Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Navitas Semiconductor Corp (NVTS, Financial) reported Q2 revenue of $20.5 million, at the top end of their guidance, marking a nearly 40% revenue increase compared to the prior year.
- The company’s GaNSafe ICs and Gen-3 Fast silicon carbide technology are driving new business, with over 100 customer projects in the pipeline for each technology.
- Navitas Semiconductor Corp (NVTS) announced seven new data center design wins in Q2, with their data center pipeline doubling since December.
- The company has a strong customer pipeline in the electric vehicle segment, with over 200 customer projects and 15 new design wins in Q2.
- Navitas Semiconductor Corp (NVTS) continues to see strong growth in mobile markets, with significant adoption of their GaN technology by major OEMs like Samsung, Xiaomi, and Oppo.
Negative Points
- Gross margin in Q2 was 40.3%, down from 41.5% in the same quarter last year, primarily due to product mix in the mobile market.
- The company reported a Q2 loss from operations of $13.3 million.
- Despite strong revenue growth, the solar industry segment experienced a significant slowdown due to higher interest rates over the last 18 months.
- Navitas Semiconductor Corp (NVTS) is facing challenges in maintaining gross margins due to the increasing share of lower-margin mobile market revenue.
- The company has put on hold the expansion of their internal silicon carbide epi capacity due to slower market growth rates.
Q & A Highlights
Highlights of Navitas Semiconductor Corp (NVTS) Q2 2024 Earnings Call
Q: Gene, I wanted to get an update on what you're seeing as far as the end market trends. How are you seeing the macro side and more importantly, the company-specific ramps? Any pushouts, pull-ins in those ramps, any color on your visibility would be great?
A: (Gene Sheridan, CEO) The good news is that we're not seeing pushouts and delays. Our pipeline continues to grow across all segments, especially in EV onboard chargers, appliance and industrial, and AI data centers. We have over 60 customer projects in development and seven new data center design wins in Q2. Mobile and consumer markets remain strong, contributing to our near-term upsides.
Q: On the gross margin side, when those company-specific design wins start to ramp over time, how do we think about the gross margin puts or takes?
A: (Janet Chou, CFO) Our gross margin is heavily dependent on mix. Mobile, which is more than half of our revenue this year, is margin diluted. However, as demand recovers in higher-margin markets like solar, EV, and industrial, we expect margin improvements. We're committed to a long-term gross margin target of 50% and above.
Q: Are the other non-mobile businesses flattening out, or are they still declining as you look to September?
A: (Gene Sheridan, CEO) We've seen further upsides on mobile and consumer, which is helpful on the top line. Solar is still a small percentage and quite a bit down from last year. Other segments like EV, appliance, and industrial are stable, and enterprise is just getting started.
Q: Which of the four segments outside of mobile (data center, EV, appliances, and solar) do you think will contribute revenue the earliest?
A: (Gene Sheridan, CEO) We're already shipping silicon carbide into EV and solar, and GaN into appliance and industrial. GaN will go into solar for the first time next year and into EV by the end of '25. Both GaN and silicon carbide will ramp in appreciable production volumes in the second half of this year.
Q: Can you give us any commentary about bookings trends, backlog, and whether you feel like you're starting to see the turn in some of these other markets beyond mobile?
A: (Gene Sheridan, CEO) Short-term backlog coverage for near-term quarters is solid. Inventory correction is stable to improving. We're not seeing appreciable pushouts or delays. The actual production volumes will be the swing factor, but we are cautiously optimistic.
Q: What are the biggest challenges for the industry to increase the power level of power supplies in data centers?
A: (Gene Sheridan, CEO) It comes down to the switching speed and efficiency of the power chips. Faster switching allows for smaller mechanical components, and higher efficiency reduces heat. Our team has invented a new architecture for PFC that pushes another 30% energy savings, which is a big deal.
Q: Could you go over the wins or pipeline by silicon carbide versus gallium nitride in EV projects?
A: (Gene Sheridan, CEO) The majority of the EV pipeline is silicon carbide oriented. We focus on onboard chargers and DC-to-DC converters. We're also looking at traction inverters and roadside chargers, which are entirely silicon carbide-focused.
Q: Are the new data center design wins additive to the $10 million to $20 million expected in 2025?
A: (Gene Sheridan, CEO) We expected the pipeline to grow from 30 to 60 customer opportunities. This is in line with our expectations, and we still anticipate a significant ramp for next year.
Q: Can you talk more generally about competition in GaN? Are you seeing anything from China or other major players?
A: (Gene Sheridan, CEO) Discrete GaN is increasingly challenged due to reliability concerns and complexity. Our GaNSafe ICs and bidirectional GaN offer significant competitive advantages. We don't see any major changes in the competitive landscape.
Q: Have you adjusted the pace of your silicon carbide epi capacity expansion given lower market expectations?
A: (Gene Sheridan, CEO) With slower market growth rates, we put the first reactor on hold and expect to bring it online next year. Our original plan of $20 million strategic manufacturing investments over three years has shifted by about one year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
