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spk00: Good afternoon. My name is Sarah and I'll be your conference operator. I would like to welcome everyone to today's Transform Inc Business Update conference call. All lines have been placed on mute to prevent any background noise. After the speaker's prepared 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. If you would like to withdraw your question, press the pound key. Please be advised that today's conference is being recorded. I would like to turn the call over to Brett Perry of Shelton Group Investor Relations. Brett, please go ahead.
spk04: Good afternoon, and welcome to Transform's quarterly business update conference call. Joining us today from Transform are Mario Rivas, Chief Executive Officer, Premit Parikh, Co-Founder, President, and Chief Operating Officer, and Cameron McCauley, Chief Financial Officer. Before we begin, I'd like to point out that there is a slide presentation associated with today's call, which management will be referencing during the conference call. These slides can be accessed through the webcast link in the Investor Relations section of Transform's website, and they will also be posted and available as a linked PDF subsequent to today's live conference call. Additionally, during the course of this call, the company may make forward-looking statements regarding the company's financial position, strategy, and plans, future operations, specific end markets, and other areas of discussion. It's not possible for the company or management to predict all risks, nor can the company assess the potential impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. In light of these risks, uncertainties, and assumptions, the forward-looking statements discussed during this call may or may not occur, and actual results could differ materially and adversely from those anticipated or implied. Any projections as to the company's future performance represent management estimates as of today, August 16, 2021. Neither the company nor any person assumes responsibility for the accuracy or completeness of the forward-looking statements. The company undertakes no obligation to publicly update these forward-looking statements for any reason after the date of this call to conform such statements to actual results or to changes in the company's expectations. For more detailed information on risks associated with the company's businesses, we refer you to the risk factors described in Transform's S-1, 10-KT, and other subsequent filings with the SEC. With that said, it's now my pleasure to turn the call over to Transform CEO, Mario Rivas, for opening remarks. Mario, please go ahead.
spk01: Thank you, Brad. And thank you, everybody, for joining us today. We look forward to the report on our continued progress during the first half of the year. Feminal for the fiscal first quarter of 2022 increased 33% sequentially to $3.2 million, driven by record product sales. operating expenses on a non-GAAP basis in the fiscal first quarter of 2022 were $4.6 million. On a non-GAAP basis, the net loss for the fiscal quarter of 2022 was $5.3 million, or 13 cents per share. Along with the strong operating performance, the company remains committed to its previously communicated ambition to uplift on NASDAQ later in the calendar year. With that target in mind, In July, we were also excited to strengthen our board with the addition of Ms. Kelly Smails as an independent director, and she comes to us with an extensive semiconductor finance background. With that, and for more details, I pass the call to Primet Parikh.
spk07: Primet Parikh Thank you, Mario, and good afternoon, everyone. TransformTGAN is leading the gallium nitride revolution with commercially ramping disruptive technology in the marketplace. backed by best-in-class gang technology solutions and the industry's strongest IP position, addressing large and growing markets like adapters and chargers for 5G and electric vehicles, technology and solutions validated by strong blue-chip partners and customers, and all of this made possible by our exceptionally talented and experienced teams. We've made very rapid strides in the last quarter and the recent months, particularly market penetration and ramping of the product revenue. After the end of the fiscal first quarter and recently in August, we also completed two important milestones. First, the completion of our AFSW wafer fab joint venture transaction to move forward strongly with our asset-light vertically integrated model, and second, also closing of a $5 million equity investment from an international public company, like we just announced in today's news. For those new to Transform, I will first reiterate some of the overall gain value in market and business opportunities in front of us, along with Transform's solid value proposition, including phenomenal technology and IP with strong manufacturing capability that is the backbone of our growth. Then we will review our key achievements in the quarter and execution priorities. So the reason GAN is on its way to becoming the future of the multi-billion dollar power semiconductor industry is because existing silicon has reached physical limits. In powering the so-called Moore's Law of power conversion, as we term it, intrinsically, gallium