's obviously no design wins as part of the announcement. Um you know, there's a long time till you get there. You're announcing this transition away from your core bread and butter markets. Are you getting any design and Engineering Revenue along the way, or is it really just risking at all, you know, but with the, you know, knowledge that, that you do think you have a a performing product, um, you know, before we get there and how should we think about the cash flows along the way as well? Um, you know, obviously nice to see the the race of capital but um,
What should we expect before the cache will start ramping again?
Yeah. Yeah it is um it is an important point and I don't as much as the 800 volt is exciting and there's a lot to do and we're off to a good start and we think we're all positioned and it's, but it's mainly at 2027 play 2026 is still ramping on 48-volt data centers. We've already announced the 40 design wins over 70 in total customer projects, that'll be ramping. Yeah, those are being offset by some of this reduction in Mobile dependency, but you're going to see those shine through as we ramp up uh, in 26. So you're going to see those. Um, I think great announcements great design ones. We didn't put put a big Spotlight on pop, pop line pipeline. This uh quarter just because we had so much else to cover to better, explain the AI data center opportunity, but you'll definitely see those design wins and see those uh growth sort of proof points along the way throughout 26.
And then there is another, I think, question taught for you.
Yeah. John I think you mentioned something about cash flow. Um, yeah, this last quarter, you know, our operating cash flow was around 11 million, um, you know, with the 160 million dollar balance sheet today, um, you know, we expect to maintain cash flow, um, uh, usage of around 10 to 11 million going forward. Uh, so that's our profile going forward because we expect to also keep operating expenses pretty flat.
Okay, great, thank you. And just to clarify, Gene, when you say things are improving, you know, in 2026, are you talking about just data centers? Are you expecting other markets to recover as well?
Yeah, I think that depends somewhat on the markets. We did enter this year with a strong pipeline and strong design wins. Some of those forecasts have come down or delayed a bit with the continued softness in the market. But I would certainly expect to see recovery, as I think most do, going into 2026, and that's going to add to some tailwinds for us.
Okay, thank you.
And your next question comes from the line of Richard Shannon with Craig Allen Capital group Richard, please go ahead.
Great. Thanks for letting me ask you a couple questions here. Uh Gina curious to understand kind of the the change in Focus here uh and what's driving this um have we had uh a material change in like pricing Trends in certain markets here and they've got a fairly aggressive competitive specifically in China with mobile. But wonder if there's anybody been any change here in the last uh you know quarter or 2 this dictated this. Or is it just a continuing Trend? That's been made it harder.
Yeah, I know, I think you nailed it on the head, Richard. No, no big announcements here. We've seen this trend for a while. We've talked about high, you know, the importance of of ultra fast charging and where we bring the real value. We participated in some of the more mainstream price sensitive, as I said, 4565 watt. It's decent volume there in China, but there's Trends continue. And when the markets soft people are going to get more aggressive on prices. It's sort of normal. But we don't like that pricing Trend. We don't like the margin profile and frankly, we're getting ready for a much more attractive, pricing margin profile. And what we really want to put our investment and focus as you're hearing throughout the call.
Okay, fair enough then, and if I miss this, I apologize. But I just want to get a sense of how you're thinking of the trajectory and gross margins over the near term. I think it was an earlier question about what to expect from a revenue perspective, which seems kind of maybe bumping along the bottom or whatever phrase you'd like to use. But how do we think about gross margins here? Particularly as we emphasize some of these lower margin markets? Will we get up to...
You know, bump above 40 here fairly soon. Or does that really take the, uh, revenue inflection to make that happen?
Yeah, it's actually going to take the revenue inflection to make that happen to your point. Uh, we, you know, we've delivered 38.5%. We're we're guiding the 38.5% in Q3 and we expect it to remain that level as some of the other businesses um are experiencing some tariff pressure on their margins um mainly in our silicon carbide business, so you're not going to see that, that gross margin profile increase until the other sectors kick in.
Okay, great. Thanks, guys.
Thank you, Richard.
No for your question at this time. That concludes today's call. Thank you all for joining you may now disconnect
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