Thank you for standing by. My name is Benjamin, and I will be your conference operator today. At this time, I would like to welcome everyone to Navitas Semiconductor First Quarter 2024 Results Conference Call. All lines have been muted to prevent any background noise. I would like to turn the call over to Stephen Oliver, Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone. I'm Stephen Oliver, Vice President of Investor Relations. Thank you for joining Navitas Semiconductor's First Quarter 2024 Results Conference Call. I'm joined today by Eugene Sheridan, our Chairman, President, CEO, and Co-Founder; and Janet Chou, EVP, CFO, and Treasurer. A replay of this webcast will be available on our website approximately one hour following this conference call, and the recorded webcast will be available for approximately 30 days following the call. Additional information related to our business is also posted on the Investor Relations section of our website. Our earnings release includes non-GAAP financial measures. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our first quarter earnings release and posted on our website in the Investor Relations section. In this conference call, we will make forward-looking statements about future events or about the future financial performance of Navitas, including acquisitions. You can identify these statements by words like 'we expect' or 'we believe' or similar terms. We wish to caution you that such forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from expectations expressed in our forward-looking statements. Important factors that can affect Navitas's business, including factors that could cause actual results to differ from our forward-looking statements, are described in our earnings release. Please also refer to the Risk Factors sections in our most recent 10-K and 10-Qs. Our estimates or other forward-looking statements may change, and Navitas assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions, or other events that may occur, except as required by law. And now over to Gene Sheridan, CEO.

Thanks, Steve, and thanks to all of you for joining us today. I'm pleased to announce Q1 revenue of $23.2 million, which reflects 73% year-on-year growth. These results reflect continued market leadership with our GaN technology displacing silicon in a BTD mobile market, but also expansion into home appliance and AI-based data centers with continuing shipments of our leading-edge GaN technology into the industrial, EV, solar, and energy storage segments. Let me give you further specifics in each of our target markets. In data centers, AI is driving an unprecedented and accelerated increase in power requirements. Traditional data center processes required only 300 to 400 watts each last year, while NVIDIA's latest generation demanded 700 watts, and now the recently announced Blackwell chipset requires well over 1,000 watts. This 300% increase in power in just 18 months, in combination with the EU-driven titanium standard that requires a 96% minimum energy efficiency, creates a significant challenge for our power supply customers and a substantial opportunity for Navitas. In the last six months, we have stepped up to that challenge, enabling server power supplies to increase from 3.2 kilowatts and 96% efficiency to 4.5 kilowatts and 97% efficiency, and now we are well on our way to 8 to 10 kilowatts at 97% to be delivered to our customers later this year. These advances are attributable to our leading-edge GaN technology combined with our industry-leading Gen3 fast silicon carbide and our unique data center system design capability. We are pleased to announce three major design wins at some of the world's largest power supply companies. Taken in combination with over 30 customer projects now in development, in the coming quarters, we expect to enable GaN-based data centers with AWS, Azure, Google, Supermicro, Inspur, and Baidu. In total, we anticipate millions in revenue this year and $10 million to $20 million in 2025, all being accelerated by these recent AI developments, which we expect to continue for years, if not decades to come. In EV, we are seeing a significant expansion in our customer pipeline, given strong penetration into mainstream passenger battery EVs and also plug-in hybrids, commercial EVs, and even fuel cell hydrogen clean industry cars. Our EV system design team originally created a 6.6-kilowatt onboard charger platform, which has driven significant customer adoption. Recently, we've launched a 22-kilowatt OBC platform that enables three times faster charging, while delivering double the power density, up to 30% greater energy savings, and 40% lighter weight relative to comparable solutions on the market. These systems capabilities are once again enabled by our Gen-3 fast silicon carbide and our Gen-3 industry-leading technology. We anticipate these platforms will drive considerable new revenues with additional silicon carbide customer projects ramping in the first half of '25 and again, EV adoption is on track to ramp in the second half of '25. In total, we are now engaged with over 160 EV-related customer projects across all major regions, which are expected to drive tens of millions in sales in 2025, and these projects have already increased our total EV pipeline by over 50% since we reported our $400 million pipeline in December. In the appliance and industrial segments, we are also making excellent progress. Our latest motor optimized designs now have over 15 customer projects in development with major wins at a leading European firm that will launch at the end of this year, a Tier 1 U.S.-based dishwasher supplier, and two of the top European leaders in pumps and motors, which will all launch in 2025. All told, our total pipeline in home appliances is now over $100 million. In more industrial applications, our latest Gen 3 fast silicon carbide technology is achieving rapid adoption in over 25 customer developments with over $150 million pipeline potential. Combining these together with other opportunities, our appliance and industrial pipeline has grown significantly beyond the $360 million that we reported in December. In solar and energy storage, we are seeing signs of recovery with six new wins across the U.S., Europe, and Asia for solar optimizers, microinverters, string inverters, and energy storage applications, all expected to start ramping in 2025. In particular, a major microinverter leader has publicly committed to a major transition to GaN expected to ramp in the first half of '25, which we expect represents tens of millions in annual revenue potential. In total, our solar and energy storage pipeline has also increased significantly beyond the $250 million we reported in December. In mobile and consumer markets, we continue to see strength in all major mobile OEMs across smartphones, tablets, and notebooks, continuing to adopt GaN to replace silicon in a growing percentage of their chargers, especially those at 65 watts and above—a sweet spot for our technology. In Q1, we added over 20 new fast chargers into production, taking the total released customer products to over 450. This includes ten of the top mobile OEMs across smartphones and notebooks. Notably, Xiaomi launched another two smartphone models, the Mi 14 Ultra and the CIVI 4 Pro, using our Gen-4 and Gen-3 support for ultra-fast charging. Lenovo launched the ThinkBook 170W desktop five-port charger and docking station featuring our Gen 4 GaN technology. Finally, I'm excited to announce our all-new GaN IC family, which we call GaNSlim. GaNSlim offers all the effective features of our existing GaNSense technology, such as integrated drive and loss reduction, but also slims down the solution by integrating additional external components, further simplifying the system design and reducing customer manufacturing costs. GaNSlim is a major step forward that could increase our GaN total addressable market by enabling lower system costs compared to silicon designs for many applications. GaNSlim targets applications under 500 watts across mobile, consumer, and home appliances. While the formal product launch will not occur until June, we started sampling just two months ago and already have over 20 customer projects in development, adding over $20 million to our pipeline. We anticipate over $10 million in new revenue for 2025 from our GaNSlim product line. Overall, we have not yet observed any signs of market recovery in the second half of the year, and this may translate to more moderated growth in 2024. Nonetheless, we're very pleased with the significant success and adoption of our latest industry-leading technologies, GaNSense, GaN power ICs, Gen-3 fast silicon carbide, and our newest product family, all of which are driving important increases in our customer pipeline that has increased nearly 30% from December to $1.6 billion. Much of that existing opportunity and pipeline growth is coming from new 2025 production programs across all major regions and markets, which is increasing our confidence for strong revenue growth for 2025 and beyond. With that, let me turn it over to our CFO, Janet Chou, to discuss the financials.

