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spk01: Good day and welcome to the Navitas Semiconductor Q3 23 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. In the interest of time, we ask that you keep it to one question and one follow-up per person. If you would like to withdraw your question, please press star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants this call is being recorded. Thank you. I'd now like to welcome Stephen Oliver, Vice President of Corporate Marketing and Investor Relations to begin the conference.
spk09: Stephen, over to you. Good afternoon, everyone.
spk10: I'm Stephen Oliver, Vice President of Corporate Marketing and Investor Relations. Thank you for joining Navitas Semiconductor's third 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 third 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 include factors that could cause actual results to differ from our forward-looking statements, as 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, change assumptions, or other events that may occur, except as required by law.
spk09: And now, Over to Gene Sheridan, CEO. Thank you, Steve, and thanks to everyone for joining the call today.
spk04: As we continue our mission to electrify our world with next-generation power electronics, I'm pleased to announce another record quarter for Novitas as our gallium nitride and silicon carbide technologies continue to display legacy power silicon in traditional markets and enable and accelerate new energy markets. Our Q3 revenues increased to $22 million, up 22% quarter-on-quarter, and up 115% from Q3 of last year. On a non-GAAP basis, gross margin also continued to increase for the fourth quarter in a row to 42.1%, up from 41.5% sequentially, and up from 38.4% in Q3 last year. We also remain confident that we'll more than double revenues in total for 2023 as compared to 2022. Just yesterday, Navikos' dramatic growth story was recognized for the second year running by Deloitte, including our company in their Fast 500 list. With annual revenue increasing over 2,000% in just three years, Navikos is one of the fastest growth tech companies. In addition to our strong financial performance, it's a very exciting time at Navikos as we're launching four major new technology platforms in the second half of this year. Our GAN Safe technology, launched last quarter, sets the new benchmark in our industry as the world's most protected, most reliable, and highest performance GAN power semiconductors. With advanced protection, higher power capability, and cool operation, GAN Safe breaks the glass ceiling that has prevented gallium nitride from entering the high-power, high-reliability markets for a decade. Now, applications from AI data centers and solar inverters to EV powertrains and traction drives can benefit from this high-speed, feature-rich technology for higher power density, higher efficiency, robust reliability, faster charging, and lower system costs. We're also launching our Generation 4 GaN Sense HapRidge ICs, which are our most integrated GaN devices, replacing dozens of components with a single GaN IC to reduce footprint simplify design, and enable switching frequencies up to two megahertz in mobile fast chargers and consumer adapters. For home appliance motors, pumps, and compressors, these application-specific Generation 4 ICs feature lossless current sensing and programmable turn-on and turn-off for efficient, small, quiet power delivery. This quarter, we're also launching a new generation of our Genesys technology called Gen3 Fast, with switching performance up to 50% better than competition. Together, Gen3 fast silicon carbide and GaN-safe power ICs are targeting electric vehicles, roadside chargers, solar inverters, energy storage, data center, and industrial applications in the 1 to 30 kilowatt range. The fourth, and potentially the most exciting and impactful announcement, is a breakthrough innovation called bi-directional GaN. Now, for the first time, GaN ICs can operate quickly and efficiently, conducting and blocking current in both directions. This bidirectional GaN allows the replacement of up to four discrete power transistors providing similar functionality while dramatically reducing component counts, costs, and complexity, and delivering the speed and efficiency benefits of gallium nitride. We believe this invention has the potential to create innovative advances in energy storage, grid infrastructure, motor drives, and many other emerging topologies and architectures across multiple markets. Much more to come on this front. Let me now turn to updates for each of our target markets and how these new technologies are already having an impact. In the mobile market, we continue to see strength and upside led by our major China OEMs, Xiaomi and Oppo, as they are rapidly expanding their use of GAN in a broader range with their mobile chargers. In fact, we now anticipate that about 30% of their total mobile charger shipments in 2024 will utilize GaN. This is a major milestone for our whole industry. GaN has moved from beachhead to mainstream. In addition, we just announced a major win as Navitas GaN has been adopted at Samsung to power the latest Galaxy S23, among other models, and is already contributing to our Q3 and Q4 revenue ramps. Our new Gen 4 GaNSense HEPRIDGE is further accelerating our success in mobile, as we now have over a dozen customer projects in development, targeting the fastest charging segment of 100 watts or more, already projected to contribute over $10 million per year in