Navitas Semiconductor Corp

Previous wording

A core strength of our business lies in our industry leading IP position. 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 devices 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 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. Navitas’ research and development activities arelocated primarily in the US and China.

Current wording

A core strength of our business lies in our industry leading IP position. 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 devices 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 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.

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

As of March 31, 2024, we had cash and cash equiva lents of $129.7 million. We currently expect to fund our cash requirements through the use of cash 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.

Current wording

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. 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.

Previous wording

The following table summarizes our consolidated cash flows for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

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

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.