Thank you, Gene. In my comments today, I will first review our first quarter financial results, and then I will take you through our outlook for the second quarter. Revenue in the first quarter of 2024 grew 74% year-over-year to $23.2 million, slightly above the midpoint of our guidance range. While we are experiencing similar macroeconomic factors as others, in certain of our end markets, such as EV, industrial, and solar, our mobile business was strong in the first quarter, demonstrating the benefits of our smaller, faster, more energy-efficient technology as we continue to gain significant traction in mobile and consumer charging applications. Before addressing expenses, I'd like to refer you to the GAAP to non-GAAP reconciliations in our press release earlier today. In the rest of my commentary, I will refer to non-GAAP expense measures. Gross margin in the first quarter was 41.1%, the same as the first quarter of 2023 due to mobile market product mix as we continue to see strength in that part of our business. Total operating expenses for the first quarter were $21.3 million, comprised of SG&A expenses of $8.5 million and R&D expenses of $12.9 million. This expense increase of 20% year-over-year is much slower than our revenue growth as we sharpen our focus on profitability while continuing to emphasize investments in new products, technologies, and emerging markets. The sequential growth was primarily driven by higher payroll taxes and annual salary increases. As expected, we sequentially increased our R&D to support significant new product development like GaNSlim and many others planned to launch in this year and next. Putting all this together, the loss from operations for the first quarter of 2024 was $11.8 million compared to a loss from operations of $12.3 million in the first quarter of 2023. Our weighted average share count for the first quarter was 180 million shares. Turning to the balance sheet, it remains very strong with high levels of liquidity. Cash and cash equivalents at quarter-end were $129.7 million, and we continue to carry no debt. Accounts receivable declined to $22.2 million compared to $25.9 million in the prior quarter. Inventory increased to $33.2 million compared to $23.2 million in the prior quarter. This inventory increase reflects additional strategic purchases of silicon carbide materials and increases to support major product launches and customer program runs later in the year. Moving on to guidance for the second quarter, we currently expect revenues of $20 million, plus or minus $500,000. At the midpoint, this represents year-over-year growth of more than 10% compared to the $18.1 million we recorded in the second quarter of 2023. And the guidance is down sequentially from the first quarter due to decreased demand in our EV, solar, and industrial markets, partially offset by projected continued strength in the mobile market and initial ramp for data centers. Gross margin for the second quarter is expected to be approximately 40%, plus or minus 50 basis points, as our mix continues to lean more towards the mobile market in the near term. As we move through the year, we expect margin improvement will align with growth in higher-margin markets. In total, our non-GAAP operating expenses in the second quarter are expected to be approximately $21.5 million, and this excludes stock-based compensation and amortization of intangible assets. Although we will continue to invest in growth-oriented initiatives, particularly in R&D, we expect growth in operating expense dollars will be modest during 2024. In closing, while we are not immune to some of the same macro trends seen by others, we continue to deliver growth that significantly outpaces the overall power semiconductor market. We are very pleased with the customer reception and adoption of our new products, expansion of our customer pipeline, and the outlook for much faster growth as some of our end markets recover.

