Transphorm, Inc.

Thank you for standing by and welcome to Transform's second quarter fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. To remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. David Hanover of Investor Relations. Please go ahead, Sarah.

Good afternoon, and welcome to Transform's second quarter fiscal 2024 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 link in the investor 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 businesses 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, November 9th, 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 the call over to Transform CEO, Pramit Parikh. Pramit?

Thank you and good afternoon to everyone on the call. We are pleased to report a strong second quarter of fiscal 2024 as year-over-year revenue grew 36% to $5 million and product revenue increased 18% over the prior quarter to $3.6 million, exceeding our expectations. We also delivered higher gross margin and reduced cash burn, each exceeding our expectations. The design and momentum continues to be very strong, having grown our pipeline further by over 5% since our last investor call. Our product pipeline today is over 475 million, dominated by high-power products, where Transform has a clear advantage in quality and reliability, performance, and IP differentiation. Q2 revenue was comprised of about 70% in product revenue with government revenue just under $1.5 million. The government portion at the lower end of our targeted range due to the timing of our key government contract negotiations. Overall, more than 70% of the product revenue mix came from high power areas where Transform continues to be the world's number one GAN company with superior high performance and reliability over every other GaN competitor, most notably eMode GaN. A white paper was recently published that outlines the superiority of Transforms GaN technology. We continue to make new advances, unlocking more capability of the GaN to address larger market segments as evidenced by strong product offerings that now include high-powered surface mount packages like the TOLL, and the TOLT, the topside cool package, another first by Transform in gallium nitride. We now have also started sampling pin-to-pin, as well as other high-performing, high-power products that are drop-in replacement to silicon carbide MOSFETs. We continue to have additional wins in the lower power area, especially our recent system and package SIP strategy, enabling multiple customer wins. Now going through slide three, I will first start with the high-level corporate update. Our leadership in high-power GAN remains strong as we grew our pipeline to over 475 million, and our products surpass more than 200 billion hours in the field, further demonstrating our superior reliability. We are expanding leadership in three key high-power verticals, computing power for data centers, AI machines, and blockchain, energy and industrials, including microinverters, UPS, and servo motors, and electric vehicles, initially with two- and three-wheelers, followed by four-wheelers. We continue to increase our penetration in the low-power side as well, with the system and package partnership, as well as growth in notebook chargers that benefit from the superior reliability delivered by the physics-based benefits of our GAN versus e-mode GAN. Having delivered strong product revenue growth over the previous quarter, coupled with our robust pipeline, we expect to see continued sequential product revenue growth in the current third quarter. Second, we recently engaged Bank of America BOFA Securities to act as our financial advisor in connection with our previously announced and ongoing strategic review to enhance stockholder value. Given both inbound interest we have received from third parties, Coupled with continuing strong macro interest in GaN power, with the help of Bank of America, we are systematically pursuing multiple options that may include the merger or sale of the company. As we previously discussed, we are working on securing non-dilutive debt financing, as well as having in-depth discussions on certain licensing possibilities as we work to secure our financial runway well into fiscal 2025. Now moving on to slide four, I will next review our key vectors and execution metrics for the quarter. We reported 5 million revenue in Q2, 70% of which was from product sales that exceeded our expectations, with the majority coming from high power, which is more than 300 watts for us. It is worth noting that competing eModeGAN has not realized yet end product customer ramps due to unclear full voltage reliability of eModeGAN at least from offerings from the leading e-mode GaN foundry. For fast chargers in the low power space, we secured 15 new design-ins, taking the total to more than 115, with over 30 now in production. Notable is our multiple wins at two of the top three worldwide laptop OEMs due to the performance and reliability of d-mode normally off that delivers higher efficiency from an effectively smaller die due to its superior dynamic characteristics. We are gaining rapid traction with our SIP or system in package strategy with more and more integrated controller and driver companies and the strong ecosystem partners now who are increasingly preferring to design in transforms pure play GAN chips with more than five products now in design in and two SIP products released. To the best of our knowledge, Transform still is the only GaN company with broad-based customers in the high power across segments from 300 watts to over 4 kilowatts who have ramped in the market, and now we are addressing 7.5 kilowatt power levels from a single chip. Since our last update, we've had a record of 33% sequential increase in design-ins for high power that stand today at over 100 of which over 35 are in production. Adding to our already diversified package portfolio, we introduced several new products, notably the high-power surface mount TOLL and TOLT topside cool packages are first for GaN. We are working with leading customers in the server, energy and microinverter space for this high-reliability, high-performance parts. We are also sampling a 4-pin TO247 high-power GAN, something eMode GAN cannot do due to the inherent gate weakness. And these 4-pin TO247s are pin-to-pin compatible with silicon carbide MOSFETs while exhibiting 25% lower losses at 5 kilowatts versus the latest silicon carbide MOSFETs from global top-three supplier. high-temperature full-voltage stress testing on the SuperGAN products revealed superior reliability and the dynamic performance over eModeGAN from the leading foundry that exhibited 400% increase in resistance, i.e. losses, for the eModeGAN case after just 500 hours of reliability testing. Whereas this may be acceptable for low-power