revenue, ramping next year. In the solar and energy storage markets, we observe the same near-term macro market softness that others have observed, creating headwinds for our silicon carbide business. However, as GaN and sodium carbide are displacement technologies versus legacy silicon MOSFETs and IGBTs, we also see robust growth in our customer pipeline. Our current outlook for the solar market, consistent with what we've seen from various analysts, is for a recovery in the second half of 2024. And based on our pipeline and customer activity, we expect our revenue growth in solar to exceed that of the industry in 2024 and beyond. It's a similar story in EV. While some OEM forecasts have been tempered, we are experiencing significant increases in our customer pipeline in both onboard and roadside chargers. Our EV system design center has just completed development of a 6.6 kilowatt, 800 volt onboard charger platform, which sets all new industry benchmarks in system efficiency, density, and cost. We see significant customer interest in this exciting new hybrid platform, which achieves such high performance by integrating both our latest Gen3 fast solar-carbon devices and our new GAN safe ICs. In data center, as discussed previously, the recent dramatic technology and market developments surrounding AI have created unprecedented demand for more power, higher energy efficiency, and greater power density. Our system design center has really stepped up to the challenge with a new 4.5 kilowatt AC to DC platform design that offers energy efficiency well in excess of the 96% titanium plus standard and has twice the power density of previous best-in-class legacy silicon designs. As a result, the number of projects in our customer pipeline have grown significantly in the past quarter. The customer pipeline in appliance and industrial is also growing significantly as major OEMs initiate GAN or sodium carbonate programs to meet regulatory requirements for energy efficiency and consumer demands for power density improvements, along with the transitions from gas-powered heating and cooling systems to fast adoption of heat pump technology. As mentioned earlier, our Gen 4 GAN-sense average ICs are application-optimized and a big draw for 100 to 1,000-watt thermal appliance applications. with Gen3 fast sodium carbide and GAN safe power as these addressing higher power industrial markets. Looking across all of our target markets, the system benefits derived from GAN and sodium carbide are amplified by long-term specular tailwinds. These include electrical energy source conversion from fossil fuels to renewables, gas-powered vehicles transitioning to all forms of electric transportation, and the intense and rapidly accelerating power demands of AI and edge computing. Additional momentum is provided by continued energy efficiency and noise pollution regulations. While we're not immune to some market slowdowns, as displacement technologies in traditional markets and as accelerating and enabling technologies in energy markets, we expect Navitas' GAN and sodium carbonate revenues to far exceed market growth rates in 2024 and for years to come. You can hear more about our growth plans at our exciting in-depth, in-person Investor Day held in conjunction with our new headquarters opening day in Torrance, California on December 12th. This agenda includes a deep dive into our four new technology platforms, highlighted applications in growing markets, customer pipeline review, financial outlook, insightful customer presentations, and an immersive introduction to Planet Navitas, the future of our electrified planet. We encourage you to join the Novitas management team, board of directors, customers, media, and special guests at our new headquarters for this important event. And now, over to Ron to review the financials.
spk00: Thank you, Gene. In my comments today, I will first take you through our third quarter results, and then I'll walk you through our outlook for the fourth quarter and some of the market dynamics we're seeing. Revenue in the third quarter of 2023 was, again, well above our guidance. growing 115% year-over-year and 22% sequentially to $22.0 million. The beat was driven primarily by continued strong growth in the mobile market and initial mass production for a major Tier 1 onboard charger customer. Our results were tempered somewhat by macroeconomic factors impacting high-end consumer and solar markets. Nevertheless, we continue to see strong positive indicators for revenue growth over the near term and long term. Our pipeline continues to grow and is at a new record, and we continue to experience strong bookings as evidenced by entering the fourth quarter nearly fully booked. Before addressing expenses, I'd like to refer you to the GAAP to non-GAAP reconciliations in our press release earlier today. In the rest of my commentary, I will refer to non-GAAP expense measures. Growth margin in the third quarter increased to 42.1% from 41.5% in the second quarter of 2023 and 38.4% in the second quarter of 2022. Growth margins in the quarter were at the higher end of our guidance due primarily to excellent yields exceeding our internal targets which we believe already lead the industry. Third quarter total operating expenses were $17.9 million, comprising SG&A expense of $7.4 million and R&D of $10.5 million. This is in line with our guidance, and as we've discussed in the past, as revenue scales, we are investing in our business in a disciplined manner as we focus on growing profitability. Putting all this