Transphorm, Inc.

Good afternoon. My name is Savannah and I will be your conference operator. I would like to welcome everyone to today's transform business update conference call. All lines have been placed on mute to prevent any background noise and 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 one on your telephone keypad. If you would like to withdraw your question, please press star one again. Please be advised that today's conference is being recorded. Joining today's call from Transform are Mario Rivas, Chief Executive Officer, Premant Parikh, Co-Founder 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 live webcast link in the Investor Relations section of Transform's website, and they will also be posted on a linked PDF subsequent to today's 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 the risks, nor can the company assess the total 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 statement. 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's estimates of today, February 9th, 2022. Neither the company nor any person assumes responsibility for the accuracy or completeness of the forward-looking statement. The company undertakes no obligation to publicly update forward-looking statements for any reason after the state of this call to conform such statements to actual results or to change in the company's expectation. For more detailed information on risks associated with the company's business, we refer you to the risk factors described in Transform's S-1, 10-KT, and other subsequent filings with the SEC. With that, I will now turn the call over to Transform's CEO, Mario Rivas, for opening remarks. Mario, please go ahead.

Thank you, Savannah. Welcome to everyone on today's call, and thank you for joining us. Product revenue increased sequentially for the eighth consecutive quarter and grew 220% year-over-year to a quarterly record of $3.6 million. We shipped over 1 million SuperGAN Gen 4 FETs for 45-watt to 300-watt power adapter and fast charger applications in December of 2021. We increased the total designings for power adapters and fast chargers to over 50. with over 20 of them in production. And the total design-ins for higher power, between 300 watts and 4 kilowatts, increased to over 30 with 20 of them in production. We closed the 12.9 million non-broker private placement of common stock at $7.71 a share in December, bringing the total amount of equity financing closed during the quarter to more than $45 million. cash and equivalents as of December 31st, 2021 was $41 million. With that, allow me to pass the call to Prima to work through the developments in more detail over the past few months.

Thank you, Mario, and good afternoon, everyone. As you just heard, Transform has continued our record product revenue traction for yet another quarter, achieving key milestones as we had talked, demonstrating capability to deliver over a million adapter parts in a month and strengthen our balance sheet with strong investor support. Like before, I will start with a quick recap of GAN, overall value proposition, TGAN, leadership position, and clarifying our views on market positioning of various type of GAN, including clarifying some misinformation floating out there in the market, and then move to reviewing our team's strong execution on various fronts in December quarter, That sets us up now for an exciting 2022. What is gallium nitride? It is a part of the wide bandgap semiconductor material family that is becoming the new present and future of power conversion because it reduces energy, eliminates electrical waste, enables compact power conversion, and lowers power system costs across a variety of electrical energy conversion applications and does this much better than silicon and also better than other new material semiconductors like silicon carbide. Transform, T-G-A-N, T-GAN is an established innovator and leading manufacturer supplier of GAN power semiconductors over the widest range of applications from lower power to higher power. from adapters and fast chargers to higher power data center, mining, crypto mining, communications, broad industrial renewables, and in designing for automotive electric vehicle applications. Our strong technology and world-leading intellectual property, more than 1,000 patents, and our products have been validated by our Blue Chip investors, customers, partners, including financial, IC design solution partners, manufacturing, and automotive industry leaders. Our talented team has relied on our core and complete GAN manufacturing capability, allowing control and innovation with our asset-light vertically integrated models that has yielded our comprehensive product portfolio with more than 30 billion hours of field operation, having delivered 21.5 million revenue in the calendar year 2021. Transform is in a very unique position of strength. to have products in the market today that addresses a tremendous multi-billion market opportunity, or Gantam, as we call it, for power conversion, from lower power to higher power. And there are markets that we are already ramped in today. For example, the power adapters and chargers, higher power server crypto data compower, and now ramping in industrial energy and renewable markets. which are also moving for us now from the mid-term to the more closer near-term regime. And mid to long-term, the largest growth opportunity remains in automotive electric vehicles. This Gantam, as you can see on the right, in the multi-billion dollar range over the next few years, and a further inflection point through the EV powertrain segment, middle of the decade, and we believe reaching $10 billion Gantam opportunity by end of the decade. Across this gamut of applications, transform GAN solutions deliver high efficiency, compact systems with easy to use products for the customer with proven performance benefits against silicon carbide, silicon, and other GAN solutions. What is necessary and we aspire to do every day is deliver a combined spectrum of benefits to all power conversion customers. by taking the inherent benefits of gallium nitride over silicon-silicon carbide to the next level. Our core GAN FET architecture delivers performance with high efficiency over a wide range of power levels with leadership in product