What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-05 compared with 2024-05-15 · 89 added, 34 removed, 128 unchanged (49% of the section changed)

25 unchanged sentences

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 genera tions of GaN technology.

In the three months ended March 31, 2024 and 2023, we spent approximately 87% and 130%, respectively, of our revenue on research and development.

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

In the three and six months ended June 30, 2024, we spent approximately 93% and 90%, respectively, of our revenue on research and development.

In the three and six months ended June 30, 2023, we spent approximately 93% and 109%, respectively, of our revenue on research and development.

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

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Selling, general and administrative costs are expensed as incurred.

Interest Income

Interest income primarily consists of interest earned from our cash on hand.

Interest Income (Expense), net

Interest income (expense), net primarily consists of interest earned from our cash on hand.

Legacy Navitas is a dual domesticated corporation for Ireland and U.S.

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Results of Operations

The tables and discussion below present our results for the three months ended March 31, 2024 and 2023 (in thousands):

The tables and discussion below present our results for the three months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended

March 31, Change

June 30, Change

Net revenues $ 20,468 $ 18,062 $ 2,406 13 %

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Other income (expense), net:

Interest income 1,682 903 779 86 %

Interest income (expense), net (72) 347 (419) (121) %

Dividend income 1,361 459 902 197 %

Gain (loss) from change in fair value of earnout liabilities 7,550 (32,224) 39,774 (123) %

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Loss before income taxes (22,267) (58,623) 36,356 (62) %

Income tax provision 70 61 9 15 %

Income tax provision (benefit) 61 (96) 157 (164) %

Net loss (22,328) (58,527) 36,199 (62) %

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Net loss attributable to controlling interests $ (22,328) $ (58,527) 36,199 (62) %

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

Revenue for the three months ended March 31, 2024 was $23.2 million compared to $13.4 million for the three months ended March 31, 2023, an increase of $9.8 million, or 73%.

The increase is primarily due to increased sales within the mobile/consumer market.

Six Months Ended

June 30, Change

(dollars in thousands) 2024 2023

Net revenues $ 43,643 $ 31,420 $ 12,223 39 %

Cost of revenues (exclusive of amortization of intangible assets included below) 26,138 18,445 7,693 42 %

Operating expenses:

Research and development 39,200 34,186 5,014 15 %

Selling, general and administrative 31,469 32,209 (740) (2) %

Amortization of intangible assets 9,548 9,272 276 3 %

Total operating expenses 80,217 75,667 4,550 6 %

Loss from operations (62,712) (62,692) (20) — %

Other income (expense), net:

Interest income (expense), net (70) 1,250 (1,320) (106) %

Dividend income 3,041 459 2,582 563 %

Gain (loss) from change in fair value of earnout liabilities 33,749 (59,976) 93,725 (156) %

Other income 114 31 83 268 %

Total other income (expense), net 36,834 (58,236) 95,070 (163) %

Loss before income taxes (25,878) (120,928) 95,050 (79) %

Income tax provision (benefit) 131 (35) 166 (474) %

Net loss (26,009) (120,893) 94,884 (78) %

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

Net loss attributable to controlling interests $ (26,009) $ (120,375) 94,366 (78) %

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

Revenue for the three months ended June 30, 2024 was $20.5 million compared to $18.1 million for the three months ended June 30, 2023, an increase of $2.4 million, or 13%.

Sales have increased due to strong mobile and consumer markets.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2024 was $13.7 million compared to $7.9 million for the three months ended March 31, 2023, an increase of $5.8 million or 74%.

The increase was primarily driven by significant revenue growth.

Cost of revenues for the three months ended June 30, 2024 was $12.5 million compared to $10.6 million for the three months ended June 30, 2023, an increase of $1.9 million or 18%.

The increase was primarily driven by revenue slightly offset by lower gross margin mobile sales.

Research and Development Expense

Research and development expense for the three months ended March 31, 2024 of $20.2 million increased by $2.8 million, or 16%, when compared to the three months ended March 31, 2023, primarily driven by an increase in research and development materials by approximately $1.4 million since March 31, 2023 and an increase in research and development stock compensation expense by approximately $0.2 million reflecting increases in research and development personnel.

Research and development expense for the three months ended June 30, 2024 of $19.0 million increased by $2.2 million, or 13%, when compared to the three months ended June 30, 2023.