together, the loss from operations was $8.7 million compared to a loss from operations of 10.3 million in the third quarter of 2022. Our weighted average share count for the third quarter was 175.1 million shares. Turning to the balance sheet, it remains very strong with high levels of liquidity. Cash and cash equivalents at quarter end were $176.7 million. and we continue to carry no debt. Accounts receivable were $17.6 million compared to $15.2 million in the prior quarter, reflecting higher sales during the quarter, but our day sales outstanding improved as we continued to focus on working capital efficiency. Inventory declined to $15.9 million compared to $18.9 million in the prior quarter, And days of inventory also continued to improve, better by nearly 50% from one year ago as we continued to move towards exceeding our inventory turnover goal of better than three times. We took an adjustment of $2 million during the quarter for reserves against GAM products that was two generations old as our customers and end markets migrate towards our Gen 4 and other higher performance and higher integration products like GAM Sense, and GAN Sense control. Moving on to guidance for the fourth quarter, we currently expect revenues ranging between $25 to $26 million. At the midpoint, this represents substantial year-over-year growth of 106% over the $12.3 million we recorded in the fourth quarter of 2022, and an expected 16% sequential increase over the third quarter of 2023. Our guidance is based on continued silicon carbide capacity expansion, continued strength in mobile, and ongoing market share gains in EV onboard charging. I'd also like to note that at the midpoint of guidance, our revenues for 2023 will have increased 108% over 2022, which is consistent with what we indicated at the beginning of this year. Those margins for the fourth quarter are expected to improve to approximately 42.5% plus or minus 30 basis points. In total, our non-GAAP operating expenses in the fourth quarter are expected to be approximately $20 million, and this excludes stock-based compensation and amortization of intangible assets. We continue to invest in growth-oriented initiatives for our end markets. As we have indicated before, we expect increases in our spending will be substantially less than growth in our revenues as we continue to see leverage in our business model. To put that in perspective, compared to the fourth quarter of 2022, at the midpoint of our guidance, we expect revenues in the fourth quarter of 2023 to grow 106%, yet operating expenses based on our guidance are expected to grow only 18% over the same period. For the fourth quarter of 2023, we expect our weighted average share count to be approximately 179 million shares, stock-based comp to be approximately $12 million, and amortization of intangible assets to be approximately $4.8 million. In closing, we are extremely pleased with the results for the quarter and our near-term and long-term outlook. While we see similar macro trends as others, such as the impact of higher interest rates on the high-end consumer and solo markets, and we aren't entirely immune to those trends, as our results indicate, we are showing that we can outperform the market and expect that going forward, we will continue to grow significantly faster than the overall growth rates in our targeted end markets. Operator, let's begin the Q&A session.
spk01: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. In the interest of time, we ask that you keep it to one question and one follow-up question per person. We'll pause for just a moment to compile the Q&A roster. And your first question comes from the line of Quinn Bolton of Needham and Company. Your line is open.
spk05: Hey, guys. Congratulations on the results. I guess maybe, Gene, it sounds like you're going to give us a lot more detail on the four new platforms, but wondering if you might be able to just kind of give us some direction for Gantt Sense, Gantt Safe, the Gen 3 SICK, and the bi-directional. What end markets are these platforms targeting? Are there specific target end markets for each platform, or do these platforms kind of address most of the end markets you're targeting?
spk04: Yeah, great question, Quinn. Yeah, the Gansafe and Gen3 Fast silicon carbide are both targeting higher power, more industrial markets. So in general, you'll see them going into data center, solar, energy storage, EV, and industrial markets. Gansense Halfbridge, the Generation 4 Gansense Halfbridge that we're just launching, is very targeted on mobile and consumer at the higher power range, 100 watts to maybe 500 watts, bidirectional GAN, the fourth platform, that's the newest. It's a technology announcement, so the actual products will be launching next year. And it's such a groundbreaking thing, we're still debating and discussing all the different applications it might go into. It could be anything from mechanical circuit breakers being displaced by semiconductor ones, very fast, very efficient, very reliable. It could be into AC to AC motors, which are huge in industrial and appliance markets and others. So it's pretty far-reaching, and we'll be exploring that further with customers as we launch the products next year.
spk05: I guess I wanted to sort of ask a question on the bidirectional. I thought, at least in concept, a FET tends to be bidirectional in nature, right? And so can you give a little bit more detail what's unique about the new bidirectional GAN FET that you've developed recently? just a little bit more color would be helpful.
