Thank you for standing by and welcome to Navitas Semiconductors Fourth Quarter and Full Year 2021 results conference call. At this time all participants are in a listen only mode. After the speakers presentation there will be a question and answer session. [Operator Instructions] I would now like to hand the conference over to your host, Vice President of Corporate Marketing and Investor Relations, 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 2021 results conference call. I'm joined today by Gene Sheridan, our Chairman, President and CEO, and Todd Glickman, our CFO. This call is being webcast on the investor relations section of our website at IR.Navitassemi.com. And the replay will be available about an hour following this call and available for another 30 days. Additional information related to our business is posted on the investor relations section of our website. Our earnings released and this presentation include certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures, with the most directly comparable GAAP measures are included in our earnings release, and also posted on our website in the investor relations section. In this conference call, we will also make forward-looking statements about future events or about the future financial performance of Navitas. 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 affecting Navitas discussed in our SEC filings, including the prospectus dated December 6, 2021 as supplemented or amended from time to time. Our estimates or other forward-looking statements may change, and Navitas assumes no obligation to update forward-looking statements to reflect actual results, change assumptions or other events that may occur except as required by law. Now, over to Gene Sheridan, CEO.

Thanks for the close out. And thank you to everyone for joining us today. As we close out 2021 I would like to summarize some of our key accomplishments. In October we celebrated our IPO within seven years of founding we believe a record for any power or semiconductor company and the result of intensive focus to establish Navitas and the clear technology and market leader in Gallium Nitride or GaN Power ICs. GaN is a next generation power semiconductor with up to 20 times faster operation and our GaN plus Power ICs deliver 3x more power and 3x faster charging in half the size and weight and with up to 40% energy savings compared to traditional silicon chips. In 2021, the annual revenues doubled to nearly $24 million with Q4 revenue growing sequentially by over 30%. At the end of ‘21, our cumulative unit shipments increased to over $35 million units with zero GaN related field failures, while Q1 will see slightly lower revenue compared to Q4 given expected seasonality, we anticipate sequential growth in Q2 of greater than 50% as we expect multiple major new tier one GaN charger launches ramping significantly in next quarter. In total, we continue to forecast another doubling of annual revenues for this year. Our gross margins improved in ‘21 by over 10 points year-on-year as all customers adopted our generation two in the first half and started ramp of our generation three late in the year, both of which offered Navitas and our customers significant performance improvements and cost reductions. For 2022, we will see the impact of the TSMC 20% wafer price increase, which will limit our margin expansion in the year while we look forward to our generation for ramp in the second half of ‘22 which will fuel our…

Thanks, Gene. And thanks everyone for joining us today. Let me take you through our fourth quarter numbers and guidance for Q1 and 2022. GAAP revenue for the quarter grew to $7.3 million representing 30% sequential growth from the third quarter of 2021. For the full year, we grew revenue to $23.7 million, which represents year-over-year growth of 100%. Mobile demand remained strong throughout the year despite the fact that our GaN revenue growth was limited in the second half due to our customers supply chain constraints of non-GaN related components. Non-GAAP gross margin was 44.3% in the fourth quarter, up from 37.7% in the same quarter of the prior year. For fiscal year 2021 we grew non-GAAP gross margin to 45.4% from 33.2%, which is consistent with our strategy to deliver attractive margin expansion while passing along cost reduction to our customers. With regard to expenses, we have grown our sales and marketing teams to support our rapid growth in the mobile market and our expansion into data center, solar and EV. We have also invested in legal and accounting infrastructure needed to be a successful public company. Taking together, we have increased our non-GAAP SG&A expense from $3.7 million in the fourth quarter of 2020 to $4.2 million in Q4 of 2021. Non-GAAP R&D expense grew to $6 million in the fourth quarter of 2021 compared to $4.5 million in Q4, 2020 as we continue developing multiple new generations of GaN ICs and we've developed and delivered new high power GaN ICs for datacenter, solar and EV. Putting all this together non-GAAP net loss from operations was $6.9 million compared to a net loss from operations of $6.3 million in the fourth quarter of 2020 as we are in a heavy investment mode in this rapid growth phase…

Thank you. [Operator Instructions] Our first question comes from the line of Ross Seymore of Deutsche Bank. Your line is open.

