Navitas Semiconductor Corporation (NASDAQ:NVTS) Q1 2023 Earnings Call Transcript

Navitas Semiconductor Corporation (NASDAQ:NVTS) Q1 2023 Earnings Call Transcript May 15, 2023

Navitas Semiconductor Corporation beats earnings expectations. Reported EPS is $-0.07, expectations were $-0.08.

Operator: Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I’d like to welcome everyone to the Navitas Semiconductor First Quarter 2023 Earnings Conference 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. [Operator Instructions] Stephen Oliver, Investor Relations. You may begin your conference.

Stephen Oliver: Good afternoon, everyone. I’m Stephen Oliver, Vice President of Corporate Marketing and Investor Relations. Thank you for joining Navitas Semiconductor’s first quarter 2023 results conference call. I’m joined today by Gene Sheridan, our Chairman, President, CEO and Co-Founder; and Ron Shelton, our CFO and Treasurer. A replay of this webcast will be available on our website approximately 1-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 on 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.

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 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 section 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, changed assumptions or other events that may occur except as required by law.

And now, over to Gene Sheridan, CEO.

Gene Sheridan: Thanks, Steve. I’m very pleased with our Q1 results, as we exceeded our guidance for all financial metrics and experienced solid growth in key markets including electric vehicle, solar, energy storage and appliance industrial with a market recovery started in our mobile business. In the past 12 months, we completed 3 strategic transactions. All 3 are progressing and integrating very well. With VDDTech, we will be sampling our GaN and silicon carbide optimized high frequency digital isolators by the end of this year, with revenues to ramp late next year adding up to $4 per system when combining with GaN and silicon carbide in electric vehicle, solar, energy storage and appliance industrial applications. With Elevation, we have just launched our next generation platform called GaNSense Control and, in total, we already have over 50 customer projects in development and have shipped accumulative 1 million units into mobile and consumer customers.

The GaNSense Control family will be expanding to address appliance industrial customers as well as data center customers over time. GeneSiC is our largest acquisition to date and positions Navitas as the only next-generation pure-play power semiconductor company. I’m excited to announce that nearly the entire GeneSiC team is relocating to our new headquarters in Southern California and is integrated very nicely across all key functions in the company, especially taking advantage of the Navitas global sales, FAE and system design centers driving over 100 new opportunities since the acquisition across all of our target markets. Let me now update on our product and business development progress in each of our key markets. In electric vehicle, which includes onboard charging, DC to DC converters, traction control and fast roadside chargers.

Across both GaN and silicon carbide, we have strong momentum in shipments, backlogs and pipeline with over 25 customer projects either shipping with silicon carbide or in development with GaN and silicon carbide, and a total revenue pipeline of over $300 million. In particular, our prior announcement for our joint system design center with Geely, the 5th largest EV supplier globally last year, has already delivered exciting results with our new silicon carbide onboard charging design that will generate an additional $15 million to $20 million in revenue next year. We are still on track for GaN based EVs in production in 2025. Our EV system design center now has 5 system designs in development, working closely with our top EV customers, utilizing a combination of GaN and silicon carbide.

In solar and energy storage, we have strong momentum in shipments, backlog and pipeline with over 35 customers in production or in development, and a total revenue pipeline of over $150 million. We have development projects with the majority of the top 10 solar players globally, with many shipping now with silicon carbide and GaN shipments into the solar market on track to ramp next year. In home appliance and industrial, we have over 45 customers in production or development and a revenue pipeline of over $150 million, fueled by strong government funding and regulations in U.S., Europe and other regions driving clean energy upgrades to homes and factories. Last week at PCIM, a major Power Electronics Trade Show in Europe, we introduced our first silicon carbide power module called the SiCPak.

This strategic announcement is the first of many as Navitas enters the high power silicon carbide module market, which is a significant percentage of the entire silicon carbide market. The SiCPak will be a key package technology to expand our silicon carbide business in the industrial markets in the near-term. In data centers, we are well positioned to address the accelerating power requirements being driven by AI, IoT and data in general. We continue sampling our new high powered GaN ICs, which we launched to the market in Q4 and have increased our customer development projects to 15, representing a revenue pipeline of over $60 million. Our design center is developing 6 system designs that are supporting and accelerating these customer revenues, which are on track to ramp late this year and next.

Also at PCIM last week, we announced our Gen-5 silicon carbide MPS diodes, which are a perfect fit for data center power supplies and a great complement to our new GaN ICs, adding appreciably to the total value and dollar content we expect to deliver to all of our data center customers. Finally, in our mobile business, we see the beginning of a market recovery with 20 new mobile chargers launched in Q1 and strong bookings going into Q2. These launches include the latest Xiaomi 13 Pro and Ultra flagship phone inbox designs and Lenovo’s ThinkBook biscuit laptop charger, which has an amazing profile of only 12.8 millimeters. In mobile, we have over 150 customer projects in development with a revenue pipeline of over $100 million. In summary, I’m very pleased with our progress across acquisitions, product launches, customer developments, and market expansion.

We now see all target markets in solid growth mode, and our strategy to deliver leading edge GaN and silicon carbide with complementary silicon controllers and isolators is translating into significant customer value, market adoption and financial results. Now, let me turn it over to our CFO, Ron Shelton, to update on those financial results as well as our guidance.

