Thank you for holding. And welcome everyone to the Navitas Semiconductor Fourth Quarter 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the call over to Stephen Oliver, VP, Corporate Marketing and Investor Relations. Mr. Oliver, please go ahead.

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 2022 results conference call. I’m joined today by Gene Sheridan, our Chairman, President, CEO and Co-Founder; and Ron Shelton, our 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 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 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.

Thank you, Steve and welcome to everyone on the call today. I’m very pleased with our Q4 results, which came in above our midpoint guidance across all key metrics. For 2022 in total, I'm especially happy with the dramatic expansion and diversification we achieved both organically and through acquisitions. Navitas entered this year with a solid position in five major growth markets with leading edge GaN and silicon carbides, along with complimentary silicon drivers and controllers. Such a position give us confidence to reiterate our expectations to double our revenues in 2023 as compared to 2022. This month, we completed the buyout of our Silicon Control, our joint venture, constituting our third transaction in just nine months. All major steps in building up portfolio of leading edge GaN, silicon carbide with silicon-based digital isolators and analog controllers optimized for wide band-gap materials, which we believe is unequal in our industry. This pure-play focus on next-generation power semiconductors without any distraction or dilution by traditional silicon power devices, uniquely positioned Navitas for growth and leadership in next-generation electrified systems from EV and renewables to industrial and appliance markets to mobile consumer and data center segments. In total, these transactions have expanded our market opportunity by 75% from $13 billion to over $23 billion per year by 2026. 2022 is an extraordinary year for our company. We rapidly expanded into these new market segments transitioning from a company in 2021 that was 100% mobile consumer focused to a more diversified set of markets resulting in 2022 revenues with approximately 30% in appliance and industrial, 12% in solar and storage, 5% in EV, and 40% in mobile and consumer segments. With these diversified markets, also comes a diversified regional footprint with 24% of our 22 sales in North America, 32% in Europe, and…

Thank you, Gene and thanks everyone for joining us this afternoon. In my comments today, I’ll first take you through our fourth quarter and annual 2022 financial results. Then I’ll walk you through our outlook for the first quarter and the full year of 2023. Revenue for the fourth quarter grew to $12.3 million and represents 68% growth from the fourth quarter of 2021. For the full year of 2022, we grew revenue to $37.9 million, representing year-over-year growth of 60%. This was in line with our guidance. Looking back, 2022 was truly a pivotal year for Navitas. As we entered the year, we had most of our revenue coming from GaN based products focused on the China mobile market. We exit the year with our end markets, diversifying beyond that smartphone market into home appliances, solar, data center, industrial and EV. Not only have we maintained our leadership position in the GaN market, our acquisition of GeneSiC immediately gave us entry into the silicon carbide market with industry leading products for which we are seeing significant demand. Together with GaN, we exit the year as a pure-play next-generation power semiconductor company with a complete set of products, industry-leading technology, organizational scale and our most important asset, a group of incredibly talented and committed employees to successfully address the market opportunity totaling over $23 billion by 2026. 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, all costs and operating expense commentary will refer to non-GAAP costs and operating expenses. Non-GAAP gross margin in the fourth quarter was 40.6%, an increase from 38.4% in the third quarter as we benefited from a shift in the mix of our product revenue. For fiscal year…

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

Hi guys. Thanks for letting me ask question. Thanks for the end market color. The diversification is very impressive to see. Just wondered if you thought by those end markets within the doubling of revenue growth and even the first quarter guidance, any sort of directional color by those end markets.

Yes. Hi, Ross nice to hear from you. Yes, I think each of them are growing. We commented that the mobile recovery we see starting in Q2, but given that recovery is starting in Q2 and flowing into the second half of the year, we see that growing less than the others overall, but each market shows strong growth year-on-year.

And then Gene, for my follow up, you talked about the gross margin increasing and exiting the year at about 45% or the mid-40s. Can you just talk about the puts and takes? I know mix is going to be a tailwind, Gen 4 traction. But any sort of color on those metrics.

Really as Ron said, it’s primarily the Gen 4 transition. Silicon carbide prices are stable. Those margins are north of 50% as we’ve commented before, will also benefit from increasing margins as the GaN enters higher margin, higher power markets. So those are the primary factors driving that incremental improvement.

Great. Thank you.

Thanks, Ross.

Blake Friedman with Bank of America, your line is open.

Hi. Thanks for taking my question. Just wanted to follow-up on the gross margin side of the business. Is there any way you can quantify the headwind that’s coming from the higher wafer cost that you mentioned in the opening remarks?

