Navitas Semiconductor Corp 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us,” or “our” refer to the business of Navitas and its subsidiaries. Throughout this section, unless otherwise noted, “Navitas” refers to Navitas Semiconductor Corporation and its consolidated subsidiaries. This quarterly report includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are attempts to predict or indicate future events or trends or similar statements that are not a reflection of historical fact. Forward-looking statements may be identified by the use of words such as “we expect” or “are expected to be,” “estimate,” “plan,” “project,” “forecast,” “intend,” “anticipate,” “believe,” “seek,” or other similar expressions. Forward-looking statements are made based on estimates and forecasts of financial and performance metrics, projections of market opportunity and market share and current indications of customer interest, all of which are based on various assumptions, whether or not identified in this press release. All such statements are based on current expectations of the management of the Company and are not predictions of actual future performance. Forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions and expectations. Many actual events and circumstances that affect performance are beyond the control of the Company, and forward-looking statements are subject to a number of uncertainties. Our business is subject to certain risks that could materially and adversely affect our business, financial condition, results of operations, or the value of our securities. These and other risk factors are discussed in the Risk Factors section beginning on p. 13 of our annual report on Form 10-K for the year ended December 31, 2025, as updated in the Risk Factors section in this quarterly report on Form 10-Q, and in other documents we file. If any of these risks materialize or if our assumptions underlying forward-looking statements prove to be incorrect, actual results could differ materially from the results implied by these forward-looking statements. Overview Navitas Semiconductor Corporation designs, develops and markets next-generation power semiconductors, including gallium nitride (“GaN”) power integrated circuits (“ICs”), high-voltage silicon carbide (“SiC”) devices, associated high-speed silicon system controllers, and digital isolators used in power conversion and charging applications. We focus primarily on high-power markets, including AI data centers, energy and grid infrastructure, performance computing, and industrial electrification. Our products are designed to improve system efficiency, increase power density, enhance thermal performance, and reduce overall system size and cost compared to traditional silicon-based technologies. By leveraging the electrical properties of wide-bandgap (“WBG”) materials such as GaN and SiC, our solutions enable higher switching frequencies, higher voltage operation, and improved energy efficiency. These capabilities are increasingly important in applications such as hyperscale data centers, renewable energy systems, grid modernization infrastructure, and industrial automation. We operate as a fabless semiconductor design company and outsource wafer fabrication, assembly, and testing to qualified third-party manufacturing partners. This business model allows us to operate with relatively low capital expenditure requirements; however, our results depend on the capacity, cost structure, yield performance, and operational execution of our manufacturing partners. We maintain operations around the world, including the United States, Philippines, China, Taiwan, and South Korea , with principal executive offices in Torrance, California. Navitas 2.0 Restructuring Plan We continue to execute the Navitas 2.0 Restructuring Plan, which was initiated in the fourth quarter of 2025 to reposition the Company as a focused high-power semiconductor provider serving large, durable, higher-margin markets. The plan remains centered on portfolio and organizational realignment, technology roadmap execution, go-to-market optimization, and disciplined investment in strategic end markets. 20 TABLE OF CONTENTS Results of Operations The tables and discussion below present our results for the three months ended March 31, 2026 and 2025 (in thousands): Three Months Ended March 31, Three Months Ended March 31, 2026 2025 Net revenues $ 8,598 100.0 % $ 14,018 100.0 % Cost of revenues (exclusive of amortization of intangible assets included below) 5,361 62.4 8,711 62.1 Operating expenses: Research and development 14,567 169.4 12,668 90.4 Selling, general and administrative 11,252 130.9 11,740 83.7 Amortization of intangible assets 4,734 55.1 4,734 33.8 Restructuring expense 450 5.2 1,469 10.5 Total operating expenses 31,003 360.6 30,611 218.4 Loss from operations $ (27,766) (322.9) % $ (25,304) (180.5) % Revenue We design, develop and manufacture GaN FETs, GaN ICs, SiC MOSFETs and modules, and Schottky diodes that deliver best-in-class performance, ruggedness, and quality. Our revenue represents the sale of semiconductors through specialized distributors to original equipment manufacturers (“OEMs”), their suppliers, and other end customers. We consider the domicile of our end customers, rather than the distributors we sell to directly, to be the basis of attributing revenues from external customers to individual countries. Revenues for the three months ended March 31, 2026 and 2025 (in thousands) were attributable to end customers in the following countries: Three Months Ended March 31, Three Months Ended March 31, Country 2026 2025 United States $ 3,513 41 % $ 4,346 31 % China 3,110 36 5,747 41 Europe 1,071 12 2,103 15 Asia excluding China 904 11 1,822 13 Total $ 8,598 100 % $ 14,018 100 % The decline in sales of $5.4 million or 39% was primarily due to the decrease in sales of mobile in the Asia region, primarily China, and consumer markets. Cost of Revenues Three Months Ended March 31, $ in thousands 2026 2025 % Change Cost of revenues (exclusive of amortization of intangible assets) $ 5,361 $ 8,711 (38.5) % Percentage of revenue 62.4 % 62.1 % The decrease of $3.4 million or 38% was primarily driven by a decline in sales. The increase in percent of revenue was primarily due to higher stock-based compensation. 