nitride performs at higher efficiency and lowest losses versus silicon or silicon carbide. TGAN is leading in delivering on this intrinsic performance potential of GAN along with other GaN companies. In terms of cost and scalability, GaN on silicon is both cost-effective and compatible with downstream silicon wafer fab manufacturing, having already achieved lower system cost solutions versus silicon power today and a strong roadmap for gallium nitride approaching silicon-like device costs. The end result for our power conversion customers is highly efficient, cooler, compact, and cost-effective systems. At the core of our architecture is the TGAN normally of GANFAC platform, which is addressing applications today from adapters and chargers around 45 to 200 plus watts to server enterprise industrial and automotive solutions at 10 kilowatts, packing both high performance with high reliability with a unique integrated combination of a high voltage gallium nitride device with a lower voltage silicon device. As a result, the TGAN, normally off transistor or a FET, achieves the best high-voltage switching of gallium nitride, delivering efficiency, compact size, more robust outside world interface with the silicon FET, by the way, compatible with standard drivers, such as those that already come with modern analog controllers, no need for anything special, demonstrated quality reliability in high volume with a vertically integrated production environment. Some of the metrics we have achieved, It's installed power base over 350 megawatts, device hours in excess of 15 billion field operating hours, with excellent field reliability performance. Another quick recap, TGAN has the capability of complete control and innovation across the value chain. With what we call our asset-light vertically integrated model, we own the key portions of the manufacturing. the core epi-wafer technology, which is a must in our opinion to own and control, the wafer fab, in which we are a joint venture partner with a strong new partner now in place, package manufacturing through subcontractors, but with the control of IP. For example, how to make high-power gallium nitride work in industry-standard thermally robust packages, which others cannot do so, and a strong emphasis on application-driven resources, both internally and and with quality partners, as you saw in press releases last week, for our Qualcomm QC5-compatible 100-watt adapter solution. Overall, we are addressing a tremendous market opportunity in front of us with Gallium Nitride for power conversion, a $3 billion Gantam, as we call it, in 2023, with a further inflection point through the EV powertrain segment to reach $10 billion by the end of the decade. In the near term, our revenues are being derived from power adapters, chargers, computing, data center infrastructure, crypto mining power supplies, followed by broad industrial and energy applications in the near to midterm, to the growth of these large automotive electric vehicles and charging markets in the mid to long term. All of this with strong and growing Gantams. Across the gamut of these applications, transformed gallium nitride solutions deliver higher efficiency, compact systems, and do so reliably with easy-to-use products by customers with proven performance benefits against silicon, silicon carbide, and other GaN solutions. Dissecting this market opportunity further, of the total discrete power semiconductor TAM, which we looked at in this case, the GaN TAM, which is the portion reasonably addressed with current and future planned GaN device offerings, is $1.8 billion today, out of which, as you can see, the biggest segment by far is the power adapters and chargers. While all the segments are growing, with the Gantem growing at a much faster rate than the general power market, the largest market growth opportunities five years from today is expected from the EV segment, going to well over $2 billion, or 10x from what is available today in 2026. So now let's turn our attention to how we are penetrating this market today and how we are driving our growth. We are pleased to report a 12-month quarterly CAGR of unit shipments of over 130% with doubling of power product unit shipments over the last few quarters and meeting our goal of more than tripling this quarter completed in June. What we are aiming for the second half of the calendar year combined, which is from July to December of this year, is a 3x growth in unit shipments over the first half of the calendar year combined. We have to do this keeping in mind supply chain challenges facing everyone in the semiconductor industry, and we watch our external packaging and associated BOM supply with that value chain closely. This rapid growth for transform has been driven by our growth in the adapter and charger market as we continue to capture shared data with superior technology and sustained shipments also in the higher power segments, which has been always our unique forte for quite a while. We have outlined before that adapters and charger customers for GaN adapters and chargers are appreciating T-GaN's reliability, robustness, smaller die size, as much as 50% smaller in some cases, higher figure of merit and performance, leading to an increased pace of design-ins since we fully entered this