Transphorm, Inc.

Thank you for standing by and welcome to the Transforms fourth quarter and full year fiscal 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. I would now like to hand the call over to David Hanover with Investor Relations. Please go ahead.

Good afternoon and welcome to Transform's fourth quarter and full year fiscal 2023 earnings conference call. Joining us today from Transform are Pramit Parikh, CEO, President and Co-Founder, 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 prepared remarks, which management will be referencing during the conference call. These slides can be accessed through the live webcast linked in the Investors section of Transform's website, where they will also be posted and available as a link to a 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 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's estimates as of today, June 27, 2023. Neither the company nor any person assumes responsibility for the accuracy or completeness of the forward-looking statements. The company also undertakes no obligation to publicly update forward-looking statements for any reason after the date of this call to conform such statements to actual results or to the changes in the company's expectations. For more detailed information on risks associated with the company's business, we refer you to the risk factors described in Transform's most recent annual report on Form 10-K and other subsequent filings with the SEC. With that said, it is now my pleasure to turn over the call to Transform's CEO, Primet Kharique. Please go ahead, Primet.

Thank you, David, and good afternoon, everyone. Welcome to Transform's fiscal fourth quarter and full year 2023 conference call. We continue to be pleased with our increased design and momentum, both low power and high power areas, with a growth in our power products pipeline to over $440 million, and the total pipeline now nearing $600 million, dominated by high-powered products. Q4 revenues were 3.2 million, almost 100% comprised of product revenue, which was on target. This total revenue of 3.2 million was lower than the estimated 4.5 million, largely impacted by the delay in the award and commencement of a key $15 million government contract and deliverables on another smaller ARPA-E government contract, both of which were pushed out into the current quarter. We are happy to report that the new $15 million program is now fully in place. The overall product revenue of about $15 million in FY 2023 represents a healthy 20% increase year over year. Furthermore, more than 70% of the product revenue mix came from high power, where Transform is the number one GAN player with high performance and high reliability over every other GaN competitor, notably eMode GaN. Going on to slide three now. Before going into our key operating metrics, I want to address our recent announcement regarding a review of strategic opportunities and alternatives for enhancing stockholder value, as well as our applying rights offering. As many of you are aware, the GaN power semiconductor sector has recently generated a tremendous amount of interest from leading power semiconductor companies who have silicon and silicon carbide, but not necessarily GaN power. This interest has been evidenced by the recent announcement of a large acquisition in the GaN space by the top power semiconductor company, as well as capital raises and other announcements of interest in GaN or GaN strategy. Transform is one of the few pure play GaN companies operating at scale. It is an established leader, especially in high-power GAN, with best-in-class technology and reliability, outperforming e-mode GAN or the TSMC GAN in pretty much every GAN topology and power level today. This is backed by wafer manufacturing ownership and our strong power GAN IP portfolio of more than 1,000 owned or licensed patents. Given this activity, coupled with Transform's progress in GAN, we believe it is an appropriate time to undergo the strategic review with the single objective of enhancing shareholder value. Based on multiple opportunities, including various levels of inbound interest we have received, our review will include, but not be limited to, financing, both from strategic partner or investor, and or traditional debt and equity financing alternatives, licensing opportunities in the US and Asia, and potential M&A opportunities. We also recently announced a rights offering which has support from key shareholders, and we are pursuing conventional asset-based debt, both of which will give us runway well into fiscal 2025. Moving on to slide four and coming back to our key vectors and metrics for the quarter. We achieved a 22% increase year over year in product revenue, nearing about $15 million in FY2023, with majority contribution from high-power GAN, which is more than 300 watts, and in key segments like computing and energy, while growing our presence in fast chargers with demonstrated performance over multiple GAN flavors in the market. For fast chargers in the low-power space, where we now address 25 watts to 300 watts, we secured 10 new design-ins, taking the total over 90, and ramped three new designs into production. Notably, we announced in March at the APEC trade show and conference that we entered the SIP or the system in package market with integrated controller and driver with our partner, Veltran, the leading player in USB PBICs. We have repeatedly seen that our SuperGAN FET delivers higher performance over the typical TSMC style e-mode GAN. Recently, in fact, showing over 10% lower loss and running well over 30% cooler in a 280-watt charger, also as reported in power electronics news, and validating the physics-based benefit of our GaN versus e-mode GaN. Given this design in momentum and continued superior performance, we see the beginning of an increased ramp in the second half of the fiscal year. Transform has leadership in high power, and to the best of our knowledge, it is the only GaN company with customers across segments from 300 watts to 4 kilowatts who have ramped in the market with their end products. We had a 25% sequential increase in design-ins in this area that now stand over at 60, out of which 30 are in production. We also believe we are the only GAN company to have ramped in the microinverter segment with several hundred thousand parts already sold and targeting $1 million with our lead customer over the coming 12 months. with several other design-ins with marquee customers in progress. To accelerate revenue in the second half of the fiscal year, we introduced a series of industry standard pin-to-pin compatible surface mount packages in the low power area, but also applicable to high power over 300 watts, notably with the higher performance of our SuperGAN FETs versus EMODEGAN across the range, which has been quantitatively validated. Clearly, We need to take this momentum and the 45% increased product skews into increased revenue by enhancing our sales and application outreach worldwide, as well as continuing to partner with strong IC and controller companies with our GAN that can be used seamlessly with standard drivers and controllers. We also released at PCIM our 1200-volt GAN FET simulation kits generating significant interest from EV customers who have begun to look at TransformGAN as future proof, 650 volt today, 1200 volt in future, directly taking on silicon carbide at 1200 volts. On the operations side, we intensely focused on initiatives to increase capacity as well as direct margin improvement. Our Japan epi reactors are now well into production and we are pleased to report new reactors at Global Wafers are released into development and on track for completing qualification and release to production in the fiscal fourth quarter. We have put in place lower cost packaging partners for our flagship high power TO products from which we expect to see solid margin improvements in the coming quarters. Let me now turn to slide five to our partnership and key initiatives. Including our global wafer partnerships, We now have six out of the eight emulsivity reactors we have installed, with four running at various levels of production or development, and we are on track for eight reactors in production by the second half of fiscal 2025, setting us up for around $50 million of annualized product revenue with just these reactors. Our AFSW wafer fab is running well, and we will be addressing incremental capacity add-ons in our fiscal 2024 to be ready for fiscal 2025. We made sound progress with our industrial and automotive customer shareholder partners. Our team completed development for the next round of GaN servo motor products and secured 0.5 million funding this month. We have also streamlined our partnership with Nexperia, who remains an important long-term customer for the supply of wafers. We completed their exclusivity in the four-wheeler automotive space after paying off the remaining debt in April and have now launched a worldwide initiative for EV four-wheelers with focus in China, EU, North America, India, and continuing in Japan. In all of these areas, our high-power GaN products are already well-recognized in non-automotive segments, something we hope to leverage from. We are also reiterating our commitment to two and three wheeler EV design win by end of this year for RAMP in calendar year 2024. To that end, we are newly sampling solutions to our customers from 300 watt to two kilowatt power levels for EV two and three wheeler onboard chargers and portable chargers. Although delayed from fiscal Q4 22 to fiscal Q1 of 23, we have secured and are now executing on our new $15 million government program for enhancing epiwaffer manufacturing for the US DoD ecosystem, and in future also applicable to the commercial RF GAN space. We also have significant interest from companies pursuing GAN manufacturing with the US CHIPSAT program, which could materialize into licensing revenue and non-dilutive cash for us in fiscal year 2024. Moving to slide five now, Our core capabilities from low power to high power, wafers and packaged products are all reflected in our large and growing pipeline that now stands over $440 million in power products, a growth of about 7% from our last update and well over $500 million including power device wafer sales and our government contracts business. The probabilistically weighted pipelines are about 40% approximately of the total number that again will increase as more design-ins move towards the finish line. By power levels, high power, which overall is everything more than 300 watts, where other GANs like eMode today is weaker, represents the largest piece of our pipeline. By market area, industrial, power adapters and chargers, data center, renewables and microinverters are some of the key segments. The EV pipeline is growing And now with the worldwide push, since our exclusivity constraint is no longer there, we expect rapid increases in this area. Also, it should be noted that a significant portion of wafer sales pipeline to Nexperia is already towards electric vehicles. Moving over to slide seven now. In summary, we continue to be in a unique and differentiated position among the GAN suppliers with our core platform spanning a wide range of the power spectrum. Products in the market today that address a $3 billion-plus market opportunity, GAN-CAM, for power conversion that is expected to double over $6 billion GAN-CAM in the next three years. From lower power adapters and chargers to higher power computing comprising of server, AI, blockchain, and datacom power to industrial and energy and PV inverters, including microinverters, all areas we are either already in production or ramping towards production. In the mid to long term, large growth opportunities with automotive electric vehicles, both EV2 and 3-wheelers, first in calendar year 2023, followed by EV4 wheelers, are expected to further continue GAN and Transform's growth beyond 2024-2025. Our customers have confidence in both GAN and Transform, evidenced by our end products having been in the field for over 175 billion hours now with very low 0.1 field failure or fit rates, rivaling those of traditional silicon devices. This is an exciting proof point for what lies ahead for us, along with the fact today that we are still the only GAN offering with products in the market ramped in our customer systems from 30-watt fast chargers to 4-kilowatt energy and server products. Our immediate focus will be on one, completing the rights offering, meaningfully extending the cash runway well into fiscal year 2025, and undergoing the strategic review process, identifying the best options for enhanced shareholder value. Two, expanding sales and application footprint, converting more design-ins into ramped production, and significant design-in expansion based on our superior performance, high-reliability SuperGAN products, as well as our ecosystem of strong solution partners in ICs. Three, scaling capacity, improving margins with higher volumes, lower cost packaging, and our technology roadmap improving performance by reducing cost, as well as accessing new markets like 800-volt battery electric vehicle systems with new offerings like 1200-volt GAN. We remain well-positioned to tackle the near-term headwinds and progress towards our long-term model in FY 2024 and beyond. With that, I will hand it over to Cameron to walk you through our financials in details.