What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-15 · 91 added, 33 removed, 148 unchanged (46% of the section changed)

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Founded in 2013, Navitas is a U.S.

based developer of gallium nitride power integrated circuits that provide superior efficiency, performance, size and sustainability relative to existing silicon technology.

based developer of gallium nitride and silicon carbide power semiconductor devices that provide superior efficiency, performance, size and sustainability relative to existing silicon technology.

Our solutions offer faster charging, higher power density and greater energy savings compared to silicon-based power systems with the same output power.

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Today, we have over 185 patents that are issued or pending.

In addition to our comprehensive patent portfolio, our biggest proprietary advantage is our process design kit (PDK), the ‘how-to’ guide for Navitas designers to create new GaN based device and circuits.

Our GaN power IC inventions and intellectual property translate across all of our target markets from mobile, consumer, EV, enterprise, and renewables.

We evaluate various complementary technologies and look to improve our PDK, in order to keep introducing newer generations of GaN technology.

In the three months ended March 31, 2023 and 2022 , we spent approximately 130% and 198%, respectively, of our revenue on research and development.

In the six months ended June 30, 2023 and 2022 , we spent approximately 109% and 149%, respectively, of our revenue on research and development.

Navitas’ research and development activities are located primarily in the US and China.

May 2023 Public Offering

On May 26, 2023, the Company completed an underwritten public offering (the “May 2023 Public Offering”) of 10,000.000 shares of its Class A Common Stock at a public offering price of $8.00 per share, before deducting underwriting discounts and commissions.

In connection with the May 2023 Public Offering, the Company granted the underwriters of the offering a 30-day option to purchase up to an additional 1,500,000 shares of the Company’s Class A Common Stock (the “Option Shares”) from the Company at the same public offering price.

On June 1, 2023, the underwriters exercised in full their option to purchase the Option Shares.

The sale of the Option Shares closed on June 5, 2023.

After deducting underwriting discounts and commissions and before deducting offering expenses payable by the Company, the Company received net proceeds of $75.6 million and $11.3 million from the May 2023 Public Offering and sale of the Option Shares, respectively.

The total net proceeds received by the Company after deducting offering expenses was $86.5 million.

The Company intends to use the net proceeds for working capital and other general corporate purposes, including potential acquisitions or strategic manufacturing investments.

Buyout of Elevation Semiconductor

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The future earn-out payments were fair valued at $0.6 million, for a total merger consideration of $244.0 million.

GeneSiC’s net assets and operating results since the merger date are included in the Company’s Condensed Consolidated Balance Sheet and Condensed Consolidated Statements of Operations as of and for the three months ended March 31, 2023.

During the Company’s second quarter of 2023, the Company received information regarding products shipped by GeneSiC to a distributor prior to the Company’s acquisition of GeneSiC.

GeneSiC had the option, but not the obligation, to accept returns sold to the distributor.

The Company determined that a $1.7 million return liability should have been recorded as of the close of the acquisition on August 15, 2022.

The Company recorded the return liability as a purchase price adjustment as of June 30, 2023, resulting in an increase to goodwill and accounts payable and other accrued expenses of $1.7 million.

Acquisition of VDDTech

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Based in Mont-saint-Guibert, Belgium, VDDTech creates advanced digital-isolators for next-generation power conversion.

VDDTech’s net assets and operating results since the acquisition date are included in the Company’s Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Operations for the three months ended March 31, 2023.

Results of Operations

We design, develop and manufacture GaN ICs, SiC MOSFETs and Schottky MPS diodes that deliver best-in-class performance, ruggedness and quality.

We design, develop and market next-generation power semiconductors including gallium nitride (“GaN”) power integrated circuits (“ICs”, silicon carbide (“SiC”) and associated high-speed silicon system controllers, and digital isolators used in power conversion and charging.

Our revenue represents the sale of semiconductors through specialized distributors to original equipment manufacturers (“OEMs”), their suppliers and other end customers.