Operator, let's begin the Q&A session.

Yes. Congratulations on the great results. And also, congratulations, Gene for a well-deserved nomination as a finalist for Entrepreneur of the Year in L.A. It's exciting news that you're showing about data centers. And we did host a tour of a CoreSite data center, and the clear message from the management team was they need more power. It seems like there's definite demand from data centers, and it's pretty exciting that you're winning the designs now and you're going to start seeing revenue. Is this revenue going to be accretive to gross margin right away? Or does it take a while to get the volumes up to get to gross margins that would be above corporate average?

Yes. Good question, Kevin. It’s accretive straightaway, running above the average, typical of any of the industrial markets, especially with new products like GaNSafe and Generation 3 fast silicon carbide, and we expect them to be accretive on gross margin immediately. As I mentioned in my remarks, a few million dollars of ramping already started this first half, but ramping will be more significant in the second half, with $10 million to $20 million anticipated for next year.

Okay. Great. And can you give us a ballpark for the dollar content, like if there's a dollar content per watt or per kilowatt for Navitas?

Yes, it's going to depend a lot per power level, as you said. But depending upon power level, you could probably assume $15 to $50. It's in that kind of range, and it’s going up as the power level increases. Our design center delivered a 3.2 kilowatt last year, more recently, 4.5 kilowatts. We're trying to push that to 5.5-kilowatt customers, and now we're working on 8 to 10 kilowatts. With each of those, that content increases, and on the 8 to 10 kilowatts, it’s probably in the $40 to $50 range.

It's actually Charlie trade for John. Just a couple of questions for you. When do you expect to see a normalization in demand? Is 40% to 50% revenue growth still possible this year?

Yes. We're seeing continued softness in Q2. It's a good chance Q2 is the bottom. It's a little early to call since we don't have perfect visibility on Q3. But I think the general consensus in the industry from our peers sees much more dramatic degradation in revenue than we do in the first half. They are expecting a turnaround by summer. We are looking for signs to confirm growth. But right now, as we said in our remarks, we would be a little more moderate in our growth expectations compared to the 40% to 50% we indicated last quarter.

Great. And just one more question from me. Have pipeline opportunities identified in December converted to designs or orders at the expected rate?

Yes. It varies by market. Of course, mobile and consumer tend to be shorter term, and you can see those adoption rates happening faster. For some of the other markets, they're still developing, and data center ramping later this year. I did mention that a large percentage of the $1.6 billion added since $1.25 billion is already concentrated in 25 programs, which is why we're so optimistic across each of the markets in terms of the conversion rate and indicated tens of millions in new revenue in most of the key markets that we targeted.

So you mentioned that some automotive weakness might be contributing to lower near-term growth, but I thought automotive was more on the long-term spectrum and that it wouldn't really kick in for a while. So is that more reflective of actual fewer shipments near term? Or is it more just customers slowing their development process?

Yes. No, great question, Jack. Today, we're only shipping silicon carbide into EV, and we have ongoing production there. With the slower growth rates recognized in the overall industry, it created some pockets of inventory and a slowdown in the production pull-through from customers. With that said, we haven't seen any delays in new programs. We announced the joint labs with Shine and Geely. Those companies are shipping into major OEMs like Hyundai, BYD, Volvo, and Honda; those programs are all tracking for a ramp in 2025. We're also still on track for GaN to go into EV for the first time in the second half of '25. So we don't see much slowdown in the overall pipeline—it's actually growing significantly. We highlighted 50% growth, from $400 million to $600 million; we don't see a slowdown in the programs, but we certainly feel some moderation in the short term just in the production throughput.

Got it. Okay. And then just sticking on the automotive side. This quarter and last quarter, you've heard quite a few companies in the automotive supply chain, at least on the semiconductor side. They've talked about sentiment shifting away from fully electric vehicles towards hybrids. I understand that in the long term, this would be a negative development for silicon carbide since I don't think you really need or can use silicon carbide in the traction of a hybrid. But for some of the smaller, lower power slots like the DC/DC converter, is there still an opportunity for GaN or silicon carbide for hybrids?

Yes, that's right. We have observed the same trend. While there's a bit of a slowdown on battery EV in the near term, we've seen plug-in hybrids pick up. Commercial EVs are still going strong, and I've mentioned those in my remarks. The GaN content can be pretty solid, with battery EV ranging from $400 to $500 of GaN or silicon carbide and wide bandwidth content. The plug-in hybrid can also vary depending on the configuration, but may range from $200 to $300. It’s significant, albeit smaller, and we have a number of nice projects in the pipeline that we've added.

Is Nick here on for Quinn Bolton? Can you talk more about your appliance segment? Any details on the performance in the quarter and your guidance? Are you still on track to hit the $10 million per year run rate exiting the year?

Yes, good questions. Thanks for focusing on that. Appliance is not as exciting as some of the other segments, but we are making really promising progress. I had four major wins just in the last quarter, one of which includes a leading European hair care product that’s still on track for the end of the year, expected to reach $10 million a year as it ramps starting this year and throughout next year. We also added the dishwasher line from a leading dishwasher name—these guys don’t want us to release the name yet, but it's a significant win, along with two really top pump and motor leaders in Europe. That business is stable, and we anticipate nice growth towards the end of the year and definitely next year. The pipeline, by the way, was $360 million in December and has grown since then. So we're quite optimistic on home appliance and industrial markets.

And for my follow-up, the gross margin guidance came in just a little bit weaker. Is that entirely driven by the mix, driven by mobile being a little bit better like you talked about in the comments?

Thank you for your question. You're absolutely right. Our gross margin is heavily dependent on mix. We see very strong momentum in the mobile space, but the higher mix in mobile is actually margin dilutive. We anticipate margin expansion once we see growth in higher-margin markets like EV, industrial, and data center.

I just wanted to drill into the customer pipeline a little bit more. If I recall, about a year ago, I think that pipeline was a few hundred million. Then into the summer, it got up to $760 million. And then by the year-end December 12 meeting, Investor Meeting in Torrance, California, it was $1.2 billion. And I think last quarter, you said it was north of that. Now at $1.6 billion, it's remarkable. I was wondering if you could provide a little detail on how you scrub that and if you have any sense of what the conversion is ultimately into revenues?

Yes. Good question, thanks, Richard, for bringing it up. First of all, on definition, pipeline has a few important criteria. One is that it's a valid committed production program. There's a lot of R&D happening out there, especially with gallium nitride and silicon carbide. So we always scrub it to ensure it's a valid committed program. Number two, we see a good technical fit for what they require for GaN or silicon carbide or for our product to make sure the technical fit is there. Third, we look at the value proposition and the strong opportunity and motivation from the customer to use the product. It's not confirmed design wins or contracts, but we consider those to be qualified opportunities. We track unqualified ones but don’t report them in the $1.6 billion. They must meet that criteria. Within the $1.6 billion of qualified opportunities, we're tracking by stage as they go through evaluations, system design, design validation, preproduction, and then into production. In terms of conversion, it's early to call it. I think in mobile, where we see conversion rates of around 30% to 40%, while other markets that are forming might take 18 to 36 months. We're still seeing that rollout, and we'll be able to judge conversion rates much better in data centers, solar, and EV later this year and into next year.

