Yahoo Finance Navitas Semiconductor Corporation (NASDAQ:NVTS) Q1 2024 Earnings Call Transcript
Navitas Semiconductor Corporation (NASDAQ:NVTS) Q1 2024 Earnings Call Transcript May 9, 2024
Navitas Semiconductor Corporation isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. My name is Benjamin, and I’ll be your conference operator today. At this time, I would like to welcome everyone to Navitas Semiconductor First Quarter 2024 Results 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] Thank you. I would like to turn the call over to Stephen Oliver, Vice President of Investor Relations. Please go ahead.
Stephen Oliver: Good afternoon, everyone. I’m Stephen Oliver, Vice President of Investor Relations. Thank you for joining Navitas Semiconductor’s first quarter 2024 results conference call. I’m joined today by Gene Sheridan, our Chairman, President, CEO, and Co-Founder; and Janet Chou, EVP, 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 sections in our most recent 10-K and 10-Qs. Our estimates or other forward-looking statements may change, and Navitas assumes no obligation to update forward-looking statements to reflect actual results, change assumptions, or other events that may occur, except as required by law.
And now, over to Gene Sheridan, CEO.
Gene Sheridan: Thanks, Steve, and thanks to all of you for joining us today. I’m pleased to announce Q1 revenue of $23.2 million, which reflects 73% year-on-year growth. These results reflect continued market leadership with our GaN technology displacing silicon in our EVTECH [ph] mobile charger market, but also expansion into home appliance and AI-based data centers with continuing shipments of our leading edge GeneSiC technology into the industrial, EV, solar, and energy storage segments. Let me give further specifics in each of our target markets. In data centers, AI is driving an unprecedented and accelerated increase in power requirements. Traditional data center processors required only 300 to 400 watts each last year, while NVIDIA’s latest generation prevented 700 watts, and now the recently announced Blackwell chipset requires well over 1,000 watts.
This 300% increase in power in just 18 months in combination with the EU-driven titanium standard that requires a 96% minimum energy efficiency creates a very big challenge for our power supply customers and a very big opportunity for Navitas. In the last 6 months, we have stepped up to that challenge, enabling server power supplies to increase from 3.2 kilowatts at 96% efficiency to 4.5 kilowatts at 97% efficiency, and now we are well on our way to 8 to 10 kilowatts at 97% to be delivered to our customers later this year. These advances are attributable to our leading-edge GaNSafe technology, combined with our industry-leading Gen-3 Fast silicon carbide and our unique data center system design capability. We are pleased to announce three major design wins at some of the world’s largest power supply companies.
Taken in combination with over 30 customer projects now in development, in the coming quarters, we expect to enable GaN-based data centers with AWS, Azure, Google, Supermicro, Inspur and Baidu. In total, we anticipate multiple millions of revenue this year and $10 million to $20 million in 2025 all being accelerated by these recent AI developments, which we expect to continue for years if not decades to come. In EV, we are seeing a significant expansion in our customer pipeline given strong penetration into mainstream passenger battery EVs and also plug-in hybrids, commercial EVs and even fuel cell hydrogen clean energy cars. Our EV system design team originally created a 6.6 kilowatt onboard charger platform, which is driving significant customer adoption.
Recently, we have launched a 22 kilowatt OBC platform that enables 3x faster charging, while delivering double the power density up to 30% greater energy saving and 40% lighter weight relative to comparable solutions on the market. These system capabilities are once again enabled by a combination of our Gen-3 Fast silicon carbide and our GaNSafe industry-leading technologies. We anticipate these platforms will drive considerable new revenues with additional silicon carbide customer projects ramping in the first half of 2025 and, again, EV adoption on track to ramp in the second half of 2025. In total, we are now engaged with over 160 EV-related customer projects across all major regions, which are expected to drive tens of millions of sales in 2025, and these projects have already increased our total EV pipeline by over 50%, since we’ve reported our $400 million pipeline in December.
In the Appliance and Industrial segments, we are also making excellent progress. Our latest motor-optimized GaNSense half-bridge now has over 15 customer projects in development, with major wins at a European leader in hair care that will launch at the end of this year, a Tier 1 U.S.-based dishwasher supplier, and two of the top European leaders in pumps and motors, which will all launch in 2025. All told, GaNSense half-bridge total pipeline is now over $100 million in home appliance. In more industrial applications, our latest Gen-3 Fast silicon carbide and GaNSafe technology are achieving rapid adoption in over 25 customer developments, with over $150 million pipeline potential. Combining these together with other opportunities, our appliance and industrial pipeline has grown significantly beyond $360 million that we reported in December.
In Solar and Energy Storage, we are seeing signs of recovery with six new wins across U.S., Europe, and Asia for solar optimizers, micro-inverters, string inverters, and energy-storage applications, all expected to start ramping in 2025. In particular, a major micro-inverter leader has publicly committed to a major transition to GaN double-ramp in the first half of 2025, which we expect represents tens of millions in annual revenue potential. In total, our solar and energy storage pipeline has also increased significantly beyond the $250 million we reported in December. In Mobile and Consumer markets, we continue to see strength as all major mobile OEMs across smartphone, tablet, and notebooks, continue to adopt GaN to replace silicon in a growing percentage of their chargers, especially those at 65 watts and above a sweet spot for GaN ICs. In Q1, we added over 20 new fast chargers into production, taking the total released customer products to over 450.