This is primarily driven by an increase in product development by approximately $1.2 million since June 30, 2023 as it relates to EV, enterprise and solar.

Additionally, salaries and benefits have increased as we build out our target end markets.

Selling, General and Administrative Expense

Selling, general and administrative expense for the three months ended March 31, 2024 of $16.1 million decreased by $3.0 million, or 16%, when compared to the three months ended March 31, 2023, primarily driven by lower stock compensation expense in selling, general and administrative compared to March 2023 by around $3.8 million given the stock grant in March 2023 related to the acquisition of the minority interest of the Joint Venture as discussed in Note 15 Noncontrolling Interest.

Selling, general and administrative expense for the three months ended June 30, 2024 of $15.4 million increased by $2.2 million, or 17%, when compared to the three months ended June 30, 2023, primarily driven by higher stock compensation expense in selling, general and administrative compared to June 2023 by around $0.8 million reflecting increases in personnel.

Additionally, salaries and benefits have increased as we build out a worldwide sales force.

Amortization of Intangible Assets

Amortization of intangible assets for the three months ended March 31, 2024 of $4.8 million increased by $0.3 million, or 6%, when compared to the three months ended March 31, 2023.

The increase is primarily due to business acquisitions resulting in more intangible assets.

Amortization of intangible assets remained the same as we did not acquire new intangible assets.

Other Income (Expense), net

Net interest income for the three months ended March 31, 2024 was $1.7 million compared to $0.9 million net interest income for the three months ended March 31, 2023, primarily due to the higher interest rate received on money markets funds.

During the three months ended March 31, 2024, we recognized a $26.2 million gain 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 $26.2 million was primarily a result of the decrease of the closing price of our Class A common stock listed on the Nasdaq, resulting in the decrease in the estimated fair value of the earnout shares from $4.76 as of March 31, 2023 to $2.42 as of March 31, 2024.

Income Tax Provision

Income tax provision for the three months ended March 31, 2024 increased $0.0 million when compared to the income tax expense of $0.1 million for the three months ended March 31, 2023.

Net interest (expense) income for the three months ended June 30, 2024 was $(0.1) million compared to $0.3 million net interest income (expense), net for the three months ended June 30, 2023, primarily due to the higher interest rate received on money markets funds in the prior year three months ended June 30, 2023.

Dividend income consists of income earned on our money market treasury funds that are recorded as cash equivalents on our consolidated balance sheet.

Increase of $0.9 million is primarily due to a full quarter of dividend income for the three months ended June 30, 2024 compared to only one month of dividend income for the three months ended June 30, 2023.

During the three months ended June 30, 2024, we recognized a $7.6 million gain from the change in fair value of our earn-out liabilities.

The increase in the gain of our earn-out liabilities of $39.8 million was primarily a result of the decrease of the closing price of our Class A common stock listed on the Nasdaq, resulting in the decrease in the estimated fair value of the earnout shares from $8.58 as of June 30, 2023 to $1.53 as of June 30, 2024.

Income Tax Provision (Benefit)

Income tax provision for the three months ended June 30, 2024 increased $0.2 million when compared to the income tax benefit of $0.1 million for the three months ended June 30, 2023.

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, 2024 Compared to the Six Months Ended June 30, 2023

Revenue for the six months ended June 30, 2024 was $43.6 million compared to $31.4 million for the six months ended June 30, 2023, an increase of $12.2 million, or 39%.

Sales have increased due to strong mobile and consumer markets.

Cost of Revenues

Cost of revenues for the six months ended June 30, 2024 was $26.1 million compared to $18.4 million for the six months ended June 30, 2023, an increase of $7.7 million or 42%.

The increase was primarily driven by revenue slightly offset by lower gross margin mobile sales.

Research and Development Expense

Research and development expense for the six months ended June 30, 2024 of $39.2 million increased by $5.0 million, or 15%, when compared to the six months ended June 30, 2023.

This is primarily driven by an increase in product development by approximately $2.2 million since June 30, 2023 as it relates to EV, enterprise and solar.

Additionally, salaries and benefits have increased as we build out our target end markets.

Selling, General and Administrative Expense

Selling, general and administrative expense for the six months ended June 30, 2024 of $31.5 million decreased by $0.7 million, or 2%, when compared to the six months ended June 30, 2023.

Salaries and benefits have increased as we build out a worldwide sales force.