Ron Shelton: Thank you, Gene. In my comments today, I’ll first take you through our first quarter results, then I’ll walk you through our outlook for the second quarter and the full year of 2023. Before I get into the results for the first quarter, I first want to step back and remind you of some of our commentary last quarter. As you might recall, we indicated that we could see revenue doubling in 2023 as compared to 2022. Our first quarter results are a great start to meeting that objective. Revenue in the first quarter of 2023 grew to $13.4 million, which was higher than our guidance. This represents 98% growth over the first quarter of 2022 and an 8% increase on a sequential basis. The beginning of the year is unfolding as we discussed last quarter.

We’re seeing growth in silicon carbide products as we add capacity and expand our pipeline of opportunities. The mobile market seems to be bottoming and starting to recover in Q2. And, in general, our overall customer engagement and activity continues to expand. Before addressing expenses, I’d like to refer you to the GAAP to non-GAAP reconciliations in our press release issued earlier today. In the rest of my commentary, all costs and operating expense commentary will refer to non-GAAP costs and operating expenses. Non-GAAP gross margin in the first quarter was 41.1% as compared to 44.0% in the first quarter of 2022, an increase from 40.6% in the fourth quarter of 2022. In last quarter’s call, we discussed some of the drivers behind expanding gross margins for this year, among them transitioning to next generation products and gaining share in new, higher margin market segments.

In the first quarter results represent the beginning of those efforts taking hold in our results. Total non-GAAP operating expenses were $17.8 million for the first quarter of 2023. Our non-GAAP SG&A expense was $7.6 million, and non-GAAP R&D was $10.2 million, slightly better than guidance as we continue to invest for growth in a disciplined manner. Putting all this together, the non-GAAP loss from operations was $12.3 million, compared to a loss from operations of $9.6 million in the first quarter of 2022. As we continue to invest simultaneously across new markets and focus on growth opportunities. Our weighted-average basic share count for the first quarter was 156.8 million shares. Turning to the balance sheet, it continues to remain very strong with high levels of liquidity.

We’ve talked in the past about keeping a focus on working capital, and we’re making significant improvements in those areas. Cash and cash equivalents at quarter end were $100.8 million, and we carry no debt. Accounts receivable was $7.4 million, compared to $9.1 million in the prior quarter reflecting improved day sales outstanding. Inventory declined to $18.9 million, compared to $19.1 million in the prior quarter. As we continue to drive inventory levels to more closely align with our business going forward. Over time, we’re confident that our inventory levels will trend towards our long-term target for inventory turns of better than 3 times. Lastly, we continue to work on terms with our suppliers to better align payment terms with standard industry practice.

Moving on to guidance. For the second quarter, we currently see revenues in the range of $16 million to $17 million. At the midpoint, this represents substantial year-over-year growth of approximately 90% over the $8.6 million we recorded in the second quarter of 2022 and a 24% sequential increase over the first quarter of 2023. Our guidance is based on robust strength in EV, solar, appliance/industrial, and the beginnings of a recovery in the mobile and consumer market, all further evidenced by a more than 50% increase in backlog during the quarter. As I mentioned earlier, we believe this translates to a doubling of revenue over 2022 that we discussed in last quarter’s call. Gross margins for the second quarter are expected to move slightly higher in the range of 25 to 50 basis points.

We continue to expect that gross margins will expand over the next few quarters as we transition to next generation products and gain share in new higher margin market segments. For these reasons, as previously discussed in last quarter’s call, we expect our gross margins will continue to grow through the year and trend to the mid-40s as we exit 2023. In total, our non-GAAP operating expense in the second quarter are expected to be approximately $19 million, and this excludes stock based compensation, transaction expenses, and amortization of intangible assets. We will continue investing in growth, but expenses will decline as a percentage of revenue, as we scale throughout the year. With that in mind, we expect that expenses will increase at a rate of mid- to high-single-digits on a quarterly sequential basis.

For the second quarter of 2023, we expect our weighted average basic share count to be approximately 162 million shares. In closing, we are extremely pleased with the results for the quarter, and we are excited about the significant opportunities in front of us, which are starting to show up in our results as noted in our second quarter and full year guide. As I’ve said before, we are the only pure-play next generation power semiconductor in the industry, and we intend to invest resources in our targeted end markets, products and technologies with the intent of becoming one of the fastest growing semiconductor companies in the world. We’re off to a great start. Operator, let’s begin the Q&A session.

See also 12 Best Household and Personal Care Stocks To Buy and States With the Lowest to Highest Capital Gains Tax Rate.

Q&A Session

Operator: [Operator Instructions] Your first question today comes from the line of Ross Seymore with Deutsche Bank. Your line is open.

Operator: Your next question comes from the line of Kevin Cassidy with Rosenblatt Securities. Your line is open.

Operator: Your next question comes from the line of Tristan Gerra with Baird. Your line is open.

Operator: Your next question comes from the line of Quinn Bolton with Needham and Company. Your line is now open.

Operator: [Operator Instructions] Your next question comes from the line of Jon Tanwanteng from CJS Securities. Your line is open.

Operator: Your next question comes from the line of Natalia Winkler with Jefferies. Your line is open.

Operator: Your next question comes from the line of Richard Shannon with Craig-Hallum. Your line is open.

Operator: There are no further questions at this time. And this concludes today’s conference call. Thank you for attending. You may now disconnect.