Navitas Semiconductor Corp Q3 FY2024 earnings call

• Major new technology launch: new low-voltage GaN technology optimized for 48 volt systems, creating $1 billion market opportunity. • Strategic partnership with Infineon: creating common GaN specifications for dual sourcing, aiding customer adoption. • Q3 revenue $21.7M, record GaN shipments. • Progress in markets: AI/data centers with 8.5kW power supply design, EV with 6 new design wins, mobile with 26 design wins, appliance/industrial with 30 design wins, solar with 10 design wins. • Headcount reduced by ~14% (45 employees), OpEx reduced by ~$2M per quarter, focusing on AI data center, mobile, and EV as strategic markets.

Q3 revenue was $21.7 million, within prior guidance and a record quarter for GaN shipments. Mobile business hit an all-time record in Q3. Data center revenue started ramping in Q3 and will continue in 2025. EV had six new design wins in Q3. Mobile had 26 design wins, appliance and industrial had 30 design wins, solar had 10 design wins including a multimillion dollar win at Generac.

• Q4 revenue expected in range of $18 million to $20 million. • Gross margin for Q4 expected to be approximately the same as Q3, ~40% plus or minus 50 basis points. • Non-GAAP operating expenses in Q4 expected to decline to ~$20.5 million. • Muted outlook for next couple of quarters, but solid growth expected to resume later next year.

• Forward-looking statements subject to risks and uncertainties that could cause actual events or results to differ materially from expectations. Important factors affecting business, including those in 10-K and 10-Q Risk Factors, could cause actual results to differ from forward-looking statements.

Q: Yes, thanks for taking my question. And, yes, very interesting on the dual source below voltage GaN platform agreement. Is there any IP licensing in this? And maybe another question I have is, is this driven by customer requests or is this more driven by the two companies you and Infineon saying that this would be a value add to our customers?

A: Yes. Thanks, Kevin. Good question. So, yes, we have a cross license. It's a broad base, 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. And why do we do it? I think two reasons. One, we've certainly seen with GaN ICs, people love the technology, they love that advanced technology, but they really don't like sole sourcing. And so we want to go faster. We want to get into mainstream high volume markets quicker. If you can do that with two credible high quality suppliers with common specs, common footprints, things can go a lot faster. This has been proven in the industry, it's been done many times. And I think it's going to work really well for us. And I think Infineon fits our kind of reputation strategy and value-based pricing. I also think we're entering the low-voltage GaN 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 concerns customers and causes hesitation. So we want to be avoid that situation, give them the risk assurance supply chain risk reduction, assurance of two strong suppliers and also know they're free of any patent issues to worry about.

Q: Thanks for taking my question. 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?

A: Yes, 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. We're mainly engaged on the OBC. We see some nice progress in 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. And we have a lot of really impressive designs going on, on roadside chargers with our high-voltage silicon carbide 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 slower growth rates everybody is experiencing on EV.

Q: 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?

A: Yes. Thanks, Tyler. Yes, 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 are some pockets that have to be worked through. I think the channel inventory numbers are coming down. So I think the trend is good. 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 come as silicon carbide market is recovering. We're winning, as I said, a bunch of designs and onboard chargers, off board chargers as well as industrial and solar. We talked about in my prepared remarks, 10 new design wins in solar. That's the biggest we've seen this year. So these are good encouraging signs. A lot of those high power markets are silicon carbon as you know. 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.