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Results of Operations

The table and discussion below present our results for the three months ended March 31, 2023 and 2022 (in thousands):

The tables and discussion below present our results for the three and six months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended

March 31, Change

(dollars in thousands) 2023 2022

Net revenues (including $0 and $613 of related party revenues) $ 13,358 $ 6,740 $ 6,618 98 %

June 30, Change

Net revenues $ 18,062 $ 8,611 $ 9,451 110 %

Cost of revenues (exclusive of amortization of intangible assets included below) 10,572 5,026 5,546 110 %

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Income (loss) before income taxes (58,623) 34,107 (92,730) (272) %

Income tax provision 61 3 58 1933 %

Income tax (benefit) provision (96) 270 (366) (136) %

Net income (loss) (58,527) 33,837 (92,364) (273) %

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Net income (loss) attributable to controlling interests $ (58,527) $ 33,837 (92,364) (273) %

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Reve nue for the three months ended March 31, 2023 was $13.4 million compared to $6.7 million for the three months ended March 31, 2022, an increase of $6.6 million, or 98%.

Six Months Ended

June 30, Change

Net revenues $ 31,420 $ 15,351 $ 16,069 105 %

Cost of revenues (exclusive of amortization of intangible assets included below) 18,445 8,803 9,642 110 %

Operating expenses:

Research and development 34,186 22,847 11,339 50 %

Selling, general and administrative 32,209 38,537 (6,328) (16) %

Amortization of intangible assets 9,272 172 9,100 5291 %

Total operating expenses 75,667 61,556 14,111 23 %

Loss from operations (62,692) (55,008) (7,684) 14 %

Other income (expense), net:

Interest income (expense), net 1,709 28 1,681 6004 %

Gain from change in fair value of warrants — 51,763 (51,763) (100) %

Gain (loss) from change in fair value of earnout liabilities (59,976) 118,260 (178,236) (151) %

Other income (expense) 31 (1,141) 1,172 (103) %

Total other income (expense), net (58,236) 168,910 (227,146) (134) %

Income (loss) before income taxes (120,928) 113,902 (234,830) (206) %

Income tax (benefit) provision (35) 273 (308) (113) %

Net income (loss) (120,893) 113,629 (234,522) (206) %

Net loss attributable to noncontrolling interests (518) — (518) — %

Net income (loss) attributable to controlling interests $ (120,375) $ 113,629 (234,004) (206) %

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Revenue for the three months ended June 30, 2023 was $18.1 million compared to $8.6 million for the three months ended June 30, 2022, an increase of $9.5 million, or 110%.

The increase reflects a combination of the Company’s customer growth trajectory, evolving from aftermarket customers to higher volume customers, and the accretive revenue impact from the acquisition of GeneSiC.

Total sales volume increased 121%, from 7.3 million to 16.2 million units shipped, while the average selling price increased 4% to $1.07 per unit.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2023 was $10.6 million compared to $5.0 for the three months ended June 30, 2022, an increase of $5.5 million or 110%.

The increase was primarily driven by significant revenue growth, acquisition of GeneSiC, in addition to TSMC’s 20% wafer price increase which created a higher cost of revenues.

Research and Development Expense

Research and development expense for the three months ended June 30, 2023 of $16.8 million increased by $7.3 million, or 76%, when compared to the three months ended June 30, 2022, driven by an increase of $3.9 million in stock based compensation and $3.1 million in compensation costs related to growth in headcount.

We expect research and development expense to continue to increase as we grow our headcount to support our expansion into new applications.

Selling, General and Administrative Expense

Selling, general and administrative expense for the three months ended June 30, 2023 of $13.2 million decreased by $0.8 million, or 6%, when compared to the three months ended June 30, 2022, driven by decreases of $2.4 million in stock based compensation, offset by an increase of $1.1 million in headcount costs, $0.3 million in professional fees, and $0.2 million higher transaction expenses.

We expect selling, general and administrative costs to increase to support our growth and as a result of the increased costs for infrastructure required as a public company.

Amortization of Definite-Lived Intangible Assets

Amortization of definite-lived intangible assets for the three months ended June 30, 2023 of $4.8 million increased by $4.7 million, or 5582%, when compared to the three months ended June 30, 2022.

The increase is primarily due to business acquisitions that occurred during the fiscal year ended December 31, 2022.

Other Income (Expense), net

Net interest income for the three months ended June 30, 2023 was $0.8 million compared to $0.1 million net interest expense for the three months ended June 30, 2022, primarily due to the higher interest rate received on money markets funds.

During the three months ended June 30, 2023, we recognized a $32.2 million loss from the change in fair value of our earn-out liabilities.

Subsequent to the recognition of the earnout liability upon the consummation of the Business Combination on October 19, 2021, we remeasure the fair value of this liability at each reporting date.

