Navitas Semiconductor Corp
NASDAQ:NVTS
Earnings Call Analysis
Q3-2023 Analysis
Navitas Semiconductor Corp
Navitas Semiconductor has reported a remarkable quarter, with an impressive 22% increase in revenue over the previous quarter, reaching $22 million. This marks a substantial year-on-year growth of 115%. Adding to this success is the company's improved gross margin, now at 42.1%, up from the previous quarter's 41.5% and significantly higher than the 38.4% reported in the same quarter last year. The company's leadership is confident in their ability to more than double their total revenues in 2023 compared to the prior year a sign of robust business confidence and market traction.
The technology innovations that the company is launching are generating considerable excitement. This includes their GaNSafe technology, which sets a new standard for gallium nitride power semiconductors, and their Generation 4 GaNSense half-bridge ICs, which promise to revolutionize mobile fast chargers and consumer adapters. Moreover, the new Gen-3 Fast silicon carbide technology and the introduction of bidirectional GaN ICs display the company's commitment to leading the charge in efficient, high-performance power solutions. These advancements are expected not only to meet but to drive demand in major markets such as electric vehicles, consumer electronics, and renewable energy.
Navitas has highlighted particular strength in the mobile market, led by major Chinese OEMs like Xiaomi and Oppo rapidly incorporating GaN into their chargers. Furthermore, significant partnerships, such as with Samsung for the Galaxy S23 model, are contributing to revenue growth. Though the solar and energy storage markets have shown some softness, the company's outlook remains optimistic, with anticipated industry recovery and revenue growth exceeding overall market trends in the coming years.
Navitas has also stated a healthy cash position, with sufficient cash and no debt to allow the company to reach operating breakeven and support its expansion plans. The company's financial strategies appear cautious and measured, suggesting a capacity for sustained growth and potential acquisitions if opportunities align with their strategic objectives.
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Good day, and welcome to the Navitas Semiconductor Q3 '23 Earnings Conference Call. [Operator Instructions] And finally, I would like to advise all participants, this call is being recorded. Thank you. I'd now like to welcome Stephen Oliver, Vice President of Corporate Marketing and Investor Relations, to begin the conference. Stephen, over to you.
Good afternoon, everyone. I'm Stephen Oliver, Vice President of Corporate Marketing and Investor Relations. Thank you for joining Navitas Semiconductor's Third Quarter 2023 Results Conference Call.I'm joined today by Gene Sheridan, our Chairman, President, CEO, and Co-Founder; and Ron Shelton, our CFO and Treasurer. A replay of this webcast will be available on our website approximately 1 hour following this conference call, and the recorded webcast will be available for approximately 30 days [ after ] the call. Additional information related to our business is also posted on the Investor Relations section of our website.Our earnings release includes non-GAAP financial measures. Reconciliations of these non-GAAP financial measures with the most directly comparable GAAP measures are included in our third quarter earnings release and also posted on our website in the Investor Relations section.In this conference call, we will make forward-looking statements about future events or about the future financial performance of Navitas, including acquisitions. You can identify these statements by words like we expect or we believe or similar terms. We wish to caution you that such forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from expectations expressed in our forward-looking statements.Important factors that can affect Navitas' business include factors that could cause actual results to differ from our forward-looking statements, are described in our earnings release. Please also refer to Risk Factors section in our most recent 10-K and 10-Qs. Our estimates or other forward-looking statements may change, and Navitas assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions or other events that may occur except as required by law. And now over to Gene Sheridan, CEO.