Hi guys, thanks certainly to asked a question. Gene, I want to talk first about the supply side of the equation. Last quarter, you mentioned that probably cost you a million units. Has that gotten better? Is that still a headwind? Did you look forward into the first half of this year? Just any update there would be helpful.

Sure. Definitely, Ross. Thanks for asking that question and joining us. We don't see short term significant impact based on the guidance. We think our customers have adequately factored that into their forecasts as of now and looking forward in the year. And if anything we see a little progress because we have worked with our customers to approve some of the additional suppliers for the non-GaN components, which creates some flexibility for them. So it seems like the trends are moving in the right direction. And we think we factored in any of those constraints on a go forward basis.

Thanks for that color and I guess is my follow up just switching over to the margin side of things. I think everybody's well aware of the wafer price increases that the foundries have passed through. Can you just talk a little bit about the magnitude of the offset when you get to Gen three and Gen four. I know it's a couple of years out. So it doesn't have to be precise guidance. But Todd, you mentioned that your 55% target is unchanged. If we got a little bit of linearity between the 44 and the 55 target, any sort of stair step up timing that we really need to be cognizant of?

I would add we're ramping generation three. Now, there's sort of an offset between the generation three cost reduction and the TSMC price increase that results in being kind of margin neutralized, as we said, sort of flat into this year from Q4 Gen four kind of restarts that margin expansion will start sampling of that in Q2 and that'll ramp in the latter part of the year. And I think ultimately result in nice margin expansion into ‘23. And I think then we could sort of look at that stair step as you said or that linear extrapolation towards the 55% a longer term goal.

Perfect, thank you.

Thanks Ross.

Thank you. Our next question comes from [indiscernible] of Baird. Your line is open.

Hi, this is Tyler on for [indiscernible]. Thank you for taking my questions. I'm starting off with engagements or joint ventures do you have in China that you can talk about and how is China part of your market share plans given the power charger supply chain there?

Yes thanks Tyler. Good question. Certainly China has been fundamental to our strategy from the start largely, almost half or 40% of our company footprint is in China, we have an extraordinarily strong local team. They're not just in sales and technical support FAE but multiple design centers. They're both developing GaN chips as well as developing GaN based power systems of the design centers I mentioned actually. Mobile was our first one, which is center, they're supporting customers around the world. But even our data center and our new newest EV design center is there. So it's a very strong team. Those are not formal joint ventures or partnerships per se, but internal capabilities and that sets us up to really former strong customer partnership with all the key customers not only in China but globally, so we're in a really strong spot there in China.

Great. And then for my follow up in 2020, you shipped about 11 million units into smartphones. What was that figure for 2021?

2021 unit shipments, revenue estimate.

At the end of ‘20 was 6.5 the end of ‘21 was 35.

Yes. So close to 25 million let's say, north of 20 million units is our estimate.

Awesome, I appreciate you taking my questions.

Thank you, Tyler.

Thank you. Our next question comes from Kevin [indiscernible] Securities. Your line is open.

Thanks for taking my question. On the -- you'd mentioned that fast charging is little less than 20 minutes takes two power ICs. What percentage of designs that you're working on will be using that?

Yes. Hi, Kevin, thanks for the question. Ultra fast charging, obviously a big deal. There, we're talking about over 100 watts, anything north of 65 watts actually requires that power factor correction, extra circuit, thereby doubling the likely GaN content. And we didn't break it out in any specific detail. But it's certainly the fastest growing part of the fast charger market. And there is certainly many designs coming. The first was Xiaomi. As I mentioned Vivo is already recently launched. And obviously, we can't talk about the specific customers coming out before they're public. But it is a fast growing percentage. And there's many new designs in that category to launch later this year.