The increase in fair value of our earn-out liability of $32.2 million was primarily a result of the increase of the closing price of our Class A common stock listed on the Nasdaq, resulting in the increase in the estimated fair value of the earnout shares from $4.76 as of March 31, 2023 to $8.58 as of June 30, 2023.

Income Tax (Benefit) Provision

Income tax provision for the three months ended June 30, 2023 did not change materially when compared to the three months ended June 30, 2022.

We expect our tax rate to remain close to zero in the near term due to full valuation allowances against deferred tax assets.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Revenue for the six months ended June 30, 2023 was $31.4 million compared to $15.4 million for the six months ended June 30, 2022, an increase of $16.1 million, or 105%.

Total sales volumes increased 69%, from 14.8 million to 25.1 million units shipped, while the average selling price increased 26% to $1.21 per unit.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2023 was $7.9 million compared to $3.8 million for the three months ended March 31, 2022, an increase of $4.1 million or 108%.

Cost of revenues for the six months ended June 30, 2023 was $18.4 million compared to $8.8 million for the six months ended June 30, 2022, an increase of $9.6 million or 110%.

The increase was primarily driven by significant revenue growth, acquisition of GeneSiC, in addition to TSMC’s 20% wafer price increase which created a higher cost of revenues.

Research and Development Expense

Research and development expense for the three months ended March 31, 2023 of $17.4 million increased by $4.1 million, or 31%, when compared to the three months ended March 31, 2022, driven by increases of $3.0 million compensation costs related to growth in headcount as the Company develops products in Solar, Enterprise and EV and $1.3 million toward the expansion of new products, slightly offset by a decrease of $0.3 million in stock based compensation.

Research and development expense for the six months ended June 30, 2023 of $34.2 million increased by $11.3 million, or 50%, when compared to the six months ended June 30, 2022, driven by an increase of $6.6 million in compensation costs related to growth in headcount and $1.4 million toward the expansion of new products, in addition to an increase of $3.2 million in stock based compensation.

We expect research and development expense to continue to increase as we grow our headcount to support our expansion into new applications.

Selling, General and Administrative Expense

Selling, general and administrative expense for the three months ended March 31, 2023 of $19.1 million decreased by $5.5 million, or 22%, when compared to the three months ended March 31, 2022, driven by decreases of $7.8 million in stock based compensation and $0.5 million in professional fees, slightly offset by an increase of $1.9 million in headcount costs and $1.3 million higher transaction expense.

Selling, general and administrative expense for the six months ended June 30, 2023 of $32.2 million decreased by $6.3 million, or 16%, when compared to the six months ended June 30, 2022, driven by decreases of $10.4 million in stock based compensation and $0.6 million in professional fees, partially offset by an increase of $3.1 million in headcount costs and $1.5 million higher transaction expense.

We expect selling, general and administrative costs to increase to support our growth and as a result of the increased costs for infrastructure required as a public company.

Amortization of Definite-Lived Intangible Assets

Amortization of definite-lived intangible assets for the three months ended March 31, 2023 of $4.5 million increased by $4.4 million, or 5,013%, when compared to the three months ended March 31, 2022.

Amortization of definite-lived intangible assets for the six months ended June 30, 2023 of $9.3 million increased by $9.1 million, or 5291%, when compared to the six months ended June 30, 2022.

The increase is primarily due to business acquisitions that occurred during the fiscal year ended December 31, 2022.

O ther Income (Expense), net

Net interest income for the three months ended March 31, 2023 was $0.9 million compared to immaterial net interest expense for the three months ended March 31, 2022, primarily due to the higher interest rate received on money markets funds.

During the three months ended March 31, 2023 , we recognized $27.8 million loss from the change in fair value of our earn-out liabilities.

Other Income (Expense), net

Net interest income for the six months ended June 30, 2023 was $1.7 million compared to immaterial net interest expense for the six months ended June 30, 2022, primarily due to the higher interest rate received on money markets funds.

During the six months ended June 30, 2023, we recognized a $60.0 million loss from the change in fair value of our earn-out liabilities.

Subsequent to the recognition of the earnout liability upon the consummation of the Business Combination on October 19, 2021, we remeasure the fair value of this liability at each reporting date.

The increase in fair value of our earn-out liability of $27.8 million was primarily a result of the increase of the closing price of our Class A common stock listed on the Nasdaq, resulting in the increase in the estimated fair value of the earnout shares from $1.47 as of December 31, 2022 to $4.76 as of March 31, 2023.