qualification and reliability. Field reliability now rivals that of standard silicon. Our asset-light vertically integrated model allows for in-house GAN supply with control, innovation, and ability to scale. While others are now talking, which is a good thing, about getting into higher power with GaN, we have been there for a while now and have sent benchmarks for titanium-class GaN power supplies more than three years ago, and in process also built up core intellectual property. And we are not stopping at 650 volts or 900 volts, where Transform has the only GaN product in the market, but are now pursuing advanced R&D with 1,200 volts, which we think is well in the realm of GaN not just silicon carbide domain anymore. The TGAN FET is directly compatible with leading silicon controllers and their inbuilt integrated drivers, no extra components or shrubbery required to interface our GAN with the outside world. And this is manifested in our growing ecosystem of solutions partners as we will review. And finally, our strong IP portfolio that I alluded to, five to 10 times bigger than some competition in GaN, covers not only how GaN is made, but also how it is used in many ubiquitous power application architectures, for example, like the bridge topology. As a result, T-GaN has enabled our customers with products that range from adapters to automotive, from lower power to higher power, from 30 watts to 30 kilowatts, for example, Realizable by our Gen 5 10 kilowatt class solution in a multi-phased application. Every major category of power conversion can be targeted now, including automotive converters and chargers, and in the future, electric vehicle powertrain inverters as well. Shifting gears to some of these verticals now, from lower power to higher power, and then why we win. As the GAN adoption is happening fast now, many good companies are in the market. The market needs multiple companies to grow at a fast rate and to support the customers, especially at lower power. This is happening with Transform having the distinction of being in market both at lower power and higher power, allowing the customers to do more with less and a simpler architecture and bill of materials with our GAN solutions. One of the things we try in earnest is not to confuse the market and to do our best as to how GAN, any GAN, can help the customer win. Indeed, there are some misinformation or myths, as we call it, that sometimes get spread around and confused about gallium nitride. So first of all, no matter what you call your GAN, normally off operation is what the customer and the application has always demanded in power. That has been a constant. There are many good ways of doing it, which is up to the individual companies. For example, term terminologies like e-mode approach or d-mode approach or whatever the mode is. At the end of the day, one needs to deliver the best performing and the most reliable normally of GAN. That is what matters. Performance is delivered by superior underlying GAN technology and coupled with solutions working with the customer. There is no universal one-size-fits-all quite yet. For example, here we show on the right a transform GAN solution, TGAN FET, outperforming an e-mode GAN, in this case happens to be an IC variant, in the same third-party customer testing, only as an example. Then there are all kinds of claims about megahertz switching and fast frequency, so on and so forth. The fact is that years ago, we have taken our normally off GAN to one megahertz, thousand kilohertz, 99% efficient operation. And that too at higher power, one kilowatts, which is more challenging. This is high frequency operation is a system design trade-off. Heat losses, transformer losses, everything has to be keeping in mind. So we work closely with our customers. Of course, as far as the power switch is concerned, the fundamental GAN, that is due to the inherent nature of GAN. It is not due to any particular IC or other topology. Good GAN will switch fast. And finally, a lot is talked about integration and drivers, and it is very important. But one often ignored fact is that modern-day controllers, many modern-day adapters and charger controllers, especially at lower power, have integrated drivers basically for free. As it turns out, in our architecture, we integrate a small silicon flat with our GAN. There is no extra driver needed at all in these cases, especially at lower power. So integration is about where, what, how you integrate to give the best advantage to your customer. In the table below, we list out some of our differentiated benefits that we apply both to adapters and chargers for mobile and laptops, 45 watts to 200 watts plus, which is a key market trend in the last couple of years. The shift for adapters and chargers to GAN, very exciting for the GAN world. There are multiple good offerings from various companies at the lower power end, which is growing, and Transform is also moving fast in this area, as evidenced by the million units shipped in December. As you see here, silicon obviously has been working great in the past, but now falls short in efficiency, speed, and small size required for new products. GaN launches from here. Transform GaN excels in ease of use and flexibility, compatibility with standard drivers, No extra bond components or shrubbery needed to interface our GaN to the external world, which means cost-effective, easy to use. The intrinsic GaN performance, which is our basic GaN material and device, is fully exploited to achieve highest efficiency or lowest losses among many other GaN adapters. And the ability to go to higher power levels, and reliably so, where The PGAN implementation, the so-called PGAN in the e-mode rendition, off the normally off, presents a weaker input interface and a weaker device. Another important reminder is power conversion application, again, span from low to mid to high and then also very high power levels. Today, out of the GAN offerings, and this is what, to our best of the knowledge, of released products in the market by customers, Our customer systems, not just stock for the future, transforms GAN spans from 30 watts to 10 kilowatts, and in a three-phase it can be even higher, as we have demonstrated with our Gen 5 products. Many competing offerings may vie