segment last year. We attempt to capture some of these attributes here in this graphic. First off to note is all GaN products in the market today are normally off, contrary to any confusion that some companies may be causing. How normally off is realized is, of course, each company's own solution, but completely transparent to the customer. In case of transform with our architecture, our GaN fetch can be paired with a multitude of controllers and drivers. By the way, most controllers at this power level, such as required in the adapters and chargers, already have driver ICs integrated for free. So the so-called IC GaN approach sometimes can be redundant or even problematic in such cases. Most gallium nitride operates at higher speed versus silicon. and achieves smaller size and good efficiency, which is why new adapters and chargers are migrating to gallium nitride solution from the leading gallium nitride companies today, including Transform. Our SuperGAN FETs have shown some of the best efficiency and power density, i.e., compactness, combinations in standard adapter architecture, like the QRF, the quasi-resonant flyback, or the ACF, the active clamp flyback, compared to other GAN solutions with a good bomb cost, as our gallium nitride does not need any external biasing networks or bias rail matching networks needed for the e-mode GaN, which is also doing well in the market. One strong benefit of Transforms GaN FET is the proven ability of delivering higher power, and furthermore, doing so in thermally robust packages. Some of the competing e-mode GaN device, due to inherent gate weakness, are frankly difficult to offer in standard leaded package, which are demanded, especially as we go to higher power. Equally important is the quality and reliability and not suffering from any failures or degradation over time, such as have been reported in literature for some of the e-mode gallium nitride devices. Simultaneously, we have to and we have grown our base of IC and solutions partners, for example, leading companies offering integrated controller and driver solutions. This has allowed us to drive optimal solutions versus silicon and other gallium nitride to increase our pace of adoption. We announced the Cylana ACF 65-watt design last quarter, and last week, we announced our Qualcomm QC5-compatible 100-watt quick charger design with Salome, a reputed adapter manufacturer. Our wins for the adapter chargers range from 35 watts wall plug to 65 watts ultra slim, highly efficient compact phone and notebook chargers to 160 watts and 240 watts for higher power adapters. One particular bomb teardown reported reveals that transform GAN can do more with less high efficiency with a smaller GAN device versus a larger emote GAN device, and that is because of the fundamentally better device technology. Another customer found it easier to pass thermal requirements with transform solutions. We aim to continue to grow this pipeline. The higher power space is equally important. And again, here we have higher performance and higher reliability products. In this space, we also compete with some of the silicon carbide offerings. as other emote GAN is not quite ready for reliable high power in high volume manufacturing, specifically in thermally robust packages like the TO247, like due to the inherent device weakness I mentioned. An example shown here is our highest power 15 milliohm product, which is to the best that we can tell, the lowest R1 for a 650 volt qualified gallium nitride in a discrete TO247 package. As shown here in an apples to apples comparison, It outperforms silicon carbide MOSFETs and JFETs that score both in a standard package, in a standard bridge circuit, realizing 25% to 38% lower loss and able to deliver 10 kilowatt class power levels from a single part in our lab testing. Customers have selected our higher power products. For example, the Gen 4 35 milli-ohm, Gen 3 and Gen 4 35 milli-ohm, and 50 milli-ohm parts over the last several years now for robust 1.5 kilowatt to 4 kilowatt solutions for diverse applications ranging from gaming, crypto mining, servers, industrial, and military applications for their reliability, ease of use, and high efficiency power conversions. And all of this is always backed by TGAN's strongest IP portfolio, with patents spanning materials, devices, design, fab, and packaging. Equally importantly, the use of these devices in applications, such as ACF adapters or server crypto power supplies, for example, or for that matter, automotive power converters and inverters. This patent portfolio is several times stronger, both in number and quality of IP. than many of the standalone galvanized companies, as well as some of the large power semiconductor companies vying to offer GAN in the market. Shifting gears, a quick word on our AFSW joint venture transaction that we closed recently for our previously announced plans. This transition was planned for many months now, and we completed it after finalizing a strong partner last year and completing the regulatory process this July. With the financial and strategic partner, JCP Capital, we formed a new joint venture, Ganovation, with the goal of accelerating GAN adoption. And Ganovation is the entity that acquired 100% of AFSW. It also brings in financial as well as ecosystem