Amortization of Intangible Assets

Amortization of intangible assets remained fairly consistent as we did not acquire new intangible assets.

Other Income (Expense), net

Net interest (expense) income for the six months ended June 30, 2024 was $(0.1) million compared to $1.3 million net interest income (expense) for the six months ended June 30, 2023, primarily due to the higher interest rate received on money markets funds in the prior year.

Increase of $2.6 million in dividend income is primarily due to two quarters of dividend income for the six months ended June 30, 2024 compared to only one month of dividend income for the six months ended June 30, 2023.

During the six months ended June 30, 2024, we recognized a $33.7 million gain from the change in fair value of our earn-out liabilities.

The increase in the gain of our earn-out liabilities of $93.7 million was primarily a result of the decrease of the closing price of our Class A common stock listed on the Nasdaq, resulting in the decrease in the estimated fair value of the earnout shares from $8.58 as of June 30, 2023 to $1.53 as of June 30, 2024.

Income Tax Provision (Benefit)

Income tax provision for the six months ended June 30, 2024 increased $0.2 million when compared to the income tax benefit of $0.0 million for the six months ended June 30, 2023.

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

Liquidity and Capital Resources

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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, 2024, we had cash and cash equiva lents of $129.7 million.

As of June 30, 2024, we had cash and cash equiva lents of $112.0 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, 2024 and 2023 (in thousands):

March 31, 2024 March 31, 2023

The following table summarizes our consolidated cash flows for the six months ended June 30, 2024 and 2023 (in thousands):

June 30, 2024 June 30, 2023

Consolidated Statements of Cash Flow Data:

6 unchanged sentences

We derive liquidity primarily from equity financing activities.

As of March 31, 2024, our balance of cash and cash equivalents was $129.7 million, which is a decrease of $23.2 million or 15% compared to December 31, 2023.

As of June 30, 2024, our balance of cash and cash equivalents was $112.0 million, which is a decrease of $40.8 million or 27% compared to December 31, 2023.

Operating Activities

For the three months ended March 31, 2024, net cash used in operating activities was $19.8 million, which primarily reflects a net loss of $3.7 million.

This decrease to operating cash flows are partially offset by adjustments for non-cash share-based compensation of $13.5 million, non-cash gains of $26.2 million in earnout liabilities, amortization of intangible assets of $4.8 million, and an aggregate cash used in operating assets and liabilities of $7.8 million.

Specifically, increases in inventories of $10 million due to wafer purchases, decreases in customer deposits of $2.9 million partially offset by a $3.7 million decrease in accounts receivable and a decrease in accounts payable, accrued compensation and other expenses of $0.5 million.

For the six months ended June 30, 2024, net cash used in operating activities was $34.9 million, which primarily reflects a net loss of $26.0 million.

This decrease to operating cash flows is partially offset by adjustments for non-cash share-based compensation of $26.6 million, depreciation of $1.4 million, non-cash gains of $33.7 million in earnout liabilities, amortization of intangible assets of $9.5 million, and an aggregate cash used in operating assets and liabilities of $14.0 million.

Specifically, increases in inventories of $3.0 million due to sales increases coupled with decreases in accounts payable, accrued compensation and other expenses of $10.4 million and customer deposits and deferred revenue of $4.7 million, partially offset by an decreases in accounts receivable of $3.2 million and prepaid expenses and other current assets of $1.4 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 $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, 2024 of $5.4 million was primarily due to $2.5 million cash funding of a joint venture and $2.9 million for purchases of fixed assets.

Net cash used in investing activities for the six months ended June 30, 2024 of $8.1 million was primarily due to $2.5 million cash funding of a joint venture and $5.6 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, 2024 of $2.0 million was primarily due to proceeds from stock option exercises of $0.2 million and proceeds from our employee stock purchase plan of $1.8 million.

Net cash provided by financing activities for the six months ended June 30, 2024 of $2.2 million was primarily due to proceeds from stock option exercises of $0.4 million and proceeds from our employee stock purchase plan of $1.8 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, 2024, our non-cancellable contractual arrangements consisted entirely of lease obligations.

As of June 30, 2024, our non-cancellable contractual arrangements consisted entirely of lease obligations.

Refer to Note 7 - Leases for further information.

Off-Balance Sheet Commitments and Arrangements

As of March 31, 2024, 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, 2024, 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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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