spk04: Yeah, yeah, definitely. So a number of power semiconductors can be bidirectional in flowing the current. The problems are not bidirectional in blocking the current. So if you truly have a circuit that requires you to be able to block in both directions, with silicon, whether it's an IGBT or a superjunction or even existing GaN and silicon carbide, you have to put them back-to-back. So one can be blocking in one direction while the other one's flowing the current and vice versa. So you end up doubling up the components. And if you want the same performance, we're actually doing this all monolithically with a single chip. And if you want the same performance, the way the kind of math or performance works out, it could be replacing not only two back-to-backs, but even four back-to-backs for the same performance with a single chip and a fraction of the size, cost, and the great energy efficiency and speed you get with gallium nitride. Got it.
spk05: Thank you. I'll jump back in the queue.
spk04: Thank you, Quinn.
spk01: Your next question comes from Jack Egan of Charter Equity Research. Your line is open.
spk03: Hey, guys. Thanks for taking the questions. So regarding the insourcing of epitaxy, the different types of epi reactors for silicon carbide kind of come with a set of tradeoffs regarding throughput and epi uniformity. So I was just curious about your primary rationale for insourcing epitaxy? Was it largely just to increase throughput and prevent, you know, any bottlenecks from developing or does insourcing actually give you, you know, more control and, you know, improve yields or quality or anything like that?
spk04: Yeah, great question. I think there's a number of benefits. You just touched on most of them, right? But I think I'd put cost number one. I think epi has matured to the point that we can bring this in-house with a little bit of help from the equipment supplier and we've hired a top industry expert in epi that's done this for two other suppliers so we think we've got the capability to do it and number one is the cost reduction coming from having it in-house but then there's a bunch of secondary benefits control over your supply chain likely shorter cycle times assuring ourselves of having the capacity exactly when we need it in the future controlling quality And even I wouldn't rule out intellectual property, different things, inventions that are going to give us fundamental advantage compared to others that are buying outsourced epi.
spk03: Got it. That makes sense. And for the new Gansense ICs, the PR said that they're expected to contribute $10 million to annual revenue. Is all that incremental, or might some of that come at the expense of growth in some of your older product areas? Yes.
spk04: Yeah, that is a great question. I actually do believe it's all incremental. I'll clarify it's $10 million annualized starting to ramp throughout next year, so it wouldn't necessarily be $10 million for the full year, but this is also emerging, developing things. We've just started sampling the products in the last few months and launching it this quarter, so we expect those numbers to grow over time.
spk09: Got it. Okay, thanks. That's helpful. You bet.
spk01: Your next question comes from the line of Joe Moore of Morgan Stanley. Your line is open.
spk07: Great, thank you. I wonder if you could touch on your smartphone demand, maybe starting with China. You mentioned the strength there. How much of that do you think is penetration for you guys versus a recovery in that market, and kind of where do you think you stand with inventories there?
spk04: Yeah, definitely. Thanks, Joe. Yeah, smartphone is obviously a very pleasant upside for us. It started in Q2 of this year and has gone from sort of strength to strength. It started and continues to be heavily based in China. Xiaomi and Oppo are the two that we highlighted. We've traditionally had a very strong relationship with both of them, very high market share with our GAN. So it's super exciting to see this kind of upside. To your question, though, about where is it coming from, it's actually a classic case of this displacement technology that we have today. they don't have to ship any more chargers for their numbers to grow dramatically. We mentioned that 30% of their total number of chargers next year we are projecting to use gallium nitride. So even if their business was flat, you could be going from 10% or 15% adoption rates to 20% or 30% driving a lot of that revenue. So I think a lot of it is just conversion or displacement from legacy silicon over to more efficient, more powerful, faster-charging gallium nitride. And it's not just China. We did mention also the great success we're having at Samsung with the S23. That's already driving second half revenue growth as well.
spk07: Yeah, and as a follow-up, I did want to ask about the S23 win. Can you talk about what kind of penetration you might see there and how pervasive that technology could be within Samsung?
spk04: Yeah, we don't have specific adoption percentages on the Samsung market. stuff like we do with Xiaomi and Oppo. Clearly, they're earlier stage, but I think Xiaomi and Oppo have been kind of leading the charge, if you will, for mobile charging for the last few years since GAN adoption got started. So we see the other players in Korea and U.S. following in those footsteps, if you will, from a GAN adoption perspective. It is being sold as, I believe, an inbox or at least an optional inbox. So when you go to buy that S23, from our experience, the attach rates on even what we call optional inbox can be very, very high, especially when it's promoted as a GAN charger, a fast charger, which I believe is the case here.
spk09: Great, thank you.
spk01: As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. Your next question comes from Jonathan Wenting of CJF Securities. Your line is open.