21 TABLE OF CONTENTS Research and Development Expense Three Months Ended March 31, $ in thousands 2026 2025 % Change Research and development $ 14,567 $ 12,668 15.0 % Percentage of revenue 169.4 % 90.4 % The increase of $1.9 million was primarily driven by an increase in stock-based compensation as well as research and development materials, partially offset by a decrease in headcount related cost as a result of the Company’s reductions in force. Selling, General and Administrative Expense Three Months Ended March 31, $ in thousands 2026 2025 % Change Selling, general and administrative $ 11,252 $ 11,740 (4.2) % Percentage of revenue 130.9 % 83.7 % The decrease of $0.5 million, or 4%, was primarily driven by a reduction in sales commissions and professional fees partially offset by an increase in stock-based compensation. Amortization of Intangible Assets Three Months Ended March 31, $ in thousands 2026 2025 % Change Amortization of intangible assets $ 4,734 $ 4,734 — % Percentage of revenue 55.1 % 33.8 % Amortization of intangible assets remained flat. Restructuring Expense Three Months Ended March 31, $ in thousands 2026 2025 % Change Restructuring expense $ 450 $ 1,469 (69.4) % Percentage of revenue 5.2 % 10.5 % The decrease of $1.0 million was primarily due to timing of restructuring related plans. Other Income (Expense), net Three Months Ended March 31, $ in thousands 2026 2025 % Change Other income (expense), net $ (5,952) $ 8,837 — (167.4) % Percentage of revenue (69.2) % 63.0 % The decrease in other income of approximately $14.8 million is primarily due to the change in fair value of our earnout liabilities of $16.0 million partially offset by an increase in interest and dividend income. 22 TABLE OF CONTENTS Income Tax Provision Three Months Ended March 31, $ in thousands 2026 2025 % Change Income tax provision $ 67 $ 82 — (18.3) % Percentage of revenue 0.8 % 0.6 % Income tax provision was flat primarily due to our large loss from operations. We expect our tax rate to remain close to zero in the near term due to full valuation allowances against deferred tax assets. Equity method investment loss Three Months Ended March 31, $ in thousands 2026 2025 % Change Equity method investment loss $ — $ (280) — (100.0) % Percentage of revenue — % (1.9) % In the first quarter of 2026, the Company discontinued the application of the equity method of accounting following the loss of significant influence. Liquidity and Capital Resources Our primary use of cash is to fund operating expenses, working capital requirements, research and development, and capital expenditures. In addition, we use cash for strategic investments and acquisitions. We expect to continue to incur net operating losses and negative cash flows from operations and we expect our research and development expenses, general and administrative expenses, and capital expenditures will remain relatively flat. We currently expect to fund our cash requirements through the use of cash and cash equivalents on hand. We believe that our current levels of cash and cash equivalents are sufficient to finance our operations, working capital requirements, and capital expenditures for the foreseeable future. Cash Flows The following table summarizes our consolidated cash flows for the three months ended March 31, 2026 and 2025 (in thousands): March 31, 2026 March 31, 2025 Consolidated Statements of Cash Flow Data: Net cash used in operating activities $ (16,362) $ (13,533) Net cash used in investing activities $ (388) $ (41) Net cash provided by financing activities $ 1,518 $ 949 Net decrease in cash, cash equivalents and restricted cash $ (15,232) $ (12,625) March 31, 2026 December 31, 2025 $ Change % Change Cash, cash equivalents and restricted cash $ 223,370 $ 238,602 $ (15,232) (6) % 23 TABLE OF CONTENTS We derive liquidity primarily from cash on hand and equity financing activities. The changes in our cash flows for the three months ended March 31, 2026, compared to the same period in 2025, were primarily driven by the following: Operating Activities Net cash used in operating activities for the three months ended March 31, 2026 was $16.4 million compared to $13.5 million for the three months ended March 31, 2025. The increase was primarily driven by a higher net loss, including unfavorable change in the fair value of the earnout liability and working capital, partially offset by higher non-cash stock-based compensation. Investing Activities Net cash used in investing activities increased slightly during the three months ended March 31, 2026, compared to the same period in 2025, primarily due to additional capital expenditures for R&D equipment. Financing Activities Net cash provided by financing activities increased $0.6 million primarily driven by higher proceeds from stock option exercises, partially offset by increased payments on finance lease obligations. Contractual Obligations, Commitments and Contingencies In the ordinary course of business, we enter into contractual arrangements that may require future cash payments. As of March 31, 2026, our non-cancellable contractual arrangements consisted of lease obligations and an agreement for the purchase of equipment. Refer to Note 9 - “Leases” for further information on our minimum future payments related to lease obligations. Off-Balance Sheet Commitments and Arrangements As of March 31, 2026, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. Critical Accounting Policies and Estimates The preparation of our financial statements and related disclosures in accordance with U.S. GAAP requires our management to make judgments, assumptions and estimates that affect the amounts reported in our accompanying condensed consolidated financial statements and the accompanying notes included elsewhere in this quarterly report. Our management bases its estimates and judgments on historical experience, current economic and industry conditions and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our condensed consolidated financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. There have been no material changes to our critical accounting policies and estimates from the information in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our 2025 annual report on Form 10-K.