Yes. We had actually mentioned it, it’s been commented dawn by many in the industry. There was a 6% additional increase one-time that kicked in, in January of this year. That’s causing some of the muted margin or flat margin Q4 to Q1. But to put that in perspective for the full year that’s no more than 1% gross margin impact and is quickly offset by our margin expansion and cost reduction coming from Gen 4.

Got it. Helpful. And then just quickly following-up, I believe you previously said that SIC-related sales were on track to grow at a 60% CAGR into this year. I just want to confirm that you remain on track with that target for this year.

Yes. We haven’t given a breakdown or a specific growth target for GaN and SIC, but it’s fair to say both are growing very strongly year-on-year, contributing to that doubling.

Great. Thank you.

Thanks, Blake.

Tristan Gerra with Baird, your line is open.

Hi. This is Tyler on for Tristan. Thanks for taking the questions. Could you provide an update on the adoption rate in smartphones for GaN that you currently see? And then maybe provide a year-end target of where you think adoption rates could go?

Yes. Hi, Tyler. Thanks for your question. Yes, I think as we’ve described before, a few factors. Number one the adoption rate is we don’t have a specific percentage, but it’s certainly very strong in what we call the ultra-fast chargers, 100 watt and higher you saw us highlight a number of them. We see that trend now moving and strong adoption moving into more mainstream in the 60 to 100 watt range. And we see some adoption picking up even below that. But certainly the strongest adoption is in that 100 watt and above, and we think that will continue. The other comment I would make is we’re also on track for system cost parody with silicon chargers that will contribute heavily to accelerating the adoption that mainstream category of sort of 30 to 100 watt range.

Great. And then for my follow-up, what are the implications of the ramp of AI and data centers on power supplies and the potential benefit for the adoption of your GaN technology in the data center?

Yes. Great question. In fact, we didn’t really give that color, but you have two fundamental challenges. You’ve got these new standards for higher efficiency Titanium Plus demanding higher efficiency. At the same time, the AI intensive data centers are demanding more power. That’s putting a lot of pressure on the power spies that have to deliver on both of those requirements. That pressure of course is great for GaN because silicon struggles to deliver the higher power density, but also struggles to hit the higher efficiencies of Titanium Plus. So we think all of that is contributing to the acceleration in that market. And of course, we’ll be launching our first GaN-based data centers as we talked about, or shipping into those markets later this year and ramping significantly into 2024.

Great. Thanks again.

Thanks, Tyler.

Kevin Cassidy with Rosenblatt Securities, your line is open.

Hi guys, this is McClain on for Kevin Cassidy. Thanks for taking my question. In your prepared remarks, you spoke briefly on this. But could you give us some detailed commentary on the current silicon carbide supply dynamic? Thanks.

Yes, very good question. We didn’t talk much about it, but last quarter we announced that we signed a multi-year long-term agreement with X-Fab and the material suppliers for the silicon carbide substrate, an EPI that enables a 5x increase in supply from middle of last year when we acquired the company throughout this year and ramping into next year. So that’s a major supplier agreement. As you know, we’re shipping all we can build as much of the industry is. And that supply is going to starts in Q1, but it’s for wafer starts and the material to feed those starts. So we actually feel the significant capacity expansion and therefore the commensurate revenue growth in Q2 when all that increased supply goes through the supply chain. So that’s on track. It’s a great deal for us and will fuel a lot of the silicon carbide growth from Q2 and beyond.

Okay. Thank you. And then kind of as related follow-up. Could you just give us the provider qualifications for your new substrate provider?

Yes. We haven’t revealed the name or disclose the name of the supplier. So there’s not much more color to add about the substrate and EPI suppliers at this point.

Okay. Thank you. That’s all.

Thank you.

Quinn Bolton with Needham, your line is open.

Yes. Hey guys, this is Trevor Janoski on for Quinn. Thanks for letting me hop on and ask a question. So on the EV silicon carbide announcements, and sorry if I missed this, but when do you expect the roadside charger and onboard charger opportunity to begin ramping and become material part of revenue?

Yes, that ramps already occurred. We were shipping even last year when we acquired the company. In fact, we commented that EV last year and that’s only with a quarter and half benefit of the GeneSiC acquisition was at 5% of last year’s revenue. So that’s almost all OBC onboard charger as well as roadside charger. And we highlighted that both of those are growing nicely and really will be accelerated by our EV design center both the general ones supporting customers globally as well as the new GLE collaborative one that we’ve created. And we gave a number of comments about significant position and roadside chargers and why that’s moving up into the right.

And can you comment on the ASPs for these solutions?

