Navitas Semiconductor Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Comparisons are with the three months ended March 31, 2023 unless stated otherwise. Navitas designs GaN and SiC power semiconductors and uses a fabless manufacturing model.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $23.2 million | $13.4 million; up 73%, mainly from mobile and consumer sales |
| Gross profit and margin | $9.5 million; 41.1% | $5.5 million; 41.1% |
| Operating expenses | $41.1 million | $41.0 million |
| Operating loss | $31.6 million | $35.5 million |
| Net loss | $3.7 million; $0.02 per share | $62.4 million; $0.39 per share |
| Operating cash flow | $(19.8) million | $(7.9) million |
| Cash and cash equivalents | $129.7 million at March 31 | $152.8 million at December 31, 2023 |
Gross margin was approximately unchanged year over year. The reported net loss narrowed substantially, largely because of a $26.2 million noncash gain from remeasuring earnout liabilities, compared with a $27.8 million noncash loss in Q1 2023. Operating loss remained significant.
Cash used in investing was $5.4 million, including a $2.5 million additional investment in a third party and $2.9 million of property and equipment purchases. Financing provided $2.0 million, mainly from the employee stock purchase plan and stock-option exercises. Inventories increased $10.0 million during the quarter, primarily due to wafer purchases.
Total assets were $467.9 million and total liabilities were $70.0 million at March 31, 2024. The balance sheet presents no borrowings; reported lease liabilities totaled $8.2 million. Current assets were $191.1 million and current liabilities $42.0 million. Class A shares issued and outstanding increased to 183.0 million from 179.2 million at year-end.
Material changes and business concentration
- Revenue rose 73%; cost of revenue rose 74% with higher sales, leaving gross margin approximately flat.
- Research and development expense increased 16% to $20.2 million, reflecting higher materials costs and personnel-related spending.
- Selling, general and administrative expense fell 16% to $16.1 million, primarily because Q1 2023 included stock compensation associated with the joint-venture buyout.
- China represented 74% of revenue, compared with 57% a year earlier. One distributor represented 68% of Q1 2024 revenue and 78% of accounts receivable at quarter-end.
- The company relies on a single foundry for GaN wafers and a separate single foundry for SiC wafers; significant supplier, assembly, and test operations are in Taiwan and the Philippines.
Outlook, risks, and other notable items
- Outlook: No specific numerical revenue or earnings guidance is provided. Management expects operating losses and negative operating cash flow to continue, with operating and capital expenditures likely to increase as the company expands. It believes existing cash is sufficient to fund operations, working capital, and capital expenditures for the foreseeable future.
- Risks: Management cites demand and order volatility, customer inventory changes, competition, product adoption, manufacturing yields and capacity, and exposure to commodity costs such as gold. It also notes that qualifying alternative suppliers could cause delays.
- Controls: Disclosure controls and procedures were deemed ineffective as of March 31, 2024 because of material weaknesses involving accounting expertise and controls over share-based payments, the license and release agreement, and ongoing control monitoring. Management stated the financial statements fairly present the company’s results and described plans to evaluate resources and use external specialists for complex transactions.
- Contingencies: The company reported no material pending legal proceedings or material indemnification claims. It has a university license and release agreement involving $1.0 million of payments over three years plus royalties on covered products; it expects seller indemnification for royalty amounts up to approximately $1.0 million.
- Equity compensation: Stock-based compensation was substantial, and 14.2 million RSUs were outstanding at quarter-end, with $79.2 million of unrecognized compensation cost. Potential dilution also includes options and earnout shares.
Important facts for investors to verify
- Whether revenue growth extends beyond mobile and consumer applications, and whether customer and China concentration changes.
- Whether gross margin holds as sales scale and manufacturing costs, yields, and capacity evolve.
- Cash burn, inventory levels, customer deposits, and management’s stated liquidity runway.
- Progress in remediating the disclosed material weaknesses and whether controls become effective.
- The dilution and expense effects of RSUs, options, and earnout shares, and the sensitivity of reported earnings to earnout-liability remeasurement.