The increase in fair value of our earn-out liability of $60.0 million was primarily a result of the increase of the closing price of our Class A common stock listed on the Nasdaq, resulting in the increase in the estimated fair value of the earnout shares from $1.47 as of December 31, 2022 to $8.58 as of June 30, 2022.

Income Tax (Benefit) Provision

Income tax provision for the three months ended March 31, 2023 did not change materially when compared to the three months ended March 31, 2022.

Income tax provision for the six months ended June 30, 2023 did not change materially when compared to the three months ended June 30, 2022.

We expect our tax rate to remain close to zero in the near term due to full valuation allowances against deferred tax assets.

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We expect our expenses and capital requirements to increase in connection with our ongoing initiatives to expand our operations, product offerings and end customer base.

As of March 31, 2023, we had cash and cash equivalents of $100.8 million.

As of June 30, 2023, we had cash and cash equivalents of $177.7 million.

We currently expect to fund our cash requirements through the use of cash on hand.

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We can provide no assurance that additional financing will be available at all or, if available, that we would be able to obtain additional financing on terms favorable to us.

The following table summarizes our consolidated cash flows for the three months ended March 31, 2023 and 2022 (in thousands):

March 31, 2023 March 31, 2022

The following table summarizes our consolidated cash flows for the six months ended June 30, 2023 and 2022 (in thousands):

June 30, 2023 June 30, 2022

Consolidated Statements of Cash Flow Data:

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We derive liquidity primarily from debt and equity financing activities.

As of March 31, 2023, our balance of cash and cash equivalents was $100.8 million, which is a decrease of $9.5 million or 9% compared to December 31, 2022.

As of June 30, 2023, our balance of cash and cash equivalents was $177.7 million, which is an increase of $67.4 million or 61% compared to December 31, 2022.

Operating Activities

Fo r the three months ended March 31, 2023, net cash used in operating activities was $7.9 million, which primarily reflects a net loss of $62.4 million.

For the six months ended June 30, 2023, net cash used in operating activities was $17.2 million, which primarily reflects a net loss of $120.9 million.

This decrease to operating cash flows are partially offset by adjustments for non-cash share-based compensation of $29.7 million, non-cash losses of $60.0 million in earnout liabilities, amortization of intangible assets of $9.3 million, and an aggregate cash provided by operating assets and liabilities of $3.2 million.

Specifically, a $3.4 million increase in accounts payable-trade, accrued compensation, and other expenses primarily due to an increase in accrued compensation expense as a result of timing, a $1.7 million decrease in account receivable and $0.2 million decrease in inventory, partially offset by a increase in other assets of $1.6 million..

Specifically, a $11.9 million increase in accounts payable-trade, accrued compensation, and other expenses primarily due to an increase in accrued compensation expense as a result of timing, partially offset by a $6.0 million increase in account receivable and $1.6 million increase in other assets, a $0.7 million increase in prepaid expenses and other, and a decrease in operating lease liabilities of $0.5 million..

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2023 of $1.8 million was primarily due to $1.0 million cash funding of a joint venture and $0.8 million for purchases of fixed assets.

Net cash used in investing activities for the six months ended June 30, 2023 of $2.7 million was primarily due to $1.0 million cash funding of a joint venture and $1.7 million for purchases of fixed assets.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2023 of $0.2 million was due to proceeds from stock option exercises of $0.2 million.

Net cash provided by financing activities for the six months ended June 30, 2023 of $87.3 million was primarily due to proceeds from the issuance of common stock in May 2023 of $86.9 million and proceeds from stock option exercises of $0.9 million, offset by the payment of May 2023 public offering costs of $0.5 million.

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, 2023, our non-cancellable contractual arrangements consisted entirely of lease obligations.

As of June 30, 2023, our non-cancellable contractual arrangements consisted entirely of lease obligations.

Refer to Note 8 - Leases for further information.

Off-Balance Sheet Commitments and Arrangements

As of March 31, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

As of June 30, 2023, 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

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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.

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.

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As a result, following the Business Combination, our condensed consolidated financial statements may not be comparable to the financial statements of companies that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make common stock less attractive to investors.

Since the value of our public float exceeded $700 million as of June 30, 2023, we will cease to be an emerging growth company as of the end of fiscal year 2023 and will become a large accelerated filer, as defined by applicable regulations, effective as of January 1, 2024.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis