Navitas Semiconductor Corporation (NASDAQ:NVTS) Q4 2023 Earnings Call Transcript
Navitas Semiconductor Corporation (NASDAQ:NVTS) Q4 2023 Earnings Call Transcript February 29, 2024
Navitas Semiconductor Corporation beats earnings expectations. Reported EPS is $-0.04, expectations were $-0.05. Navitas Semiconductor Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon. Thank you for standing by, and welcome to Navitas Semiconductor Fourth Quarter and 2023 Financial Results Conference Call. Please be advised today's conference is being recorded and a replay will be available on Navitas Investor Relations website. I would now like to hand the conference over to Stephen Oliver, Vice President of Corporate Marketing and Investor Relations. Stephen, over to you.
Stephen Oliver: Good afternoon, everyone. I'm Stephen Oliver, Vice President of Corporate Marketing and Investor Relations. Thank you for joining Navitas Semiconductor's fourth quarter and full year 2023 results conference call. I'm joined today by Gene Sheridan, our Chairman, President, CEO and Co-Founder; and Ron Shelton, our CFO and Treasurer. Also present is Janet Chou, who will take over as EVP, CFO and Treasurer, following this earnings report as announced earlier. A replay of this webcast will be available on our website approximately 1 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 fourth quarter earnings release and also 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 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 section 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.
Gene Sheridan: Thank you, Steve, and thanks to everyone for joining the call today. As we celebrate our 10 year anniversary, I’m very excited to announce a number of major milestones for the company, which includes cumulative shipments of over 150 million devices, savings of over 200,000 tons of CO2, a customer pipeline as announced in December of over $1.25 billion, and our highest quarterly revenue ever with over $26 million in Q4. This quarterly result exceeds our guidance and reflects an increase of 111% from Q4 of the prior year. In total, 2023 annual revenue comes in at $79.5 million, which reflects growth of approximately 109% over 2022 in a year when overall semiconductors were generally down around 8%. Let me now turn to some of the market-specific developments and highlights.
While the mobile market in general is experiencing limited growth in the near term, we continue to see solid revenue increases as major mobile players transition from silicon to GaN-based chargers. Our high-speed Generation 4 Ganfen tapered platform is a key component in fast and ultrafast mobile charging. All 10 of the top 10 mobile OEMs are now in production with Navitas and GaN is climbing the adoption curve rapidly. In 2024, we expect customers like OPPO and Xiaomi to ship over 30% of all their chargers with GaN technology. Navitas now powers five different OPPO models, and we're excited to announce eight newly released Xiaomi phone models with GaN chargers ranging from 67 watts to 120 watts. In Korea, success with Samsung continues. We were already powering the S-23 charger, and now we've been selected to power the new Galaxy S-24.
GaN has moved from beachheads to Main Street and is the technology of choice for new mobile designs across phones, tablets, laptops and aftermarket chargers. We have also developed a new M-Series version of our Generation 4 Half-Bridge IC, which are optimized for motor drives and a major driver in our home appliance pipeline. As noted in December, our appliance and industrial pipeline totaled over 200 projects and approximately $360 million in potential business. I'm pleased to announce another major appliance design win with a Tier 1 player, which leverages this latest M-series package, which we believe enables the highest frequency, highest efficiency and highest power density motor drive for appliance and is expected to add over $10 million per year in new revenue starting late this year.
In total, Navitas is in development with seven of the world's top 10 home appliance OEMs, which we expect will drive further revenue starting later this year and accelerate throughout 2025 and 2026. In Appliance and Industrial segments, major OEMs are moving to GaN or silicon carbide to meet regulatory requirements for energy efficiency and consumer demands for higher power density, along with transitions from gas powered heating and cooling systems to fast adoption of heat pump technology. We now have customer designs underway at two of the top three global leaders in industrial pumps and one of the top three global leaders in heat pumps. The combination which is anticipated to drive tens of millions of new revenue starting late next year or 2026.
We are also excited to share that Navitas GaN ICs have been designed into the ground-based terminal for a major Internet satellite rollout that is expected to drive over $5 million annually with shipments beginning late this year and continuing for the next five to 10 years. In September last year, we launched GaNSafe technology, a new industry benchmark as the world's most protected, most reliable and highest performance GaN power semiconductor technology. Just this week at the prestigious APAC Conference in Long Beach, we expanded that technology family to include a topside cooled packaging option. With a 20 year warranty, GaNSafe breaks the glass ceiling that has prevented GaN from entering high power, high reliability markets for decades.
As power-hungry AI processors increased power demand by 2x to 3x, now increasing to 1,000 to 2,000 amps per processor and up to 100 kilowatts per rack new GaNSafe and Generation 3 Fast silicon carbide technologies are enabling drivers to deliver the needed power densities and efficiencies required by these next-generation AI processors. Navitas dedicated data center design center is now achieving an unprecedented 4.5 kilowatts in the industry standard CRPS185 form factor, more than double the power density of legacy silicon solutions with lower temperatures, higher reliability and at a lower cost per watt. Over 20 designs are expected to ramp into initial mass production in 2024 at the top data center players, which we expect to contribute $3 million to $5 million in new revenue in the second half of this year.
In electric vehicles, we observed the same slower growth rate as observed by our peers, which is creating some short-term revenue headwinds, but we're also benefiting from the introduction of our new GaNSafe technology plus our new Generation 3 Fast silicon carbide MOSFETs, which are significant drivers in our revenue pipeline for onboard and road size EV chargers for both 400 volt and 800 volt battery systems. Silicon carbide based onboard chargers are in or moving to production this year with customers including top EV brands such as Zeekr, Volvo and Smart. We also have multiple design engagements underway in U.S., Europe, Korea, China and Japan. These silicon carbide chargers are expected to ramp later this year and into 2021. GaN IC EV adoption is also on track for mass production ramps in 2025.
Navitas is pioneering leading-edge onboard bidirectional charging at 6.6 kilowatt and 11 kilowatts with our dedicated EV design center. Last year, we announced a joint design center with Geely, a top 10 EV player. And now we're excited to announce another joint design center with Shinry, one of the top EV onboard charger suppliers for Hyundai, BYD, Honda, Geely and others. The first Shinry development projects are already underway and are expected to contribute appreciable revenues in early 2025. In EV roadside chargers in addition to our ongoing silicon carbide production with SK Signet, which is a major supplier to electrify America and EV Go, we are adding multiple Tier 1 developments in U.S., Europe and Asia, with mass production starting in the second half of this year, which are expected to contribute over $5 million in 2025.
In the solar space, while we are observing a continued general market slowdown, given high interest rates that limit our growth in the first half of 2024, we are seeing accelerating displacement of silicon with GaNSafe and Generation-3 Fast silicon carbide technologies in our solar and energy storage customer pipeline. We now have significant developments with three of the top five U.S. solar OEMs and the majority of the world's top 10 solar players. While we are already shipping silicon carbide in the market today, GaN adoption in solar is on track to start ramping late this year. And together, these new GaN and silicon carbide customer designs are expected to add tens of millions of revenue in 2025. Overall, while we're not immune to the near-term market headwinds, which are translating to more muted revenues in the first half of 2024, the significant new wins that I've highlighted in my remarks, in combination with an anticipated market recovery starting in the second half of the year, are expected to translate into full year 2024 revenue growth of 40% to 50% over 2023.
For all of our target markets, the system benefits derived from gallium nitride and silicon carbide are amplified by long-term secular tailwinds. These include energy source conversion from fossil fuels to renewables, gas-powered vehicles, transitioning to all farms electric transportation and the intense and rapidly accelerating power demands of AI and edge computing. Our leading-edge GaN ICs and GeneSiC technologies are both displacement technologies in traditional markets and accelerating and enabling technologies in new energy markets. As we've stated before, these drivers, combined with our unique position as the industry's only pure-play power GaN and silicon carbide player position Navitas to grow at a rate that is 6 times to 10 times faster than the overall power semiconductor market for years to come.
And now over to Ron to review the financials.
Ronald Shelton: Thank you, Gene, and good afternoon, everyone. In my comments today, I will first take you through our fourth quarter and annual 2023 financial results, and then I'll walk you through our outlook for the first quarter, along with some of the market dynamics we are currently seeing. Revenue in the fourth quarter of 2023 was again above our guidance, growing 111% year-over-year and 19% sequentially to approximately $26.1 million. For the full year of 2023, we grew revenue to $79.5 million, representing year-over-year growth of 109%. Before adjusting 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.
Non-GAAP gross margin in the fourth quarter increased to 42.2% from 42.1% in the third quarter of 2023 and 40.6% in the fourth quarter of 2022. Gross margins in the quarter were at the low end of our guidance, primarily due to increased mobile market product mix as we continue to see strength in that part of our business. For fiscal year 2023, non-GAAP gross margin was 41.8% compared to 40.8% in the prior year. Fourth quarter total operating expenses were $20.7 million, comprising SG&A expense of $9.3 million and R&D of $11.4 million. This is a bit higher than our guidance due primarily to slightly higher spending on materials related to certain research and development activities. For fiscal year 2023, non-GAAP operating expenses were $73.5 million compared to $56.7 million in the prior year.
This increase reflects continued significant investments in new products, technologies and markets. All of these investments are laying the stage for significant growth in the future. Putting all of this together, the loss from operations for the fourth quarter of 2023 was $9.7 million compared to a loss from operations of $12.4 million in the fourth quarter of 2022 and a loss of $40.3 million for the full year compared to a loss of $41.2 million for 2022. Our weighted average share count for the fourth quarter was 179 million shares. Turning to the balance sheet. It remains very strong with high levels of liquidity. Cash and cash equivalents at quarter end were $152.8 million, and we continue to carry no debt. Accounts receivable were $25.9 million compared to $17.6 million in the prior quarter, reflecting a product shipment pattern that was less linear than prior quarters.
This wasn't a surprise as we had significant demand in December from our mobile customers. Inventory increased to $23.2 million compared to $15.9 million in the prior quarter. Similar to accounts receivable, we were not surprised by the near-term increase in inventory levels, which grew in anticipation of January shipments to the mobile market. Also, we procured additional silicon carbide substrates and epi wafers to support expected significant growth in the second half of the year in the EV, industrial and solar markets. Moving on to guidance for the first quarter. We currently expect revenues of $23 million, plus or minus $500,000. At the midpoint, this represents substantial year-over-year growth of more than 70% over the $13.4 million we recorded in the first quarter of 2023 and is slightly down off of the fourth quarter of 2023, largely due to expected seasonality in our mobile business and some softness in the other markets as we already discussed.
Gross margins for the first quarter are expected to be approximately 41%, 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 improving margins aligned with an expected recovery in higher-margin markets, including EV and Industrial in the second half of 2024. In total, operating expenses in the first quarter, excluding stock-based comp and amortization of intangibles, are expected to be approximately $21.5 million. We continue to invest in growth-oriented initiatives for our end markets. As we have indicated before, we expect increases in our spending will be substantially less and growth in our revenues as we continue to see leverage in our business model.
To put that in perspective compared to the first quarter of 2023, at the midpoint of our guidance, we expect revenues in the first quarter of 2024 to grow more than 70%, yet operating expenses based on our guidance are expected to grow only 20% over the same period. For the first quarter of 2024, we expect our weighted average share count to be approximately 180 million shares, stock-based compensation to be approximately $13 million in amortization of intangible assets to be approximately $5 million. In closing, we're extremely pleased with the results for the quarter and for all of fiscal 2023. Our results continue to demonstrate that we can and expect to grow significantly faster than the overall market. While we are not immune to some of the same macro trends seen by others, leading to more muted outlook for the first half of the year, we expect the strength of our pipeline and some market recovery in the second half of the year will support annual revenue growth of 40% to 50% in 2024 relative to 2023.
Operator, let's begin the Q&A session.
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