spk02: Hi, good afternoon. Thank you for taking my questions in this quarter. You guys mentioned some slowdowns that you saw in particular on markets, solar, high-end consumer. Would you say that's a net negative for your new term compared to where you expected it to be, or is that being offset by these bookings and new business in other places just versus your internal plan?
spk04: Yeah, we haven't – thanks, John. We haven't quantified that adverse impact, but there's no doubt we could have done even higher growth rates than we're achieving today in the near-term quarters if we didn't see some slowdown. in consumer and solar. With that said, we see strength in the other markets. We see strength in our pipeline growing, both in number of customers and for our projects. So despite kind of a mixed market environment out there and end-quip-it slowdowns in growth rates in some cases, we see this growing significantly faster than the market. As we mentioned in our prepared remarks, I think that probably translates to 50% growth or more next year. We haven't given official guidance, but as an early indication, you know, that speaks to the strong growth despite kind of a choppier mixed market environment out there.
spk02: Okay, great. Thank you. And then, Ron, you mentioned something about entering Q4 fully booked. Is that versus your existing capacity, or how should we qualify that comment just to help me understand what it means to be fully booked?
spk00: Yeah, so just very simply, when I say reference fully booked, as we look at Our revenue outlook for the quarter and our capacity available, it's effectively fully booked. So any guidance I gave would suggest that most of that was in backlog at the beginning of the quarter.
spk02: Got it. And then just to follow on to that, how do you improve the capacity going forward to drive that, you know, the growth that Gene just mentioned in the past comments?
spk04: Yeah, I could grab that one. So, you know, we mentioned early this year, maybe it was even late last year, we signed an agreement with XFAB for a 500% increase in capacity. That obviously is a big deal. That includes material and fab capacity. And that's throughout this year and into next year. So we're benefiting today by growing not only our backlog, as Ron said, but growing that capacity quarter by quarter appreciably throughout this year and next year. In a similar way, TSMC expanded the GAN capacity and tripled it and finished that one up last year. So we're in a pretty strong position to fill. In fact, we're shipping all we can build on GAN as well. Not that we don't have the capacity, but the orders keep coming in with very short lead times. So we're constantly scrambling to try to fulfill those upside demands in Q3 and Q4.
spk09: Got it. That's great, Collin. Thank you, Gene. You bet. Thanks, John.
spk01: Once again, if you do wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. Your next question comes from Quinn Bolton of Needham & Company. Your line is open.
spk05: Hey, just had a quick follow-up. The earn-out liability seems to be jumping all over the place. I think it was $70 million on the balance sheet last quarter down to $30-something million this quarter. Just wondering if you might be able to help us, you know, as we think about that earn-out liability for the Genesec acquisition. you know, as liability comes down, does that mean that the, you know, Genesic revenue outlook is, you know, negatively affected or, you know, what should we be reading into kind of the Genesic outlook as that liability comes down?
spk00: Yeah. Hey, Quinn, good question. Just as a point of clarification, with the Genesic acquisition, there was an earn-out as part of the deal, but we're past the period where that earn-out ran. So what you see on the balance sheet today, that earn-out liability, actually goes back to the IPO. And that earn-out liability goes up and down based on our stock price. So it has nothing to do with the Genesic acquisition and is only related to earn-out related to the IPO.
spk05: Got it.
spk09: Thanks for the clarification, Ron. Yeah, you bet.
spk01: Your next question comes from Mark Lippicus from Jefferies. Your line is open.
spk08: Hi. Thanks for taking my question. Clarification, a couple of questions. So to the question about the mobile strength, so it sounds like that this is a penetration or expansion, you expanding inside of product lines of your customers, and you haven't yet seen... you know, broader handsets start to bounce up off the bottom. Is that an accurate interpretation of what you were qualifying for your growth in mobile?
spk04: Yeah, it's a good question, Mark. It's clearly adoption or conversion from silicon is the main driver. I actually couldn't quote, you know, a bottom or their total mobile charger shipments. Probably Xiaomi and Oppo, of course, are in a better position to talk about how much they're shipping and where there might be a bottom overall, but we're certainly the beneficiary of significant conversion from silicon to GAN. So it's hard for me to quantify the two, but clearly the predominant factor is conversion from legacy silicon over to our GAN ICs.
spk08: Gotcha. Okay, that's helpful. And is it fair to assume that that linearity of bookings that you kind of ramped through the quarter? And is that fair? I mean, it kind of sounds like you guys are really hitting your stride here.