resources, especially in the area of adapters and chargers, into Ganovation and AFSW. Transform owns 25% of AFSW now, through its 25% ownership of innovation, enabling us an overall more efficient P&L going forward. It should be noted that the team and the manufacturing operations at AFSW is pretty much the same, and this move is completely transparent to our customers and partners, with AFSW remaining one of the premier high-quality manufacturing fabs for gallium nitrate power. Next, I will talk about some of the specifics of the last quarter and current business. We achieved $3.2 million of revenue based on record product revenue in the June quarter. A lot of this growth was fueled by superior GaN products and solutions in the area of fast chargers and adapters, where we grew to now 30-plus design-ins with around 20 in production. We inked new MOU for calendar year 2022 where our customers are targeting 1 million unit per month ramp in the mid to second half of next year. And in one of these programs, we have already secured the first high-volume purchase order from one such customer. We released new adapter solutions on target, including our own designs and with partners, as exemplified by the 65-watt QRF, 65-watt ACF, and the recent 100-watt Qualcomm QC5 compatible reference design. We aim to remain focused on our growth trajectory in the second half of the calendar year, on course for our target to achieve supply capacity of more than 1 million units a month in the adapter area in the October to December quarter, and with previously announced plans of qualifying our second source facility in packaging, as well as ramping up our own epi wafer supply. The high power area is important to us. Again, a unique TGAN strength versus other GAN providers. And this is not just talk for the future, as we doubled our Q247 ships again, with now 10 plus higher power design-ins with our customer in production. Our Gen 5 is a leader in power level of GAN products, and it was released for commercial application in the calendar Q3, having finished qualification on target at the end of June. Next, our goal is to secure design-ins with this 5 kilowatt plus class product. As an overall ambition, our focus clearly remains on scaling product revenues fast and targeting 200% or 3x growth over the next two years, from this year to 2022 and 2023, year over year. Continuing on the execution focus, such growth will be enabled by continued high-quality manufacturing scale-up and impactful new technology, products, and solutions. To this end, We met our plan for two new Gen 4 products that we did in both surface mount as well as leaded packages. We have two to three more releases coming up in this area before end of the year, including both lower power and higher power offerings. Thanks to the designability and drivability of our Gallium-Nited FETs and the strong underlying efficiency performance, leading controller companies are now partnering with us for solutions, an area we will aim to be even more aggressive in going forward. And we remain focused on the automotive qualification of our Gen 5 part, with the Gen 4 already sampling in a couple of design-in activities for the automotive. On the partnerships and key strategic cooperation front with our customer partners, we made very strong all-around progress. Our technology team met the June quarter milestones on the key Yasukawa development program and secured the $0.75 million of funding that was received in July. As announced previously in mid-May, we were very pleased to complete the extension of our long-term cooperative agreements with Nixpedia, and we also completed a key technology set of milestones to achieve the $8 million in licensing revenue recognition that will actually be effective in the current July quarter. We also kicked off targeted product development phase in automotive, with Morelli, our customer partner, and also a transformed investor. Our government program revenue and EPI revenue remain solidly on track. We now have five-plus repeat customers for EPI sales, for DOD applications, based on unique, fundamental TPH transformed GAN IP, and also we have sampled to commercial GAN RF customers with the goal of a design win by end of the year. Revenue from our Navy contract remains stable and on track to exceed $3 million for calendar year 2021. Additionally, we are in process of finalizing on a DARPA program that has emphasis on newer types of RFEPI and in total can be up to $1.4 million. We value the strong public-private partnerships that Transform has successfully deployed while being very synergistic to our business goals. To summarize, I am pleased to say we had another very strong quarter in the start of our new fiscal year, achieving record product revenues, a 3X scaling in unit shipments, accelerating design wins, continued rollout of products and reference design, with solid progress with our partners, and in epi business and government programs. All of this in terms of technology innovation, product shift, and revenue achieved. We also closed the pending AFS WFAP transaction bringing in a strong new partner, and very recently secured the $5 million of equity funding from a large public company. I will now hand over to call to Cameron, our CFO, who will take you through our financial metrics.
spk06: Thank you, Pramit, and hello to everyone joining us today. Let me start with a brief recap of our most recently completed quarter. For my remarks, I will refer both to GAAP and non-GAAP results, which are reconciled to GAAP in our press release tables. Non-GAAP results exclude stock-based compensation, amortization, and adjustments to the fair value of our convertible note. Turning to income, Q1 of our fiscal year 2022 saw a continuation of our strong revenue growth. Total GAAP and non-GAAP revenue comprising product and government was $3.2 million in the quarter. This is in excess of our target and represents a 33% sequential increase from the prior three months and over 200% when comparing to the same quarter last year. Focusing specifically on product revenue, the three months to June 30th saw our third successive quarter of at least doubling shipments, fueling continued growth and resulting in our highest quarterly production revenue number to date. This is our sixth successive quarter of product revenue growth. This growth, as Pramit mentioned, is being driven primarily by strong traction in the customer adapter space, but we're also seeing increased traction in higher power segments, including data centers and crypto mining. Turning to expenses, cost of goods sold increased in the quarter, driven in large part by the 33% growth in our quarterly revenue number. For other OPEX, gap spend for the June quarter was 1% higher than the March quarter. All areas of OPEX were substantially flat. This, despite being the first full quarter with our increased footprint across manufacturing, sales and applications and G&A, together with expenditures tied to our recent change in fiscal year end. For EPS, I will focus my remarks here on the non-GAAP results. As a reminder, non-GAAP excludes non-cash items such as stock-based comp, amortization, and fair value adjustments, allowing for easier operational comparables. The non-GAAP EPS loss for the quarter was $0.13. This is flat for the prior quarter and represents a $0.02 improvement in non-GAAP EPS relative to the same quarter in 2020 when excluding license and revenue. Turning now to the balance sheet on the next slide, Net current assets decreased $4.5 million in the quarter. Cash burn was higher in the prior quarter due to some annual insurance payments. Continued investment in our inventory and capex to support our growth. Strong collections in early July, together with reduced JV expenditure, are rebalancing the burn rate in the current quarter and positioning it for significant reduction. Additionally, the company completed another component of our ongoing development programme with Escala, securing $750,000 in funding in the current quarter. On the liability side, we extended the maturity of our existing revolver facility to 2023, with other assets and liabilities remaining largely stable. We're also happy to report two important developments that occurred this quarter, both contributing to strengthening of our balance sheet as we move forward. From a funding perspective, The company released an 8K earlier today, announcing the conclusion of a $5 million equity investment of $5 per share from a multi-billion dollar international public semiconductor company in Asia, solidifying our mid-term cash position. On liabilities, we have successfully executed on our deliverables with respect to our ongoing partnership with Nixperia. This execution means that the development loan is now considered forgiven and licensing revenue will be recognised in the current quarter. The above developments extend our financial runway, enabling us to continue to invest in the company's growth engine. As Mario mentioned, the company continues to target a near-term uplist onto NASDAQ. Several steps have been taken from both the compliance and governance perspective, and the company continues to perform due diligence internally as we work towards this goal. Turning now on the next slide, from the current year to a reiteration of our long-term business model. We are in the process of building a high-growth, product-driven, cash-generated business, and the company has three distinct revenue streams, licensing, government, and product. In the current year, we are continuing to generate solid revenue from both licensing and government contracts. This is being supplemented by significant growth in our product revenue. Product revenue has grown six quarters in succession and will become around one-third of our overall revenue in fiscal 2022. This is being enabled by strong traction and execution across multiple segments, led by consumer, but including increased traction in higher power applications. The company is targeting annual product revenue growth of 200% in this phase and into fiscal 23. From fiscal 23 onwards, as we continue to ramp our product revenue across our target segments, product will form 90% of our revenue. As with FY22, this growth coming from multiple segments and not simply consumer. Automotive revenue will further contribute to this multi-segment growth from 2023. This consistent, rapid acceleration in our product revenue allows KeyGAN to target a five-year annual CAGR in excess of 50%. We are also confident that this volume increase, married to our operational efficiency and strong product portfolio, will allow us to achieve an overall gross margin in the 40% range. With respect to operating margin, the company will continue to invest to support all aspects of our core operations, our stable existing structure, allowing us to translate gross margins into delivering an operating margin that we believe will be in excess of 20%. To conclude, the final slide, Transform is a pioneer and leading provider of GaN power conversion devices. We have disruptive technology that provides power conversion solutions across a number of significant growing markets. We are commercially ramping with strong production revenue growth together with a manufacturing structure in place that can support our long-term business. We have a comprehensive product offering to meet our customers' needs across a wide range of power levels and segments, all underpinned by the embassy's strongest IT position and a deep, talented team led by renowned GAN experts. This completes our prepared materials and remarks, and we would like now to open the call to any questions. Operator, please proceed with managing the Q&A portion of the call.
spk00: As a reminder, to ask the question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Again, if you would like to ask a question, press star then the number 1 on your telephone keypad. Please stand by while we compile the Q&A roster. Your first question comes from the line of Craig Ellis from B. Reilly Securities. Your line is open.
spk05: Thanks for taking the question, guys, and congratulations on what seems to be some growing momentum in the business. Pramit, I wanted to start with you just on that topic and see if you could dig a little bit deeper into the 30 charger design-ins that you now have with 20 in production, a little bit more color on maybe customer dynamics there, regional color, and technology. And with respect to those that are in production, where are we in terms of scaling into targeted volume for the higher volume wins that you have? Thank you.