adapters, it certainly is not for high-powered server, industrial, and automotive. And this is where TransformGAN especially Excel. These, coupled with the ecosystem partnerships with IC companies for TransformGAN that can be used with standard controllers and drivers, will also contribute to our anticipated sequential product revenue growth. Our 1,200-volt GAN has progressed well with models and data sheets that are drawing significant interest from EV customers, some of who are even starting to view GaN as a possible future replacement for silicon carbide with automotive qualified products today at 650 volts and then having 1200 volts in the future with the promise of a simpler supply chain and an attractive cost structure with gallium nitride. Our efforts to improve operational capacity and costs led to continued higher productivity from our Japan epi reactors. while further capacity from qualification at our global wafer reactors is expected by the start of fiscal year 2025. We added high-volume packaging subcontractors for both our high-power and low-power products, a move aimed towards improving margins as well as capacity as we target aggressive growth over the next few quarters. Moving on to slide five now, let me turn to our partnerships and key manufacturing and customer initiatives. Our manufacturing scale expansion efforts remain ongoing with global wafer reactors now in qualification and expected to be done by the end of fiscal year 2024 to ramp in fiscal 2025. We now have six out of eight of our MOCVD reactors installed and running at various levels of production or development. And consistent with previous updates, about 50 million of annualized product revenue comprising both wafer and package products can be supported. Our AFSW wafer fab continues to operate on target and has sufficient capacity plans in place for fiscal year 24 and 25. With incoming interests of third parties in the AFSW wafer fab joint venture, we are also potentially looking to add a third partner that could reduce our ownership to roughly half of the current levels in fiscal 2025 while maintaining IP ownership for our technology in the fab. Transform has the only gain offering with three and five microsecond short circuit rating developed under a funded effort from Yasukawa, a worldwide leader in motion control and robotics. We also achieved 12 kilowatts from a single device in a half bridge topology without any paralleling, which promises over 30 to 60 kilowatt scale inverters when used in three-phase single and parallel modes, an important step towards enabling EV inverters with gallium nitride. We also came one more step closer to achieving our targeted growth in the EV two-wheeler and three-wheeler charging space with the release of 300 watts and 600 watt two- and three-wheeler EV charger power supply designs. We have successful ongoing design-ins at two of the top five India-based OEMs that we expect to ramp next calendar year. As stated before, with the automotive exclusivity behind us now, we progressed on worldwide customer engagements with EV four-wheeler customers for charger and converter applications with 650-volt automotive AEC-Q101 qualified products And we are in early discussions regarding our 1200-volt technology. Some manufacturers, including a leading US OEM, have engaged in efforts to develop gallium nitride as a potential future replacement of silicon carbide. We received payments of a little bit more than $1.4 million in Q2 on our NST Excel EpiWafer Government Program. that was awarded to Transform in the fiscal first quarter of FY24. And then thus far, we have received about 4.4 million of payments from performance under this award. We are also in meaningful discussions for licensing with various parties, some of whom are planning for gang fab manufacturing under the U.S. CHIPS Act. This would result in significant non-deliverable capital that could be in place in fiscal 2024. Last but not the least, Transform is also part of the Microelectronics Commons Chipset Trust through our participation in the coalition led by University of Southern California to enhance production of 5G and 6G semiconductor manufacturing, where we expect to secure support for funding through this program for enhancing some of our RF GaN epithrusts. Now on to slide five. Our core capabilities, again, from low power to high power wafers and packaged products are captured in our large and growing pipeline. In line with our strategic emphasis and revenue profile, about 70% of our power products pipeline applications are for high power, defined as over 300 watts. Across the full spectrum, Transforms Gallium Nitride is fundamentally superior to other GAN like eMode GAN and typical foundry offerings the impact of high reliability and robustness getting even more evident in the higher power areas. This, coupled with growing ecosystem partnerships with IC companies, both in the low power and high power space, we expect to convert larger portions of this pipeline into production with supporting our targeted product revenue growth, both near-term and long-term. In closing, our priorities will be on the following areas. First, progressing through the strategic review process, now with the assistance of Bank of America, BofA Securities, to systematically identify the best options to enhance shareholder value, including the potential merger or sale of the company, and to secure non-dilutive debt and other capital, such as licensing, meaningfully extending our cash runway well into fiscal year 2025. Second, continuing sequential product revenue growth in the current fiscal Q3, and growing our worldwide sales and application footprint to enable faster conversion of our growing designers into revenue. All are based on our superior performance, high reliability, and cost effectiveness of SuperGAN products, as well as our ecosystem of strong solution partners in the IC space, SIPs notably, for lower power and system level solutions for higher power. Third, continue to improve margins through achieving higher volumes transitioning to lower-cost packaging subcontractors, and following our technology roadmap to improve performance while reducing costs. Fourth, accessing new markets like 800-volt battery EV systems and adding new offerings like the 1,200-volt GAN and motor drive products with short-circuit-capable GAN, as well as other novel topologies like the four-quadrant bidirectional switch, all firsts enabled by Transform GAN. Overall, as one of the only pure-play GaN power semiconductor companies in the world with volume production in both low-power and high-power segments, we are well-positioned to progress towards our long-term model in fiscal year 2024 and beyond. With that, I will hand it over to Cameron to walk you through our financials. Thank you.