Navitas Semiconductor Corporation

Good day, and thank you for joining Navitas Semiconductor second quarter 2023 earnings call. I'd like to turn the call over to Stephen Oliver. You may begin, sir.

Good afternoon, everyone. I'm Stephen Oliver, Vice President of Corporate Marketing and Investor Relations. Thank you for joining Navitas Semiconductor's second quarter 2023 results conference call. I'm joined today by Jean 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 one 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 second 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 10K and 10Qs. 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.

Thanks a lot, Steve. In Q2, we saw continued growth in revenues and margins, along with significant customer pipeline progress across all market segments. Q2 revenue increased to $18.1 million, up 110% from the second quarter of 2022, and up 35% sequentially from the first quarter of 2023, with gross margins climbing to 41.5%, up from 41.1% in Q1. Despite continued global softness in the broader consumer market and also some slowdown in the growth of the solar market given a rise in interest rates, I am very pleased that we are delivering this robust growth across all markets, and in particular, a nice rebound in the mobile market as GaN chargers reach cost parity with silicon chargers, enabling the launch of more mainstream models. With solid shipments in Q2 and continued momentum into Q3, we are excited to announce that as of today, we have shipped a cumulative 100 million GaN devices and over 12 million silicon carbide devices. In our electric vehicle business, we are seeing strong growth, particularly in both onboard chargers and roadside fast chargers. Recently, a consortium of seven global car manufacturers, including GM, BMW, and Stellantis announced plans to install 30,000 fast chargers across North America. This translates to an additional opportunity of up to $100 million for our silicon carbide business in the next few years. As a reminder, our silicon carbide technology is already used in over 50% of non-Tesla roadside chargers in the U.S. Overall, the opportunity in EV roadside chargers has a market potential of over $600 million per year by 2028. Based on recent developments in the generative AI market, power demands have been doubling every 3.4 months in AI and edge computing with the latest chips such as NVIDIA's GH200 consuming up to 1,000 watts just for a single GPU. When considering data centers may utilize many thousands of processors, this translates into a significant opportunity for our GaN power ICs as silicon-based designs struggle to meet these dramatic increases in the required power, efficiency, and density. We recently announced a 3.2 kilowatt server power supply platform, which delivers an industry-leading 100 watts per cubic inch with over 96% energy efficiency to meet the challenging titanium plus efficiency standard as required by the European Union. This platform is enabling customers to rapidly develop these power supplies with our GAN ICs and has already translated into a doubling of our customer data center pipeline as compared to Q1. In the appliance and industrial segment, we are also seeing a doubling of our customer projects in our pipeline based on the growing need for high efficiency electrified motor drive applications across home appliances, which includes dishwashers, dryers, refrigerators, washing machines, air conditioners, heat pumps, along with hair care products, and also includes industrial applications which utilize our silicon carbide technology for high efficiency factory automation, robotics, and HVAC systems. In solar, despite some market softness, we are experiencing a rapid increase in both the GaN and silicon carbide planned adoption into the solar inverters themselves, as well as a dramatic increase in the energy storage attach rates, which have more than doubled in recent years. One installer is reporting over 60% attach rates adding battery backup to the solar panel installations for residential California customers, and we anticipate such attach rates will approach 90% in coming years. Given these favorable dynamics, the revenue potential for each customer project has increased over 100% in our pipeline for the solar and energy storage segment. In the mobile market, despite the broader global consumer softness, we are experiencing significant growth, particularly in China and Korea. Major new charger developments by leading smartphone suppliers, including Xiaomi, Oppo, Samsung, and a number of others are expanding GAN adoption from performance models to mainstream models, translating into a significant increase in both the number of customer projects in our pipeline and the total revenue potential of those projects. Putting it all together, we're happy to announce a total customer pipeline increase from $760 million in Q1 to over $1 billion in Q2, with important growth in both customer projects and revenue potential across all of our target markets. I'm also very pleased with our progress in expanding manufacturing capacity for both gallium nitride and silicon carbide to ensure we can fully capitalize on this fast growth of our customer pipeline. As previously announced, we are in the midst of ramping our silicon carbide capacity by 5x throughout this year and next as we continue to ship all the silicon carbide devices we can produce. In addition, we're on track with our announced $20 million investment for silicon carbide in-house EPI, which will start with the first EPI reactor installed in Q1 of next year. In aggregate, over the next three years, this investment is expected to support EPI capacity of $200 million per year in revenue, and it will provide appreciable cost reduction and margin expansion. Last year, working closely with our GAN-FAB partner, TSMC, We are benefiting from a 3X increase in capacity that ensures we have plenty of headroom to support our growth objectives in the next two to three years. With the benefits of a $92 million follow-on offering in May, we continue to have a very strong balance sheet that can enable additional strategic manufacturing investments to support even higher growth rates in a highly capital-efficient manner. Today, we are also pleased to announce the first Novitas Investor Day to be held at our new global headquarters in Torrance, California, on November 30th. Investors and analysts are invited to participate in a comprehensive agenda that will include our new Electrify Experience Center that will detail the past, the present, and an exciting vision for the future in the world of electrified power applications. This agenda will also include the announcement of four major new GaN or silicon carbide technology platforms, which we believe will transform many of our target markets. We will also provide a detailed review of our customer pipeline, showcase some exciting surprise guest speakers, and provide a high-level view on our 2024 outlook. In summary, I'm very pleased with our accelerating progress across financial results, customer pipeline, market adoption, technology development, and manufacturing capacity expansion. We're excited about the significant opportunities in front of us, which are reflected in our results. Navitas is the only pure play next generation power semiconductor company. And with our vision and our capability to electrify our world, we believe we'll continue to be one of the fastest growing semiconductor companies in the industry. Now, let me turn it over to our CFO, Ron Shelton, to update on those financial results as well as our guidance.