And then when you consider the $1.6 billion, I suppose you categorize that amount into different areas. One category would be for purchase orders and production, and it extends to potentially some new programs that have been mentioned but aren't fully committed yet, as they would need to be committed to be included in the qualified opportunities.

Correct, qualified meets criteria. So it's committed to production, but the customer is committed to going into production. We have a good technical fit, a strong value proposition, and high interest to use our products. Let me clarify; it's a development pipeline. Once the products go into production, we actually remove them from the pipeline. It’s from the first qualification stage to committed production, with high interest, through preproduction. Once it goes to production, we then count that in our production forecast. For that number to grow, the number of additional programs entering the pipeline needs to exceed those going from the pipeline to production.

Okay. Yes, that's remarkable.

One other clarification too, Richard. It’s a lifetime estimate, so that's not annual revenue. The lifetime of these programs can last 5 to 10 years, but we don’t want to be overly optimistic. We generally assume about a 3- to 4-year lifetime for the more industrial markets, and for mobile consumer, we assume they run for about a year. So they have to factor in the lifetime of the product when you consider how that might translate into our revenue in future periods.

Maybe I'll focus on one of the markets that's doing relatively better right now being the mobile space here. I think a couple of quarters ago, or maybe it was more than two, you talked about a couple of your target customers committing to like 30% usage of GaN here with higher levels of power. In your conversations you’re having with both aftermarket guys and more importantly on the OEM side, what are you seeing in terms of commitment to ramp with the higher 65 watts and above? It seems like the value proposition is high, so it would be a fairly fast conversion. What’s your sense in those conversations and what is their pushback or delay in committing to something like that?

Yes. Those are great observations, and thanks for appreciating the chargers as everybody usually does. You're right, 30 watts and below is relatively slow charging and doesn’t bring much of a value proposition. Once you get into 50-60 watts, that’s pretty fast charging for a laptop and really fast for a smartphone. At 100 watts, you can charge multiple devices super fast. As you go up in power, that leads you into the sweet spot of our technology while increasing the GaN content from one chip to two chips or, in many cases, our advanced products. We continue to see trends toward faster and faster charging. Consumers don't change overnight, but Xiaomi and OPPO are great examples. The Chinese tend to be early adopters and have been the most aggressive—in terms of launching products with fast charging. We see the same trends with other mobile leaders in different regions, albeit at a slower pace. A lot of it actually comes down to battery technology; the battery technology needs to safely accept 30 watts, 65 watts, or 100 watts. So it's not simply about switching from a 30-watt charger to 100 watts. You need to advance that battery technology. The Chinese and others are proving that you can safely accept over 100 watts—and that’s 0 to 100% charge in under 15 minutes. So they’re setting the example, and I think it's just a matter of time. You’ll see that same trend. We’re already seeing it with Samsung, which is now up to 45 watts in their fast charger, for example, using our GaN technology. So those trends are solid and they're coming, and that's going to lead them right into our technology strength. Yes, as much as there are various new suppliers that pop up in the GaN space, it doesn't seem to have changed much. It's primarily Navitas, and we see Infineon and Infineon GaN systems. We see power integrations and Annoscience on the low end, but it trails off pretty quickly from there. We haven't seen any changes in ASP degradation or anything unusual. Surprisingly, there’s not much change in the competitive landscape. In silicon carbide, you still have the big players, obviously, and we're a small single-digit market share player with a lot of upside. Just 1% or 2% market share gains can matter a lot for us. Last year, things were really tight and there was almost no ASP degradation. This year, with the softening of demand and some increase in supply, we are now seeing normal ASP degradation. However, our focus tends to not be solely on pricing; we emphasize system value. In many cases, we are designing the system or co-designing the system with the customer, especially in the data center and EV spaces.

We think we can achieve operating margin level breakeven when revenue reaches $50 million to $55 million. In addition to driving profitable growth, I am focused on driving working capital efficiency and improving processes and systems. We remain very confident in our long-term target financial model, which we laid out on Investor Day.

We have no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect. For further comments or questions, please email [email protected].