Transphorm(US:TGAN)2023-11-10 21:40Financial Data and Key Metrics Changes - The company reported Q2 revenue of $5 million, a year-over-year increase of 36% and a quarter-over-quarter decrease of 15% [54] - Product revenue was $3.55 million, up 18% from the prior quarter and 12% from the same quarter last year [55] - Gross margin for the quarter was 23%, down from 35% in the prior quarter but up 11% year-over-year [58] - Operating expenses on a non-GAAP basis were $6.4 million, down 6% from the prior quarter [60] - Cash and cash equivalents were $6.2 million at quarter end, largely due to an $8 million rights issue [68] Business Line Data and Key Metrics Changes - Approximately 70% of Q2 revenue came from product sales, with government revenue just under $1.5 million [12][13] - The majority of product revenue was derived from high-power applications, particularly those exceeding 300 watts [12][13] - The company achieved a record 33% sequential increase in design-ins for high-power products, totaling over 100, with more than 35 in production [9][12] Market Data and Key Metrics Changes - The company is expanding its leadership in high-power verticals, including computing power for data centers, energy and industrials, and electric vehicles [14] - The company has secured 15 new design-ins in the low-power space, bringing the total to over 115, with over 30 now in production [16] Company Strategy and Development Direction - The company is undergoing a strategic review with Bank of America to enhance shareholder value, which may include a merger or sale [15][48] - The focus is on continuing product revenue growth, improving margins, and accessing new markets, particularly in the EV sector [49][50] - The company aims to secure non-dilutive debt financing and explore licensing opportunities to extend its cash runway into fiscal 2025 [15][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued sequential product revenue growth in the current quarter, driven by strong customer engagement and production [55][61] - The company anticipates a stable gross margin in the coming quarter and aims for long-term gross margins exceeding 40% [59] - Management highlighted the superior performance and reliability of Transphorm's GaN technology compared to competitors, particularly in high-power applications [34][78] Other Important Information - The company has established a product pipeline valued at over $475 million, with a significant portion focused on high-power applications [12][14] - Recent testing has shown Transphorm's GaN products to have superior reliability compared to e-mode GaN offerings [34] Q&A Session Summary Question: Can you provide updates on the strategic review process? - Management confirmed that they are working with Bank of America to systematically channel interest and will provide updates as they become available [75] Question: How does GaN compare to silicon carbide in terms of efficiency and cost? - Management believes GaN has 70% lower losses than silicon carbide and is seeing increasing interest in GaN for automotive applications [78] Question: Where is the company seeing more engagement activity, high-power or low-power? - Management indicated that high-power remains a focus, contributing 70% of revenue, but low-power is also a growing segment with strong performance [85] Question: What is the expected cash burn over the next few quarters? - Management expects cash burn to hover around $5.1 million, with ongoing efforts to secure debt facilities and explore licensing opportunities [88][90] Question: What is the timeline for design-ins to convert into revenue? - Management noted that high-power design cycles can take 12-24 months, while low-power designs tend to convert faster, typically within 6-12 months [98]