Thank you, Steve, and thanks to everyone for joining the call today. As we continue our mission to electrify our world with next-generation power electronics, I'm pleased to announce another record quarter for Navitas as our gallium nitride and silicon carbide technologies continue to display legacy power silicon in traditional markets and enable and accelerate new energy markets.Our Q3 revenues increased to $22 million, up 22% quarter-on-quarter and up 115% from Q3 of last year. On a non-GAAP basis, gross margin also continued to increase for the fourth quarter in a row to 42.1%, up from 41.5% sequentially and up from 38.4% in Q3 last year. We also remain confident that we will more than double revenues in total for 2023 as compared to 2022.Just yesterday, Navitas's dramatic growth stories was recognized for the second year running by Deloitte, including our company in their Fast 500 list. With the annual revenue increasing over 2,000% in just 3 years, Navitas is one of the fastest growth tech companies. In addition to our strong financial performance, it's a very exciting time at Navitas as we're launching 4 major new technology platforms in the second half of this year.Our GaNSafe technology launched last quarter set the new benchmark in our industry as the world's most protected, most reliable and highest performance GaN power semiconductors. With advanced protection, higher power capability and cool operation, GaNSafe breaks the glass ceiling that has prevented gallium nitride from entering these high-power, high reliability markets for a decade.Now applications from AI data centers and solar inverters to EV powertrains and traction drives can benefit from this high-speed feature-rich technology for higher power density, higher efficiency, robust reliability, faster charging and lower system costs. We are also launching our Generation 4 GaNSense half-bridge ICs, which are our most integrated GaN devices, replacing dozens of components with a single GaN IC to reduce footprint, simplify designs and enable switching frequencies up to 2 megahertz in mobile fast chargers and consumer adapters.For home appliance motors, pumps and compressors, these application-specific Generation 4 ICs feature lossless current sensing and programmable turn on and turn off for efficient, small, quiet power delivery. This quarter we are also launching a new generation of our GeneSiC technology called Gen-3 Fast, with switching performance up to 50% better than competition.Together, Gen-3 Fast silicon carbide and GaNSafe power ICs are targeting electric vehicles, roadside chargers, solar inverters, energy storage, data center and industrial applications in the 1 to 30 kilowatt range.The fourth and potentially the most exciting and impactful announcement is a breakthrough innovation called bidirectional GaN. Now for the first time, GaN ICs can operate quickly and efficiently conducting and blocking currents in both directions. This bidirectional GaN allows the replacement of up to 4 discrete power transistors, providing similar functionality while dramatically reducing component count, cost and complexity and delivering the speed and efficiency benefits of gallium nitride.We believe this invention has the potential to create innovative advances in energy storage, grid infrastructure, motor drives and many other emerging topologies and architectures across multiple markets. Much more to come on this front. Let me now turn to updates for each of our target markets and how these new technologies are already having an impact.In the mobile market, we continue to see strength and upside led by our major China OEMs, Xiaomi and Oppo, as they are rapidly expanding their use of GaN in a broader age with their mobile chargers. In fact, we now anticipate that about 30% of their total mobile charger shipments in 2024 will utilize GaN. This is a major milestone for our whole industry. GaN has moved from beachhead to mainstream.In addition, we just announced a major win as Navitas GaN has been adopted at Samsung to power the latest Galaxy S23 among other models and is already contributing to our Q3 and Q4 revenue ramp. Our new Gen-4 GaNSense half-bridge is further accelerating our success in mobile as we now have over a dozen customer projects in development, targeting the fastest charging segment of 100 watts or more already projected to contribute over $10 million per year in revenue ramping next year.In the solar and energy storage markets, we observed the same near-term macro market softness that others have observed, creating headwinds for our silicon carbide business. However, as GaN and silicon carbide are displacement technology versus legacy silicon MOSFET and IGBT, we also see robust growth in our customer pipeline.Our current outlook for the solar market, consistent with what we've seen from various analysts is for a recovery in the second half of 2024 and based on our pipeline and customer activity, we expect our revenue growth in solar to exceed that of the industry in 2024 and beyond. It's a similar story in EV. While some OEM forecasts