This includes 10 of the top 10 mobile OEMs across smartphone and notebooks. Notably, Xiaomi launched another two smartphone models, the Mi 14 Ultra and the CIVI 4 Pro, using our Gen-4 GaNSense ICs to support ultra-fast charging. And Lenovo launched the Thinkbook 170-watt desktop 5-port charger and docking station with Gen-4 GaNSense. Finally, I’m excited to announce that all new GaN IC family we call GaNSlim. GaNSlim offers all the impressive features of our existing GaNSense technology such as integrated drive and lossless current sensing, but also slims down the solution by integrating additional external components, further simplifying the system design and reducing customer manufacturing costs. GaNSlim is a major step forward that could increase our GaN TAM by enabling lower system costs compared to silicon design for many applications.
GaNSlim targets applications under 500 watts across mobile consumer and home appliance. While the formal product launch will not occur until June, we started sampling just two months ago and already have over 20 customer projects in development and added over $20 million to our pipeline. We anticipate over $10 million in new revenue for 2025 from our GaNSlim product line. Overall, we have not yet observed any signs of a broader market recovery in the second half of the year and this may translate to a more moderated growth in 2024. Nonetheless, we’re very pleased with the significant success and adoption of our latest industry-leading technologies, GaNSafe, GaNSense half-bridge ICs, Gen-3 Fast silicon carbide and our newest GaNSlim family.
All of which are driving important increases in our customer pipeline that is increasing nearly 30% from December to $1.6 billion. Much of that existing opportunity in pipeline growth is coming from new 2025 production programs across all major regions end markets, which is increasing our confidence for strong diverse growth for 2025 and beyond. With that, let me turn it over to our CFO, Janet Chou to discuss the financials.
Janet Chou: Thank you, Gene. In my comments today, I will first review our first quarter financial results and I’ll take you through our outlook for the second quarter. Revenue in the first quarter of 2024 grew 73% year-over-year to $23.2 million, slightly above the midpoint of our guidance range. While we are experiencing similar macroeconomic factors as others, in certain of our end markets such as EV, industrial, and solar, our mobile business was shown in the first quarter demonstrating the benefits of our smaller, faster, more energy efficient technology as we continue to gain significant traction in mobile and consumer charging applications. Before addressing expenses, I’d like to refer you to the GAAP to non-GAAP reconciliation in our press release earlier today.
In the rest of my commentary, I will refer to non-GAAP expense measures. Gross margin in the first quarter was 41.1%, the same as the first quarter of 2023 due to mobile market product mix as we continue to see strength in that part of our business. Total operating expenses for the first quarter were $21.3 million, comprised of SG&A expenses of $8.5 million and R&D expenses of $12.9 million. This expense increase of 20% year-over-year is much slower than our revenue growth as we sharpen our focus on profitability, while continuing to emphasize investments in new products, technologies, and emerging markets. The sequential growth was primarily driven by higher payroll taxes and annual salary increases. As expected, we sequentially increased our R&D to support significant new product developments, like GaNSlim and many others plan to launch in this year and next.
Putting all this together, the loss from operations for the first quarter of 2024 was $11.8 million, compared to a loss from operations of $12.3 million in the first quarter of 2023. Our weighted average share count for the first quarter was 180 million shares. Turning to the balance sheet, it remains very strong with high levels of liquidity. Cash and cash equivalents at quarter end were $129.7 million and would continue to carry no debt. Accounts receivable declined to $22.2 million compared to $25.9 million in the prior quarter. Inventory increased to $33.2 million compared to $23.2 million in the prior quarter. The inventory increase reflects additional strategic purchases of silicon carbide materials and increases to support major product launches and customer program runs later in the year.
Moving on to guidance for the second quarter, we currently expect revenues of $20 million plus or minus $500,000. At the midpoint, this represents year-over-year growth of more than 10% compared to the $18.1 million were recorded in the second quarter of 2023. And the guidance is down sequentially from the first quarter due to decreased demand in our EV, solar, and industrial markets, partially offset by projected continued strength in the mobile market and initial ramp for data centers. Gross margin for the second quarter is expected to be approximately 40%, plus or minus 50 basis points, as our mix continues to lean more towards the mobile market in the near-term. As we move through the year, we expect margin improvement will align with growth in higher margin market.
In total, our non-GAAP operating expenses in the second quarter are expected to be approximately $21.5 million, and this excludes stock-based compensation and amortization of intangible assets. Although we will continue to invest in growth-oriented initiatives, particularly in R&D, we expect growth in operating expense dollars will be modest during 2024. In closing, while we are not immune to some of the same macro trends seen by others, we continue to deliver growth that significantly outpaces the overall power semiconductor market. We are very pleased with the customer reception and adoption of our new products, the expansion of our customer pipeline, and the outlook for much faster growth as some of our end markets recover. Operator, let’s begin the Q&A session.
Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of Kevin Cassidy with Rosenblatt Securities. Please go ahead.
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