for higher power in the future, but today they are limited to lower power. So why does TGAN win? First of all, our success at higher power comes from the underlying stability of the TGAN FET architecture. that allows it to be offered in industry standard thermally robust packages like the TOs, the TO247, which today's emote gallium nitride finds it difficult to do because of inherent device weakness. Better materials capability for a GaN device that switches better and higher power from a smaller or lower current die versus that of competing GaN solutions and proven reliability with high yield manufacturing of large area GaN power chips. And now with these attributes, what these attributes have enabled us to do is build up a strong ecosystem of solution partners, notably manufacturers of controllers and integrated drivers. This includes market companies like Diodes, innovative controller companies like Cylana, and a few others who we have not publicly announced yet. In just the last few months, our partners and Transform Together have rolled out four more charger designs and solutions, three of them at the higher power range higher power range in this low power adapter and charger market at the 100 to 250 watts and one 45 watt implementation where our solutions now cover this fast charger space from 45 watts to 250 watts. TGAN architecture that is high performing and very easy to design in with our solution in the ecosystem. has allowed us to now increase the design ins to more than 50, with over 20 of them in production. We show a sample of this here, including the recent design wins that include, and as we highlight here, 100 watts, 150 watts, and 250 watt adapters and chargers for laptops and other applications. The higher power space, as I have said, is extremely important. Higher the power, higher the energy saving, higher the impact of GAN. And on a holistic level, the impact of electricity usage and carbon footprint. So here, some of our Gen 4 and Gen 5 offerings now are compared to leading silicon carbide products in this space because other gallium nitride, the emote type of gallium nitride, is not quite ready today, at least for higher power, especially in thermally robust packages like the TO247. As an example shown here, our highest power 15 milliohm product. By the way, to the best we can tell, this is the lowest R1 for a qualified ramped 650 volts gallium nitride in a discrete TO247 package. It outperforms silicon carbide, whether it be the MOSFET or the JFET, both very good products by strong companies in a standard package, in a standard bridge circuit, 25 to 38% lower losses. and ability to deliver 10 kilowatt power level from a single part in a half-bridge configuration. Again, why does gallium nitride and transform win? Because, number one, gallium nitride offers lowest losses and highest performance of leading power semiconductor materials, thus extending the Moore's law, as we term it, of power conversion, enabling performance output power density, in this case, to continuously increase by time, with time. Gallium nitride on silicon, which is a transform platform in the market, our products are made of GaN on silicon today, utilizes lower-cost silicon substrates. And after the GaN epi-wafer step that we have full ownership of, we are not limited to just an external foundry, for example. Our solutions and any GaN on silicon, for that matter, will leverage a full silicon wafer fab manufacturing, something, again, the transform has joint ownership of, control of, in our Japan Fab Joint Venture. And then the proven reliability, automotive qualifications, robustness in the field. So customers have selected our higher power offerings across the spectrum. Whether it is crypto mining, which is an extreme power hungry application where our titanium class efficient gallium nitrate solutions have enabled a 1% efficiency increase. And by the way, one system at that 1% can save a few hundred kilowatt per hour and 200 pounds of carbon footprint equivalently. What we expect is more than 50,000 metric tons of savings can be possible from what we estimate our 2022 outlook just in the crypto and the gaming segments combined together. Top right in the server power space, we have, along with our customers, enabled titanium-rated power supplies for well over three to four years now. Other GaN suppliers are now trying to follow suit in this domain, which is great. Efficiency, compactness of GaN has enabled leading gaming suppliers to adopt T-GaN solutions, increasing power by 6% to 7%, while at the same time decreasing system size by more than 10%, and being able to do so pricing the final power supply the same price as their older generation silicon solutions. And then there is a variety of industrial, energy, military, high-rel, and e-mobility solutions from 500 watts to four kilowatts where Transform is winning. We aim to grow this higher power segments and maintain our leadership position here. Electric vehicles are a key focus area for GaN and Transform. As we know, silicon carbide has done very well in this segment and GaN with its core capability, the fundamental capability I just showed is poised to enable long-term benefits to the EV marketplace. Essentially, GaN helps address the barriers of slower charging and range anxiety that stem from power losses and the heat constraints due to the heavy, bulky converter and inverters with inefficient silicon-based electronics. Transform has automotive-qualified, AEC-qualified products today. The Gen 4 high power already ramped in the market in various commercial applications. Not only that, but we are targeting to stay ahead in this game by enabling, in future, 1,200-volt gallium nitride and taking on silicon carbide there. We will announce R&D results in this area in future. All in all, we look forward to gallium nitride improving the electric vehicle range by 10% to 20% in future, or even more, depending on the efficiency enabled, and with higher power in a small form factor enabling faster charging. The acceleration of the EV opportunity and the aggressive adoption scenarios worldwide makes the longer-term scenario for GAN hyper-attractive. The specific GAN opportunities in EV today are in the areas of OBCs, onboard charger, DC-DC converters, off-grid DC to