have been tempered, we are experiencing significant increases in our customer pipeline in both onboard and roadside chargers.Our EV system design centers just completed development of a 6.6 kilowatt 800-volt onboard charger platform which sets all new industry benchmarks in system efficiency, density and cost. We see significant customer interest in this exciting new hybrid platform, which achieved such high performance by integrating both our latest Gen-3 Fast silicon carbide devices and our new GaNSafe ICs.In data center, as discussed previously, the recent dramatic technology and market developments surrounding AI have created unprecedented demand for more power, higher energy efficiency and greater power density. Our system design center has really stepped up to the challenge with a new 4.5 kilowatt AC to DC platform design that offers energy efficiencies well in excess of the 96%, Titanium Plus standard and has twice the power density of previous best-in-class legacy silicon designs.As a result, the number of projects in our customer pipeline have grown significantly in the past quarter. The customer pipeline in appliance and industrial is also growing significantly as major OEMs initiate GaN or silicon carbide programs to meet regulatory requirements for energy efficiency and consumer demand for power density improvements, along with the transitions from gas-powered heating and cooling systems to fast adoption of heat pump technology.As mentioned earlier, our Gen-4 GaNSense half-bridge ICs are application optimized and a big draw for 100 to 1,000 watt home appliance applications with Gen-3 Fast silicon carbide and GaNSafe power ICs addressing higher-power industrial markets. Looking across all of our target markets, the system benefits derived from GaN and silicon carbide are amplified by long-term secular tailwinds.These include electrical energy storage conversion from fossil fuels to renewables, gas-powered vehicles transitioning to all forms of electric transportation and the intent in rapidly accelerating power demands of AI and edge computing. Additional momentum is provided by continued energy efficiency and [ noise ] [indiscernible] to regulations.While we're not immune to some market slowdowns as displacement technologies in traditional markets and its exhilarating and enabling technologies in the energy markets, we expect Navitas's GaN and silicon carbide revenues to far exceed market growth rates in 2024 and for years to come. You can hear more about our growth plans at our exciting in-depth in-person Investor Day held in conjunction with our new headquarters opening day in Torrance, California on December 12.This agenda includes a deep dive into our 4 new technology platforms, highlighted applications in growing markets, customer pipeline review, financial outlook, insightful customer presentations and an immersive introduction to Planet Navitas, the future of our electrified planet.We encourage you to join the Navitas management team, Board of Directors, customers, media and special guests at our new headquarters for this important event.And now over to Ron to review the financials.
Thank you, Gene. In my comments today, I will first take you through our third quarter results, and then I'll walk you through our outlook for the fourth quarter and some of the market dynamics we're seeing.Revenue in the third quarter of 2023 was again well above our guidance, growing 115% year-over-year and 22% sequentially to $22.0 million. The beat was driven primarily by continued strong growth in the mobile market and initial mass production for a major Tier 1 onboard charger customer. Our results were tempered somewhat by macroeconomic factors impacting high-end consumer and solar markets.Nevertheless, we continue to see strong positive indicators for revenue growth over the near term and long-term. Our pipeline continues to grow and has added a new record, and we continue to experience strong bookings as evidenced by entering the fourth quarter nearly fully booked. Before addressing expenses, I'd like to refer you to the GAAP to non-GAAP reconciliations in our press release earlier today.In the rest of my commentary, I will refer to non-GAAP expense measures. Gross margin in the third quarter increased to 42.1% from 41.5% in the second quarter of 2023 and 38.4% in the second quarter of 2022. Gross margins in the quarter were at the higher end of our guidance due primarily to excellent yields exceeding our internal targets, which we believe already leads the industry. Third quarter total operating expenses were $17.9 million, comprising the SG&A expense of $7.4 million and R&D of $10.5 million.This is in line with our guidance. And as we've discussed in the past, as revenue scales, we are investing in our business in a disciplined manner as we focus on growing profitability. Putting all this together, the loss from operations was $8.7 million compared to a loss from operations of $10.3 million in the third quarter of 2022. Our weighted average share count for the third quarter was 175.1 million shares.Turning to the