What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-05 compared with 2024-08-05 · 58 added, 57 removed, 160 unchanged (42% of the section changed)

26 unchanged sentences

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.

In the three and nine months ended September 30, 2024, we spent approximatel y 82% and 87%, respectively, of our revenue on research and development.

In the three and nine months ended September 30, 2023, we spent approximately 75% and 95%, 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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Cost of Revenues

Cost of Revenues consists primarily of the cost of semiconductors purchased from subcontractors, including wafer fabrication, assembly, testing and packaging, manufacturing support costs, including labor and overhead (which includes depreciation and amortization) associated with such purchases, final test and wafer level yield fallout, inventory impairments, consumables, system and shipping costs.

Cost of revenues also includes compensation related to personnel associated with manufacturing.

impairments, consumables, system and shipping costs.

Cost of revenues also includes compensation related to personnel associated with manufacturing, including costs related to cash and share-based employee compensation.

Research and Development Expense

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

Dividend Income

Dividend income consist of income earned on money market treasury funds that are recorded as cash equivalents.

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 June 30, 2024 and 2023 (in thousands):

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

Three Months Ended

June 30, Change

September 30, Change

Net revenues $ 21,681 $ 21,978 $ (297) (1) %

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Dividend income 1,210 1,648 (438) (27) %

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

Gain from change in fair value of earnout liabilities 9,171 34,473 (25,302) (73) %

Other income 26 20 6 30 %

Total other income (expense), net 8,870 (31,398) 40,268 (128) %

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

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

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

Total other income, net 10,368 36,188 (25,820) (71) %

Income (loss) before income taxes (18,605) 7,542 (26,147) (347) %

Income tax provision 125 23 102 443 %

Net income (loss) (18,730) 7,519 (26,249) (349) %

Net loss attributable to noncontrolling interests — — — — %

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

Six Months Ended

June 30, Change

Net income (loss) attributable to controlling interests $ (18,730) $ 7,519 (26,249) (349) %

Nine Months Ended

September 30, Change

(dollars in thousands) 2024 2023

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Net loss attributable to controlling interests $ (44,739) $ (112,855) 68,116 (60) %

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.

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

Revenue for the three months ended September 30, 2024 was $21.7 million compared to $22.0 million for the three months ended September 30, 2023, a decrease of $0.3 million, or 1%.

The slight decline in sales was due to the decline in high power markets partially offset by growth in mobile compared to the three months ended September 30, 2023.

Cost of Revenues

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.

Cost of revenues for the three months ended September 30, 2024 was $13.1 million compared to $14.9 million for the three months ended September 30, 2023, a decrease of $1.8 million or 12%.

The decrease was primarily driven by an inventory write-off of $2.0 million that occurred during the three months ended September 30, 2023 slightly offset by product mix.

Research and Development Expense

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.

Research and development expense for the three months ended September 30, 2024 of $17.8 million increased by $1.3 million, or 8%, when compared to the three months ended September 30, 2023.

This is primarily driven by an increase in headcount-related expenses and software costs as we build out our target end markets.

Selling, General and Administrative Expense

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.

Selling, general and administrative expense for the three months ended September 30, 2024 of $15.0 million increased by $0.6 million, or 4%, when compared to the three months ended September 30, 2023, driven by increases in professional fees, salaries and benefits and a $0.8 million increase in the allowance for expected credit losses, offset by lower stock-based compensation expense.

Amortization of Intangible Assets

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Other Income (Expense), net

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.

Decrease of $0.4 million is primarily due to decreases in our investment balances in September 2024 compared to September 2023.

During the three months ended September 30, 2024, we recognized a $9.2 million gain from the change in fair value of our earn-out liabilities.

The decrease in the gain of our earn-out liabilities of $25.3 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 $4.53 as of September 30, 2023 to $0.46 as of September 30, 2024.

Income Tax Provision

Income tax provision for the three months ended September 30, 2024 increased $0.1 million when compared to the income tax benefit of $0.0 million for the three months ended September 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%.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Revenue for the nine months ended September 30, 2024 was $65.3 million compared to $53.4 million for the nine months ended September 30, 2023, an increase of $11.9 million, or 22%.

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.

Cost of revenues for the nine months ended September 30, 2024 was $39.2 million compared to $33.3 million for the nine months ended September 30, 2023, an increase of $5.9 million or 18%.