AC auxiliary inverters, and over the next several years, we will have unlocking the drivetrain inverter opportunity, something we are very closely working with our strategic partners. That will triple the accessible GAN content for automotive. We aim to be in the market with 650 volts products today and higher voltage solution in future for all the key EV slots. Next, we move into our December quarter performance and key vectors driving our growth. First and foremost, we are happy to say that we delivered on what we had said. achieving 152% revenue level from the first half of the year to the second half of the calendar year, with key highlights of maintaining dominance in the GAN high-power segment and gaining footprint in the adapter market, including the important milestone of 1 million shipments in December. Second, as evident, we have delivered multiple quarters of product revenue growth now, launching on top of our licensing and government revenue business. The key business focus now is on expansion and scaling revenue, product revenue. We outline here several key metrics that we achieved during the last quarter and put them in perspective as to future growth. First, product revenue in the quarter was 3.6 million, our eighth successive record quarter in this department, with $1 million of government revenue making up the rest. TGAN continues to grow its share in the adapter and fast chargers areas, now with over 50 design-ins, out of which over 20-plus are in production. We look forward to growing, especially in the 100-watt-plus segments. You can call it a higher range of the lower power adapter area. And we are really pleased to have new solutions and reference designs, not only by Transform, but also our valued partners who like the T-GEN solution over, say, the e-mode type of solutions because of our ease of interfacing and no external drivers needed, designability and drivability. We are pleased to lead in the GAN for the higher power. Broadly speaking, 300 watt to 4 kilowatt is in production today, and many of these applications in the 1 to 4 kilowatt range, where we increase the design-ins to now over 30, out of which more than half are in production. We aim to grow and further get into areas like energy, PV power, e-mobility, where we are opening up new design-ins. We have 17 products in our wide portfolio. Low power to high power, 650 volts and the only 900 volt product in the market. In surface mount packages and PO type of packages. Three of these are automotive qualified parts already. And we will continue in future to expand this product offering to meet our customer and market needs. Very importantly, now a significant emphasis and positive challenges will be a shift in focus on capacity expansion, and managing production growth in what is still a challenging worldwide supply chain environment expected to be there for next couple of quarters. We made a very important proof point in our adapter product capacity with the 1 million parts in December and now have expansion efforts underway for wafer capacity, both internal and external. Three key takeaways, basically. We had the record quarter product revenue growth with Transform and our partner solutions. penetrating the market, focusing on supply chain execution, and planning for capacity initiatives. To that end, we have started moving on the previously announced Global Wafers Partnership that we talked about last time. Global Wafers is also an investor in Transform for epi-wafer expansion to support significant expected 2023 demand. Our WaferFab joint venture with our financial strategic partner remains on track and looking ahead for various initiatives there also to be ready for higher ramps in the future. We are working through our industrial and automotive partnerships that remain solid. In the area of servo drives and robotics, Yaskawa is a key partner for Transform. We had a milestone deliverable delay that has shifted some of the cash payment receivables by a quarter or so, but overall no major program change. with Nexperia, who is our licensee and semiconductor partner, and especially they look to expand GAN in the automotive and EV area. Our next milestone here is our Gen 5 AEC automotive qualification, our Gen 5 already having achieved commercial qualification and introducing the market, the AEC automotive qualification we expect by middle of the year. Morelli is now moving to targeted product development phase with our Gen 4 and 5 products, for onboard charger and DC-DC converter. And also the Transform product today supports up to 50 kilowatts of prototype inverter, the drive train inverter, that can be achieved by paralleling our higher power Gen 5 devices. We continue design-ins with other Japan-based EV for 2023, 2024 DC-DC and OBC opportunities. That remains on track. The government revenue and the epi business remains steady as well. On the epi side, this is RF epi wafers. We increase our traction with DOD customers. We continue to support them. And we are also engaged with a couple of commercial designs. Still, we are awaiting the progress feedback there with the cycles of learning at our customers. The Navy program is running exactly to plan. And like I mentioned, we also have innovative 1200 volts R&D, which is in part supported by an R&D grant and contract from ARPA-E Department of Energy. With that, a quick recap of our major announcement in the last quarter and in January, starting with Yaskawa convertible to equity, the Gen 4 automotive qualification, continued partnership with Diode Zinc, highlighting the superior performance and ease of use of our gallium nitride, financial investments, over 45 million that have strengthened our balance sheet, success in the GaN adapter area, and of course, today, our product revenue, record product revenue quarter. All in all, we are very excited to be in the midst of an all-round GaN adoption growth phase with Transform and our worthy fellow GaN companies in the market. T-GaN focus remains in expanding our leadership in the high-power GaN, growing our footprints in the adapters and fast chargers, and capacity expansion, keeping up first with the demand and then, next year, staying well ahead of the demand curve. With that, I'd like to turn over to Cameron for our financial results.