balance sheet. It remains very strong with high levels of liquidity. Cash and cash equivalents at quarter end were $176.7 million, and we continue to carry no debt. Accounts receivable were $17.6 million compared to $15.2 million in the prior quarter, reflecting higher sales during the quarter, but our days sales outstanding improved as we continue to focus on working capital efficiency.Inventory declined to $15.9 million compared to $18.9 million in the prior quarter, and days of inventory outlook continues to improve, better by nearly 50% from 1 year ago as we continue to move towards exceeding our inventory turnover goal of better than [ 3 times ]. We took an adjustment of $2 million during the quarter for reserves against GaN product that was 2 generations old as our customers and end markets migrate towards our Gen 4 and other higher performance and higher integration products like GaNSense and GaNSense Control.Moving on to guidance for the fourth quarter. We currently expect revenues ranging between $25 million to $26 million. At the midpoint, this represents substantial year-over-year growth of 106% over the $12.3 million we recorded in the fourth quarter of 2022 and an expected 16% sequential increase over the third quarter of 2023. Our guidance is based on continued silicon carbide capacity expansion and continued strength in mobile and ongoing market share gains in EV onboard charging.I'd also like to note that at the midpoint of guidance, our revenues for 2023 will have increased 108% over 2022, which is consistent with what we indicated at the beginning of this year. Gross margins for the fourth quarter is expected to improve to approximately 42.5% plus or minus 30 basis points. In total, our non-GAAP operating expenses in the fourth quarter are expected to be approximately $20 million, and this excludes stock-based compensation and amortization of intangible assets.We continue to invest in growth-oriented initiatives for our end markets. As we have indicated before, we expect increases in our spending will be substantially less than growth in our revenues as we continue to see leverage in our business model. To put that in perspective, compared to the fourth quarter of 2022, at the midpoint of our guidance, we expect revenues in the fourth quarter of 2023 to grow 106%, yet operating expenses based on our guidance are expected to grow only 18% over the same period.For the fourth quarter of 2023, we expect our weighted average share count to be approximately at least 179 million shares stock-based comp to be approximately $12 million and amortization of intangible assets to be approximately $4.8 million. In closing, we are extremely pleased with the results for the quarter in our near-term and long-term outlook.While we see similar macro trends as others, such as the impact of higher interest rates on the high-end consumer and solar markets, and we are entirely immune to those trends. As our results indicate, we are showing that we can outperform the market and expect that going forward we will continue to grow significantly faster than the overall growth rates in our targeted end markets.Operator, let's begin the Q&A session.
[Operator Instructions] And your first question comes from line of Quinn Bolton of Needham & Company.
Congratulations on the results. I guess maybe, Gene, it sounds like you're going to give us a lot more detail on the 4 new platforms, but wondering if you might be able to just kind of give us some direction for GaNSense, GaNSafe, the Gen-3 SiC and the bidirectional? What end markets are these platforms targeting? Are there specific target end markets for each platform or do these platforms kind of address most of the end markets you're targeting?
Yes. Great question, Quinn. Yes, the GaNSafe and Gen-3 Fast silicon carbide are both targeting higher power, more industrial markets. So in general, you'll see them going into data center, solar energy storage, EV and industrial markets. GaNSense half-bridge -- the Generation 4 GaNSense half-bridge that we're just launching is very targeted on mobile and consumer at the higher power range, 100 watts to maybe 500 watts. Bidirectional GaN, the fourth platform, that's the newest. It's a technology announcement, so the actual products we'll be launching next year.And as such a groundbreaking thing, we're still debating and discussing all the different applications it might go into. It could be anything from mechanical circuit breakers being displaced by semiconductor ones, very fast, very efficient, very reliable. It could be in the AC to AC motors, which are huge in industrial and appliance markets and others. So it's pretty far reaching, and we'll be exploring that further with customers as we launch the products next year.
I guess I wanted to sort of ask a question on bidirectional. I thought at least in concept of Fed, it tends to be the bidirectional in nature, right? And so what -- can you give a little bit more detail what's unique about the new bidirectional GaNSafe that you've developed? Just a little bit more color would be helpful.