The increase was primarily driven by increases in mobile and consumer product revenue partially offset by the inventory write-off of $2.0 million from September 2023.

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.

Research and development expense for the nine months ended September 30, 2024 of $57.0 million increased by $6.3 million, or 12%, when compared to the nine months ended September 30, 2023.

This is primarily driven by an increase in product development 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.

Selling, general and administrative expense for the nine months ended September 30, 2024 of $46.5 million decreased by $0.1 million, or —%, when compared to the nine months ended September 30, 2023.

The decrease is primarily driven by a decrease in stock-based compensation expense of $4.1 million offset by increases in professional fees, sales force expenses, and coupled with the increase in the allowance for expected credit losses described above.

Amortization of Intangible Assets

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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.

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

Increase of $2.1 million in dividend income is primarily due to the timing of when we transferred money into our money market treasury funds.

As a result, the prior-year figure reflects only six months of activity compared to nine months in the current period.

During the nine months ended September 30, 2024, we recognized a $42.9 million gain from the change in fair value of our earn-out liabilities.

The increase in the gain of our earn-out liabilities of $68.4 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 $4.53 as of September 30, 2023 to $0.46 as of September 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.

Income tax provision for the nine months ended September 30, 2024 increased $0.3 million when compared to the income tax benefit of $0.0 million for the nine months ended September 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.

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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 June 30, 2024, we had cash and cash equiva lents of $112.0 million.

As of September 30, 2024, we had cash and cash equiva lents of $98.6 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 six months ended June 30, 2024 and 2023 (in thousands):

June 30, 2024 June 30, 2023

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

September 30, 2024 September 30, 2023

Consolidated Statements of Cash Flow Data:

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We derive liquidity primarily from equity financing activities.

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.

As of September 30, 2024, our balance of cash and cash equivalents was $98.6 million, which is a decrease of $54.2 million or 35% compared to December 31, 2023.

Operating Activities

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.

For the nine months ended September 30, 2024, net cash used in operating activities was $48.6 million, which primarily reflects a net loss of $44.7 million.

This decrease to operating cash flows is partially offset by adjustments for non-cash share-based compensation of $38.0 million, depreciation of $2.2 million, non-cash gains of $42.9 million in earnout liabilities, amortization of intangible assets of $14.3 million, and an aggregate cash used in operating assets and liabilities of $18.2 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.

Specifically, increases in accounts receivables of $1.5 million, decreases in accounts payable, accrued compensation and other expenses of $9.9 million, decline in customer deposits and deferred revenue of $8.9 million, partially offset by decreases in inventories and prepaid expenses and other current assets of $3.0 million.

For the nine months ended September 30, 2023, net cash used in operating activities was $17.4 million, which primarily reflects a net loss of $113.4 million.

This decrease to operating cash flows are partially offset by adjustments for non-cash share-based compensation of $41.8 million, non-cash losses of $25.5 million in earnout liabilities, amortization of intangible assets of $14.0 million, and an aggregate cash provided by operating assets and liabilities of $11.5 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.

Specifically, increases in deferred revenue of $13.3 million, accrued compensation expense of $12.2 million, increases in accrued expenses of $3.2 million, and increases in account payable of $2.5 million, partially offset by a $8.4 million increase in account receivable and $1.6 million increase in other assets, a $0.9 million increase in prepaid expenses and other, and a decrease in operating lease liabilities of $1.5 million.

Investing Activities

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.

Net cash used in investing activities for the nine months ended September 30, 2024 of $8.7 million was primarily due to $2.5 million cash funding of a joint venture and $6.2 million for purchases of fixed assets.

Net cash used in investing activities for the nine months ended September 30, 2023 of $4.4 million was primarily due to $1.0 million cash funding of a joint venture and $3.4 million for purchases of fixed assets.

Financing Activities

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.

Net cash provided by financing activities for the nine months ended September 30, 2024 of $3.1 million was primarily due to proceeds from stock option exercises of $0.4 million and proceeds from our employee stock purchase plan of $2.7 million.

Net cash provided by financing activities for the nine months ended September 30, 2023 of $88.2 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 $1.8 million, offset by the payment of May 2023public 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 June 30, 2024, our non-cancellable contractual arrangements consisted entirely of lease obligations.

As of September 30, 2024, 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 June 30, 2024, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

As of September 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

7 unchanged sentences

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