spk07: Sure. Thank you, Craig. And for our adopters, we are very excited now to having scaling this rapidly. So a lot of our customer makes it, we have to look at it as customer and then sometimes the end user. of the customer, a lot of the direct customers are Asia-based, as you can imagine, but some in the U.S. and Europe as well. And the end users of this are really worldwide, U.S., Europe, some in Japan, and obviously in Asia as well. So that's the kind of dynamics. Some of these are achieved directly by Transform, a lot of these. Some are with partners that we have put in place, all contributing to our growth of revenue. And this is primarily sort of the high volumes have been in our 65-watt offerings, although, like I said, we have had it from 35-watt wall plug sockets all the way up to 160-watt adapters. And the volumes are increasing now. We are also among the design-ins that we are working on, I mentioned, which also we are increasing day by day. There we are working on some inbox opportunities as well. And some of these targeted opportunities have kind of, you know, shipped already several hundred K, which has contributed to our tripling the unit volumes. And a lot of that was driven from the last quarter to this quarter with adapter volumes.
spk05: That's really helpful. And then as a follow-up question in a different part of the business for a few financial questions for Cameron, you mentioned – in your prepared remarks and it's in the slide deck that there's potential for a commercial win uh near the end of calendar 21 in the epi business can you talk about the financial and the strategic implications of that potential win yeah it's also our epi business as you know we are doing our the dod customers uh where uh really uh
spk07: Transform AP is the exclusive IP we have and for certain flavors of GAN technology, the commercial GAN RF customer. A lot of this, what we are trying to do is get in as, you know, companies, the leading companies who are there getting either as a second source to their internal AP development efforts or increasing their sources of supply. So we will find out more on the exact volumes of that actual wind will manifest more in 2022. But as you can imagine, the RF market itself is a very strong existing market, and about 20% or 15% to 20% of the revenue of the RF market can be attributed to the epi wafer bond portion. So that's the segment that we are going after.
spk05: Got it. Got it. And then, Cameron, flipping to you, great to see the company looking at the potential to increase second-half unit volumes 3x half-on-half. Can you talk a little bit about the ASP dynamics half-on-half? Because if we were looking at similar ASPs, it would seem that that could mean that product revenue could be in the $9 million range, which seems high. So just provide some color on what's going on underneath that very large rise in potential unit shipments. Sure. No problem, Craig. Thank you.
spk06: I think, you know, as we mentioned, a lot of the revenue growth itself is in that consumer adapter space. And kind of typically the ESPs there are lower than the ESPs that we see in our higher power opportunities in the data mining space and in the industrial space. the volume from a unit perspective is definitely higher, as Pramod mentioned, you know, 2 to 3x, but that doesn't translate fully into revenue just because of the fact that a lot of the growth is in areas where the ESPs are lower due to the kind of lower power applications.
spk05: Got it.
spk07: And then just... And also to add to that, Cameron and Craig, one thing to add to that is the Like we achieved record product revenue this quarter, which is excellent, and that's an amazing growth factor the company is on. But the total revenue of $3.2 million also included contribution from the other segment. So that's why your $3 to $9 million translation is a little bit – could be a little bit off.
spk05: Yep, right. There was some nice Gen 4 help in some of the higher-voltage applications in the quarter. Right. I got it. And then just moving – Moving to the last one before I hop in the queue, Cameron, it looked like gross margin was more mid-20s versus, I think, the 40% target model. Were there any one-time items in the quarter, or is that just some of the transition to higher volume consumer? And if it is, then what's the implication for gross margin in the back half of the year?
spk06: Sure. No, thank you. No, I think, you know, there are one or two smaller adjustments in the quarter, Craig. You know, at this level, there's kind of one or two rate adjustments pertaining to our government business. But I think, you know, this volume is hard to read too much into the percentages. I think that, you know, as we look at the margins going forward, you'll see a mixed change in the next quarter with licensing as well. So, you know, overall... the margins remain solid over the course of the coming quarters. And again, we continue to work, I think, with greater volume and greater manufacturing efficiency into higher long-term margins in the 40s. Great. I'll hop back into the queue.
spk05: Thanks, guys.
spk00: Your next question comes from the line of Sam Peterman from Craig Hallam Capital. Your line is open.
spk03: Hi, guys. Thanks for taking my question. I guess first one, just on the private placement that you announced, I think it said this was a public company in Asia. Could you talk about if this is a strategic partner to any extent or any color on what that relationship looks like? Thanks. Sure.
spk07: No, yes. We are very excited to have this in place and we'd be looking to drive strategic relationships with search partners in the future.
spk03: Okay. Second one for me on some of your Gen 4 products and higher power stuff in the data center, you said you're seeing some success there this quarter as well. I think last quarter you said you had five key customers in production. There was – Was growth there driven by those customers you already had, or were there new customers? Could you kind of quantify how that broke down?
spk07: Yes, no, that's great. It was actually both. Some of the existing customers proliferated into more designs, which we always like to see, and then we added into, converted from design in process to production in several new customers also. So it was a mix of both, some of that with existing customer increasing and then some addition of a couple of brand new customers that went from design ends to production.
spk03: Got it. And then were those new customers primarily in data center rather than crypto mining? Or have you seen crypto mining pick up kind of, you know, I think prices in that space have gone up again?
spk07: Actually, across the three, in gaming, in data center, and in crypto mining.
spk03: Got it. Okay, thanks. I wanted to clarify on your comment on wanting to convert one of your commercial RFFE engagements to a customer by year-end. I think last quarter you said there were two of those engagements, and you're hoping to convert one. I think used a different word this quarter. I'm not sure if it was multiple or a few. I guess, are you engaged with more than those two at this point? Is there any way you can characterize what you're engaged with there or who you're engaged with?
spk07: Yeah, we continue to sample to more. And the couple, the one I mentioned, that, again, we look to see if we can take it to commercial production, high volume production. Right now it's lower volume sampling or initial characterization type of thing. So that's the one that we believe is, as you can imagine, these are qualification cycles involved in it. So that's the one we target this year. Others would be for next year.
spk03: Gotcha. Okay. And then one more and then I'll hop back in queue. Just on automotive, I think you talked about or working on some design ends with your Gen 4 products and trying to get the Gen 5 qualified. I'm curious if you characterize where you're seeing the most success in the vehicle. I know there's several different spots that you've highlighted can be opportunities for you, whether that's on-board charger or DC-to-DC or the inverter. Are you seeing more traction in any area than another? Or could you just give some color on that?
spk07: Yeah, the first actually we are seeing right now in the onboard chargers and DC-DC converters, that's where the design-in is. The first design-in going is DC-DC converters. The next one is the onboard chargers. And for inverters, we are working with partners who are looking at the long-term inverter architectures that could be enabled by GAN, both standard as well as new architecture that GAN can meaningfully impact.
spk03: Gotcha. Okay, that's it for me. Thanks, guys.
spk00: Your next question comes from the line of David Williams from Benchmark. Your line is open.
spk02: Hey, good afternoon. Thanks for taking my question, and congrats on the solid progress.
spk07: Thank you. Thank you.
spk02: Hey, Cameron, if I can with you, just kind of thinking about the benefits associated with the JV now. You've got about half. You cut your burn about half in terms of your fixed costs there. Can you kind of talk maybe through what that means for the P&L and how you think about the benefits of that? And maybe does it create any constraints for you in terms of just your ongoing operations within that facility?
spk06: Sure. I'll let Primate address the constraints from an operational perspective. I think financially, you know, the percentage ownership went from 48 to 25. And that obviously has, you know, short-term cash benefits from us, David. We'll see the burn reduced by, you know, pretty much on that percentage from the August timeframe. And from a P&L, you'll see in the OIE line and the P&L, that number reducing in a corresponding manner. So from a cash perspective, from a P&L perspective, it's a positive development, and I think operationally very positive as well. But I'll let Pramit provide a little bit more color on that.
spk07: Operationally, actually, we set ourselves up for more growth. In fact, it will help as we need to. We already have reasonable scale in place in the wafer fab facility as we have talked before, but as we need to bring in more scale and expand that actually this relationship, because our goals are synergistic to grow the GAN ecosystem, it will actually help us operationally to have a renewed focus on delivering GAN power products from that fab.
spk00: We have a follow-up question comes from the line of Craig Ellis from B. O'Reilly Securities. Your line is open.
spk05: Yeah, thanks for taking the follow-up question. What I wanted to dig into a little bit, guys, was some of the high-volume wins that you have in the hopper for next year. So I think you mentioned that there was an MOU for a one million unit a month ramp, and the question is, do you have any operating requirements, either qualifying, additional packaging capability, or other operating requirements that you need to check off as milestones before you can start moving ahead with that type of ramp. And because I'm often asked if there's anything that's shipping in box, would that be for something that would be potentially a charger that would be off the shelf, or could that be an in-box related item?