Yes, definitely. So a number of power semiconductors can be bidirectional in flowing the current. The problems are not bidirectional and blocking the current. So if you truly have a circuit that requires you'll be able to block in both directions with, silicon, whether it's an IGBT or a super junction or even existing GaN in silicon carbide, you have to put them back to back. So one can be blocking in one direction, while the other one's [ flowing ] the current and vice versa. So you end up doubling up the components.And if you want the same performance -- we're actually doing this all monolithically with a single chip. And if you want performance the way the kind of [ math of ] performance works out, it could be replacing not only 2 back-to-back, but even for back-to-back for the same performance with a single chip fraction of the size, cost and the great energy efficiency and speed you get with gallium nitride.
Your next question comes from the line of Jack Egan of Charter Equity Research.
So regarding the in-sourcing of epitaxy, the different types of epi reactors for silicon carbide kind of come with a set of [ trade-offs ] regarding throughput in epi uniformity. So I was just curious about your primary rationale for in-sourcing epitaxy. Was it largely just to increase throughput and prevent any bottlenecks from developing? Or does in-sourcing actually give you more control and improve yields or quality or anything like that?
Yes, great question. I think there's a number of benefits, you just touched on most of them, right? But I think I put cost number one. I think epi has matured to the point that we can bring this in-house with a little bit of help from the equipment supplier, and we've hired a top industry expert in epi that's done this for 2 other suppliers.So we think we've got the capability to do it. And number one is the cost reduction coming from having it in-house. But then there's a bunch of secondary benefits, control over your supply chain, likely shorter cycle times, assuring ourselves of having the capacity exactly when we need it in the future, controlling quality, and even I wouldn't rule out intellectual property, different things, inventions that are going to give us fundamental advantage compared to others that are buying outsource epi.
And for the new GaNSense ICs, the PR said that they're expected to contribute $10 million to annual revenue. Is all that incremental? Or might some of that come at the expense of growth in some of your older product areas?
Yes, that is a great question. I actually do believe that it's all incremental. I'll clarify, it's $10 million annualized starting to ramp throughout next year. So it wouldn't necessarily be $10 million for the full year. But this is also emerging -- developing things. We've just started sampling the product in the last few months and launching it this quarter. So we expect those numbers to grow over time.
Your next question comes from the line of Joe Moore of Morgan Stanley.
I wondered if you could touch on your smartphone demand. Maybe starting with China. You mentioned the strength there. How much of that do you think is penetration for you guys versus a recovery in that market and kind of where do you think you stand with inventories there?
Yes, definitely. Thanks, Joe. Yes, smartphone is obviously a very pleasant upside for us started in Q2 of this year and has gone from sort of strength to strength. It started and continues to be heavily based in China. Xiaomi and Oppo are the 2 that we highlighted. We traditionally had a very strong relationship with both of them, very high market share with our GaN. So it's super exciting to see this kind of upside.To your question though about where is it coming from, it's actually a classic case of this displacement technology that we have today. They don't have to shift any more chargers for their numbers to grow dramatically. We mentioned that 30% of their total number of chargers next year, we are projecting to use gallium nitride. So even if their business was flat, you could be going from 10% or 15% adoption rates to 20% or 30%, driving a lot of that revenue.So I think a lot of it is just conversion of displacement from legacy silicon over to more efficient, more powerful, faster charging gallium nitride. And it's not just China. We did mention also the great success we're having at Samsung with the S23, but that's already driving second half revenue growth as well.
And I just -- as a follow-up, I did want to ask about the S23 win. Can you talk about what kind of penetration you might see there and how pervasive that technology could be within Samsung?