Okay, great. And as you look at the design centers, we're in the or data center in EV what's the product roadmap that you'll be introducing for those markets or what timeframe I guess, would you expect to see significant revenue?

Yes, it's a good question. So data center we actually announced late last year and we've already launched our first sort of system level prototype that acts as a reference design, as well as a demonstrator to all of those data center customers to show them what's possible in GaN. From there, we'll quickly expand into different power levels, different form factors, and next generation versions that keeps pushing the energy savings. So we're well on our way to the customer engagements and delivering those exciting new GaN based platforms. EV is just starting out, we announced it in January. We're in the process of building out the team, building out the lab. We will have the core team and core lab in place in Q2. We'll have initial prototypes of onboard chargers. And that's our first application focus. There's many applications in EV as you know, but we'll start with onboard chargers using our GaN technology. And we'll have that available as a prototype or a platform to demonstrate to our key customers in the second half of this year.

Great, thank you.

Thanks, Kevin.

Thank you. Our next question comes from Quinn Bolton of Needham & Company. Your line is open.

Hey, guys congratulations on the results and the nice outlook for 2022. I guess I wanted to start there, it sounds like you feel pretty good that the supply chain is starting to improve but I guess looking at the doubling in revenue, if I just do some quick math, that sort of implies on average, maybe 3.5 million of sequential revenue growth each quarter to get to that sort of 48 million level for the year. Is that the right way to be thinking about how you see the business? Is it sort of a linear increase across the four quarters of the year and you see sort of a different revenue pattern into the second half?

Great, thanks, Quinn I appreciate the question. It's a great question. When you're looking at our business on a quarterly basis, I think the best way to look at it is to look back at 2020 to look at our seasonality. We do expect the first half of the year to be around 30%, while the second half will be 70% of our total year revenue.

Got it. But 2020 is a good proxy for what you might see is normal seasonality in the business?

That's correct.

Yes, I will just add. ‘21 is a little unusual because we had a major new launch the Xiaomi 55 watt inbox in December, which is not a common time to launch and that carried through into significant revenues in Q1 making it a little bit non-traditional or non-typical in terms of seasonality. So as Todd described ‘20 is a little bit better way to look at it and give you good guidance on how to expect to ramp this year.

Got it. And just longer term question on gross margins following Ross' question. It looks like the data center and solar products sort of on track to ramp in calendar ‘23 just as you're starting to see the benefits of the fourth generation technology in the mobile and perhaps the consumer segments. And so I'm wondering, do you see pretty good progress as all of that begins to contribute in 2023? Are there headwinds to margins that we should be thinking about out in next year?

Yes, I think there are two dynamics. As you point out, one is market expansion, we generally expect improved higher margins in the higher power markets, data center, solar and EV at the same time, we think our generational improvements, even in the mobile space are going to continue to incrementally expand margins while offering cost reduction to our customer. So I think we will benefit in ‘23 and beyond by both of those dynamics, ultimately combining together to achieve that longer term goal of 55%.

Great. And last for you Gene maybe a more technical question, but you talked about as you go up in power to 65 watts and above, you need to add that power factor correction stage, which adds a second opportunity for GaN IC. Wondering if you can talk about, are you seeing a transition in architectures from like fly back to active clamp that may further increase the GaN content in some of those higher power applications? Or does active clamp architecture really play more in either data center or some of the consumer chargers?

Yes. No, it's a great question, a very good observation. In fact, around 100 watts, we see most commonly a single GaN chip in the PFC and a single GaN chip in the traditional fly back, what's called a QR flyback. Actually, as you push that power level up and you want the energy efficiency to go up, say at 120, 150 watts, even 200 watts, which is a crazy amount of power to be pumping into smartphones and mobile devices. But that's exactly where we're headed. And you could imagine how fast the charging is going to be. But as you do that, you can actually benefit from two, a second GaN switch in the PFC circuit, and a second GaN switch in the second stage, the flyback stage. And as you alluded to, there are alternative topologies beyond QR, which only uses a single GaN switch, whether it's active clamp flyback, LLC or some other variations of those two, that both employ two GaN switches. So we're really headed towards one to two to then two, three, and then eventually four GaN switches, as we keep pushing the power, the fast charging and the energy efficiency higher and higher.

