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 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.

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 nine months ended September 30, 2024, we spent approximately 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.

Previous wording

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.

Current wording

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, including costs related to cash and share-based employee compensation.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

Dividend income consists of income earned on our money market treasury funds that are recorded as cash equivalents on our consolidated balance sheet. Decrease of $0.4 million is primarily due to decreases in our investment balances in September 2024 compared to September 2023.

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous 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.

Current wording

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. 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 six months ended June 30, 2024 and 2023 (in thousands):

Current wording

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

Previous 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.

Current wording

We derive liquidity primarily from equity financing activities. 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.

Previous 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.

Current wording

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 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.

Previous wording

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.

Current wording

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, 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.

Previous 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous 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.

Current wording

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.

Previous wording

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.

Current wording

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.