Yes. Silicon carbide, it depends on the power level and the application, but in general, the silicon carbide devices tend to have ASPs that’ll range from anywhere from $2 to $20. It can extend, beyond that range. It depends on the power level and oftentimes you’re paralleling many of them in some systems, depending upon, again, the application of power level. It can be dozens of devices and dozens of dollars, if not $100 of content per system. But it really does vary depending on the power level and application.

Okay. Thank you. And a quick clarification, you stated that the mobile charging should be less of a percentage of revenue in 2023 relative to 2022. Did you mean total revenue or GaN revenue?

No, total.

Total. Okay. All right. Thank you.

Yes. Thank you. Trevor.

Gould with Gould Tactical Growth, your line is open.

Hi. Yes, this is Dick Gould. As a follow-up to Kevin’s question on the silicon carbide supply, can you give a sense of how much the insufficient supply in silicon carbide held back your revenue? It sounded like you could have shipped more had you had the substrate available.

Yes. Are you referring Dick to Q3, Q4 last year?

Yes. Yes.

Yes. I don’t think we gave specific numbers. It’s always hard to judge because there’s quite a bit of demand there that could have been shipped. But certainly 1 million or 2 million per quarter is sort of a conservative estimate.

Okay. And then just to follow up on the GaN side, can you also describe your supply situation? I understand you are adding to supply over the course of this year, I guess, I mean, I'm assuming similarly to silicon carbide ramping gradually from first quarter on?

Yes, actually and last year we had announced this that TSMC had tripled the capacity last year. Most of that capacity was added I think by the end of last year when you couple that tripling and we took a big share of that capacity as their leading customer. With the softening and the channel mobile market that we saw middle of last year and the second half of last year, that opened up a lot of capacity. So it's a pretty different situation. We enter the year with a pretty strong capacity situation. We are not supply limited in the case of GaN and we expect that'll continue throughout the year.

Terrific. Thanks.

Thank you, Dick.

Sam Peterman with Craig-Hallum, your line is open.

Hey guys, thanks for taking my question. I think I heard Eugene say in response to a question earlier that mobile as an end market was going to show growth in 2023 over 2022. I guess that was a little surprising to me just given kind of the run rate that you're exiting the year at. Can you talk about I guess, did I hear that right? And then can you talk about kind of the assumptions that are baked into your mobile outlook for the year?

Yes, no, you heard it right. It will grow strongly not as fast as the other markets since it gets sort of a slow start with that Q2 recovery just starting next quarter. But it does benefit not only from that market coming back, we see inventory levels on the channel quite low. We see forecasts and even backlog coming back and indicating that Q2 recovery in a stronger second half of the year. We also highlighted nearly 100 new GaN chargers developed with our customers last year, adding to the ones already released in the market, that puts us at something like 250 plus GaN chargers released to production, many of them ready to launch as that market comes back. And we still got another 250 in development behind that. So there's a lot of positive things there that will drive that growth, but we're still cautiously optimistic and planning that growth as I said, good growth year-on-year, but even stronger growth in the other markets.

Okay, that's really helpful. I guess as a follow up, I wanted to ask on the data center market, you talked before about I think last quarter $5 million purchase order that you thought would ship in the back half of this year. Is that still on track? And then more broadly, I know you have, I think you said you got 10 programs right now. I think you had nine last quarter. What are you seeing in terms of design activity and just in that market? I know there's certain areas that spending is slowing in the data center, but I mean, you guys obviously being at the leading edge may not be seeing that, but I'm just curious, how you're seeing the data center market?

Yes, that particular program we highlighted last time has delayed into 2024. But with that said, as you pointed out, we've actually increased the customer pipeline, including that one from nine to 10. So trending up a little bit there, we don't see any signs of slowdown. I think that one program that pushed to 2024 is kind of unique and not a reflection of any macroeconomic trends that we can see. So I think it looks positive, but as you say, we're early in that market. We're not the best indicator of it. We see all upside coming from zero and we see a lot of strong tailwinds between Titanium Plus and the earlier comments about the AI data centers demanding more power from these power supplies.

Okay, great. Thanks guys.

Thanks Sam.

Jon Tanwanteng with CJS Securities, your line is open.

Hi, this is Ross Kesselman in for Jon. A quick question, could you maybe specify on the traction you were seeing from policy changes such as the IRA and different funds for renewables and the titanium standards for Europe? I know you touched upon it, but do you think you could add a little bit more color?

Yes. I think that titanium standard is a unique one that's already in place started January 1. It's specific to EU, but most of these power supplies are designed to meet global standards. So I have to meet the minimum required standard out there, which is – or the toughest standard I should say, which is the titanium one in Europe. So that one is clearly driving strong trends for us, we have actually four different customer platforms, server platforms, four data centers in development, all of them meeting that titanium standard, working closely with those 10 customers that I talked about. I think Inflation Reduction Act is a little different. It's huge amounts of money. As we highlighted over 50 billion, 60 billion in our target markets, it is just rolling out this year. So I think it's early to talk exactly what the impact's going to be. Those are big numbers. They're bound to have an impact in each of these areas. Sustainability or I should say renewability and solar in particular. Upgrading home appliance energy efficiency and also the EV roadside charger infrastructure but I think time will tell exactly what that impact will be as we see those dollars flow to consumers, to our customers, and then ultimately to our business.

Got it. I know you've mentioned previously that there's been a kind of a constraint on the silicon carbide products. Have you seen any indications of improvement in that area?

Yes, I'd go back to the long-term agreement we signed last quarter that now starts this quarter and it translates into increased revenue capacity to support that revenue starting next quarter. And that's a 5x increase. It's not a step function, but it's 5x from middle of last year when we acquired GeneSiC and ramping throughout this year and into next year. So that gives us a lot of headroom to do more if we can do it.

Got it. Thank you so much for the additional color.

You bet. Thank you.

[Operator Instructions] Natalia Winkler with Jefferies, your line is open.

Yes. Hi. Thank you guys for taking my question. So the one I had with for Eugene, I just wanted to understand this joint venture acquisition a little bit better. Is it fair to assume that it's moving you guys to the parity with silicon in terms of pricing faster against solutions or is that kind of accelerating that parity for the higher voltage application? Thank you.

Yes, thanks Natalia. No, it's a great question and a good observation. You're exactly right. Well, what we're doing there is not only developing leading edge analog controllers that are optimized for higher frequency GaN and silicon carbide, we're actually co-packaging them with our optimized GaN. When you combine that with the cost reduction and performance improvement of Gen 4, that's also roll rolling out simultaneously, you get a really nice improvement in performance, reduced size footprint, improved power density, but also helping us on that bomb cost. And it is a factor driving us to that system cost parity compared to silicon, specifically around mobile chargers, consumer adapters. And I also mentioned the home appliance auxiliary power supplies.

Awesome. Thank you. That's really helpful. And then the other one I had was about the TSMC, Gene, if I understood correctly, you mentioned that you guys saw a 6% increase this January, January, 2023. Is that fair? And then how – like, I guess I think historically we've heard of maybe some potential kind of annual increases in November. How should we think about that dynamic? Do you have some kind of – already expected price increases or contractual ones?

Yes, that's right, 6% in January. I think you heard that from probably many suppliers. It’s certainly not unique to us in any way we had alluded or anticipated it in earlier quarters. There was a prior 20% as the whole industry discussed and felt. But we do see these as one-time events that are unique in the supply and demand, unique situation for the industry. Obviously the whole industry is shifting. I think it's shifting to a more balanced place and we look forward to a more healthy cost reduction environment. And that's certainly what we expect going forward. We certainly don't anticipate any further cost increases and don't have any contractual agreements that would suggest any cost increases.

Understood. Thank you very much.

Thanks Natalia.

Ross Seymore with Deutsche Bank, your line is open.

Hi guys. Thanks for let me speak in a follow on here. The end market color again is very helpful. I just wanted to walk through just a little bit of your view on the mobile market. I know you said it'll start growing again in the second quarter. Can you just talk about where the channel inventory is and if I'm doing my math at all, correct. It seems like you didn't ship very much at all in the fourth quarter itself into the mobile market. Was that generally correct in order to get the channel inventory down before it starts popping back?

Yes, Q4 and Q1 were both pretty soft, certainly not zero, but certainly soft compared to expectations and even prior quarters, we don't report channel inventory, but we certainly see that significantly reduced and hopefully bottomed out. And that only adds to our confidence. Coupled with actual increased order intake, we have a very strong backlog fully booked out on Q1, strong bookings into Q2 and an increased forecast from the customer. So all of that taken together leads to our anticipation of that Q2 recovery.

And is there a seasonality to that business or is the channel dynamics and China reopening and the prevalence of a huge number of design wins, much more important to think about than any sort of seasonal pattern?

No, I think seasonality is always a factor in mobile and consumer, Q1 is typically soft anyway, independent of this unique situation. You've also got Chinese New Year, which always has an impact both on consumption and production. So I think all of that rolls together to add to sort of a softer or modest Q1. And probably then adds to the recoveries that we're seeing in Q2.

Perfect. Thanks guys.

Thanks Ross.

This concludes the Q&A portion of the call and concludes the Navitas Semiconductor fourth quarter 2022 earnings conference call. We thank you for your participation. You may now disconnect.