Great. Thank you, Gene.

Thanks Quinn.

Thank you. Our next question comes from Blake Friedman of Bank of America. Please go ahead.

Hi, thanks for taking my question. Just a quick one on with consumer products expected to ramp throughout this year and data center and solar markets ramping in 2023. I was just curious if you can provide any color on how we should think about cash burn through this year as well as any color in the next year?

Let me clarify first Blake, were you looking for further definition on what sort of things are ramping in the markets or more interested in the financial part of your question?

More interested in the financial part.

Sure.

Yes. Thanks for the question. So we finished the year at around $268 million in cash with a doubling of our revenue and OpEx of $58 million on a non-GAAP basis for 2022. We do expect to use around $40 million of our cash on our balance sheet leaving us plenty of cash to put to work on strategic and other partnerships in the future.

Got it. Sounds good and then actually just kind of drilling down more on kind of consumer opportunities ramping this year. Just curious if you can highlight in what areas of the consumer market you are beginning to see early traction and maybe what percentage of revenues this year can come from consumer markets?

And Blake, when you mentioned consumer, are you lumping in mobile into that or consumer somehow separate from mobile?

Yes. Separate from mobile.

Yes. The predominant part of our revenue forecast this year is definitely dominated by mobile. That's fast chargers for phones, tablets, laptops, and frankly the aftermarket which could be charging anything that uses a USBC output. With that said, we also see this year as the start of the non mobile consumer as you're alluding to, things that don't have a battery, you're not carrying the charger around, but actually they still care about power delivery, energy savings, size and weight. We have pointed to two in the past two promising areas that we'll be launching and ramping this year. One is in LED TV. Another is in traditional desktop, PCs and PC related peripherals. We don't have any announcement yet on those but as those products come to market we'll share more details about them. There will be a small percentage of that total. But that is a promising and is really important multibillion dollar opportunity beyond mobile into the broader consumer adapter space.

Sounds good. Thank you.

Thanks, Blake.

Thank you. [Operator Instructions] Our next question comes from the line of Natalia Winkler of Jeffries. Your question, please?

Hi, Gene and Todd. So I think question is to you and I wanted to just dive in a little bit more in the gross margin throughout the year. I appreciate kind of how it stacks up longer term, but as you seen for the year, can you please kind of walk us through the different dynamics we're with inbox and aftermarket types of revenues? And how should we think about the gross margins for the year?

Sure. So that's great question, let me start with the gross margin. So we finished Q4 at 44%, We are guiding to Q1 at 44%, as well. So flat and that's driven by the TSMC price increase. We believe the full year will be at 44%. But you can look at the margins, with the understanding that GaN four is coming in the second half of the year. So we do expect a little bump there. So knowing that in mind, you'd be able a better position to determine their margins on a quarter-to-quarter basis.

This is very helpful. Thank you. And I guess the second question is sort of a similar one for the OpEx. So is it going to be stepping gradually over throughout the year? Or is it going to be a significant decrease sequentially into the second quarter and then more linear.

So it's more on the stepping gradually throughout the year as we add headcount, along with develop new products into the market. So a small step up each quarter throughout the year to hit the eventual $58 million for full year OpEx.

Understood. Thank you. That's very helpful.

Thank you. At this time, I'd like to turn the call back over to Gene Sheridan for closing remarks, sir.

Thank you, operator, and thanks to everyone who joined us today. It's a big time for Navitas an exciting year for us. And we look forward to a great future later this year as we electrify the world and move the world towards GaN based electricity. So thanks for joining us.

This concludes today's conference call. Thank you for participating. You may now disconnect.