spk07: So it's with a partner that aims to do both those kind of things. And again, this is an MOU. And like I said, we got the first order in hand pertaining to that MOU. So the start of the sort of the pilot start of that, which is also, you know, for such large opportunities, the pilots are also reasonably decent quantities. In terms of the requirements from our side, we want to make sure and like we have also announced before, is we have two sources of packaging, not so much a new package. Our packaging product is very solid in that area, but having two sources of packaging is important for us for diversification.
spk05: And then the follow-up question, Prem, it seems like there was a real strong inflection in design in the quarter. what changed with market engagement or in terms of how you're engaging with partners that developed such a strong increase quarter-on-quarter, and how should we think about those dynamics as they can play out, not just through the back half of this year, but continue to add design wins to your pipeline as we go through 2022?
spk07: So on the adapters and charges, one thing we have done definitively is – work with a solutions provider. Like I said, our GAN FET architecture is unique in the sense that it's completely flexible to use controllers from a multitude of companies, right? It's not limited. If you kind of put everything in one box, then it's limited to one particular controller. It's not like that. Or if certain emote solutions, it has to work with specific drivers. It's not like that. So actually, as we have increased this outreach, innovative and well-established, well-reputed companies, and you'll see some of these announcements in future as and when they happen, have also come to us and partnering with us with our Gallium Nitride with their controller and integrated driver IC. So that's been one important point, and we hope and we target firmly to have that drive our adapter designings. On the higher power side, it's been the Like I said, the steady growth in the data center applications, and then the crypto mining is something, to be honest, we've not been able to predict very well in the past, and it's strong now when we're seeing more demand because our parts work well, and now it's proven with more than a handful of crypto mining customers that we have. So as of now, that continues to look very promising.
spk05: That's very helpful. Thanks, Pramit. Good luck.
spk07: Thank you.
spk00: We have a follow-up question from David Williams from Benchmark. Your line is open.
spk02: Hey, guys. Thanks for taking the follow-up. I dropped off there. But I just wanted to ask maybe in terms of the demand that you saw this quarter, was there anything unusual that maybe was pulled ahead? Obviously, you've got strong demand that you're forecasting for the next few quarters. Is there anything unusual here, or is this simply just that inflection point of your outreach and just the demand trends that you're seeing?
spk07: I would not say there is anything unusual. Like I said, it's continued results of our well-established products and its proven performance with our increasingly providing solutions, especially in the adapter space, working closely with our customers and partners in the higher power space. And then we continue to watch very carefully also on the supply side, certain constraints, especially in packaging, that we are not immune to, so we continue to work very closely with our partners there. So those are the kind of mix that we juggle, the advanced solutions, winning more design-ins with more products and solid performance of our products, and then making sure we match our supply capacity growth with that.
spk02: Okay. And then maybe just one last one, if I can. On the Nexperia Has there been any changes there, anything, I guess, different there? Have you seen pushback or just kind of thinking about some of the trade restrictions and some of the ongoing issues there? Is there anything there that you would speak to?
spk07: No, no particular restrictions. Like we said, we extended our long-term cooperation agreements independently from the license technology we have, and Nexperia builds on that to do their own gallivanted offerings. in the market, which you can see, which we are also very pleased to see, especially to amplify our message and our brand of architecture of Calium Nitride in automotive with a larger reach. So that's very exciting, and we hope to see more of that. No particular restrictions as such to that I am aware of.
spk02: Great. Thanks so much. Best of luck on the quarter.
spk07: Thank you.
spk00: If there are no further questions at this time, we would like to turn the conference back to the management for any closing remarks.
spk01: Thank you, operators, for closing out today's call. I want to highlight that we plan to participate at the upcoming Jeffries Semiconductors Hardware and Communications Summit on September 1st. For those interested in meeting with us at this virtual conference or another upcoming event, we will encourage you to contact the hosting firm or search out to the Shelton Group in order to schedule a meeting. I want to thank you again for joining us on today's call, and we look forward to reporting on our continued progress during the second half of the year. Operator, you may now disconnect the call.
spk00: This concludes today's conference call. Thank you for participating. You may now
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