spk09: What do you mean by linearity, maybe? Or could you clarify?
spk08: Well, if you think about, you know, what your total bookings are for the quarter, you could have a third, a third, a third, or, you know, it could have ramped, you know, 20, 40, 50, you know, 50 or something like that as 20, 30, 50 bookings ramping through the quarter.
spk04: Yeah, I mean, I think it's fair to say while we started the quarter pretty heavily booked up, as Ron said, I also mentioned we continue to get sort of short lead time upside orders, especially from the mobile guys. They historically don't give you a ton of advance notice, but we'd certainly like to be more linear. So we're building everything we can in the back of the quarter just because that's when some of these upsides orders are also coming in early in the quarter, kind of within cycle time, putting pressure on us to try to ramp up faster.
spk08: Gotcha. And then, Ron, you talked about the cash balance. How much cash do you feel like you need to have on the balance sheet to run the company? Could you talk about appetite for further acquisitions there? going forward? And if so, what kind of is in your sweet spot? Thanks.
spk00: Yeah, sure. Good question. Well, with respect to the balance sheet and cash, you know, clearly we have enough cash and have been consistent to certainly run the business to operating break-even and execute on our EPI expansion that we've talked about before. I think beyond that, you know, our need to to approach the capital markets, raise equity or debt, would be tied to a transaction, such as an acquisition. So today, though, we feel really good about the balance sheet and where we stand with cash, no debt. I think we're being much better with working capital and being efficient with working capital, certainly efficient with our CapEx. So we're certainly comfortable with the balance sheet and where it sits today.
spk09: Fair enough. Thank you.
spk01: Your next question comes from the line of Kevin Cassidy of Rosenblatt Securities. Your line is open.
spk06: Thanks, and congratulations on the great results. And I came on the call a little late, so if I'm repeating a question, I apologize. But have your costs come down, as you've mentioned, tripling the capacity with TSMC, and then also there's just lots of news in the in the press about silicon carbide wafer substrates coming down in price. Are you able to benefit from that? And is that helping gross margin expansion?
spk04: Yeah, I think it's certainly a driver. I mean, we're coming out of an environment where I think people are dealing with cost increases, right? What we saw at TSMC on Gann and other places throughout the whole industry. So I don't see it reversing that dramatically that quickly. I think costs are reasonably stable. I think prices are reasonably stable. So I don't think it translates into big gross margin jumps. I think where we can capitalize on cost reductions, obviously in-house SEPI is one example. The yield's getting a bit better than even we expected with our great yields that Ron talked about. We're generally going to try to use those for better pricing power to drive market share and continue the great growth and adoption rates as a general approach. But with that said, we're also committed to our margin expansion plans, as we've always talked about, and we continue to balance the two.
spk06: And I guess I would assume the four major new tech platforms that you have are all going to be margin accretive.
spk04: Yeah, exactly. We generally expect any new products, especially big ones like these, are going to be highly valuable in bringing our margins up, accelerating that margin expansion, and delivering margins that are well above whatever the corporate average is at the time.
spk09: Okay, great. Thanks again. Thanks.
spk06: Congratulations again. There we go.
spk01: Your next question comes from Jack Egan of Charter Equity Research. Your line is open.
spk03: Hey, guys. Thanks for taking the follow-up. I just had one quick one. I was curious about the inventory write-off that you had in the quarter. Was that just kind of like a one-time thing, or could it be implying that there's some risk of obsolescence with some of your products? I could see also how that's just the technology moving so fast that things – become obsolete pretty quickly, but I'm just curious on your thoughts on that.
spk00: Yeah, Jack, good question, and you nailed it. You answered the question for me almost. So the write-off had to do with older generation, Gen 1, Gen 2 product, and our customer base, as we want them to, is moving very quickly to our Gen 3, Gen 4, and beyond products, and that's happening right now. And you try to kind of balance that transition. and it's hard to do. And so what we ended up this quarter as we look out over the next 12 to 15 months, we had some older generation product on the books, and the right thing to do is take a reserve against it. So it's a one-time thing against those products, and, again, it's something we evaluate every quarter. But that's what drove it. So it's really about a transition to next-gen products.
spk03: Got it. That makes sense. Okay, well, that's all from me. Thanks.
spk01: As a reminder, if you would like to ask a question, please press star followed by 1 on your telephone and wait for your name to be announced. That is star 1 if you wish to ask a question. And as there are no further questions, I would like to thank our speakers for today's presentation. And thank you all for joining us. This now concludes today's conference. You may now disconnect.
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