Yes. We don't have specific adoption percentages on the Samsung stuff like we do with Xiaomi and Oppo. Clearly they're earlier stage, but I think Xiaomi and Oppo have been kind of leading the charge, if you will, for mobile charging for the last few years since GaN adoption got started. So we see the other players in Korea and U.S. following their -- in those footsteps, if you will, from a GaN adoption perspective.It is being sold as I believe, an inbox or at least an optional inbox. So when you go to buy that S23, from our experience, the attach rates on even what we call optional inbox can be very, very high, especially when it's promoted as a GaN charger, fast charger, which I believe is the [indiscernible] here.
[Operator Instructions] Your next question comes from the line of Jonathan Tanwanteng of CJS Securities.
This quarter, you guys mentioned some slowdown that you saw in particular on market solar, high-end consumer. Would you say that's a net negative for your near term compared to where you expected it to be? Or is that being offset by these bookings and new business in other places just -- versus your interim plan?
Yes. We haven't -- thanks, John. We haven't quantified that adverse impact, but there's no doubt we could have done even higher growth rates than we're achieving today in the near-term quarters if we didn't see some slowdown in consumer and solar.With that said, we see strength in the other markets, we see strength in our pipeline growing, both in number of customers and for our projects. So despite kind of a mixed market environment out there and end [indiscernible] slowdowns in growth rates in some cases, we see is growing significantly faster than the market, as we mentioned in our prepared remarks. I think that probably translates to 50% growth or more next year.We haven't given official guidance, but as an early indication, that speaks to the strong growth despite kind of a choppier mixed market environment out there.
And then, Ron, you mentioned something about entering Q4 fully booked. Is that versus your existing capacity? Or how should we qualify that comment, just to help me understand what it means to be fully booked.
Yes. So just very simply, when I say reference fully booked, as we look at our revenue outlook for the quarter end, our capacity available, it's effectively fully booked. So any guidance I gave would suggest that most of that was in backlog at the beginning of the quarter.
And then just a follow-on to that, how do you improve the capacity going forward to drive that -- the growth that Gene just mentioned in the past [ comment ]?
Yes, I could grab that one. So we mentioned early this year, maybe it was even late last year, we signed an agreement with X-FAB for a 500% increase in capacity. That obviously is a big deal that includes material in fab capacity, and that's throughout this year and into next year. So we're benefiting today by growing not only our backlog, as Ron said, by growing that capacity quarter-by-quarter appreciably throughout this year next year.In a similar way, TSMC expanded the GaN capacity and tripled it and finished that one up last year. So we're in a pretty strong position to fill. In fact, we're building -- we're shipping all we can build on GaN as well, not that we don't have the capacity, but the orders keep coming in with very short lead times. So we're constantly scrambling to try to fulfill those upside demands in Q3 and Q4.
[Operator Instructions] Your next question comes from the line of Quinn Bolton of Nederman Company.
I just had a quick follow-up. The earnout liability seems to be jumping all over the place. I think it was $70 million on the balance sheet last quarter down to $30-something million this quarter. Just wondering if you might be able to help us as we think about that earn-out liability for the GeneSiC acquisition, as liability comes down, does that mean that the GeneSiC revenue outlook is negatively affected? Or what's the -- what should we be reading into kind of the GeneSiC outlook as that liability comes down?
Yes, Quinn, good question. Just as a point of clarification, with the GeneSiC acquisition, there was an earnout as part of the deal, but we're past the period where that earnout ran. So what you see on the balance sheet today, that earn-out liability actually goes back to the IPO. And that earnout liability goes up and down based on our stock price. So it has nothing to do with the GeneSiC acquisition and is only related to an earnout related to the IPO.
Your next question comes from the line of Mark Lipacis from Jefferies.
Clarification -- a couple of questions. So a the question about the mobile strength. So it sounds like that this is a penetration or expansion, you expanding inside of product lines of your customers, and you haven't yet seen broader handsets start to bounce up off the bottom. Is that an accurate interpretation of what you were qualifying for your growth in mobile?
Yes, it's a good question, Mark. It's clearly -- adoption or conversion from silicon is the main driver. I actually couldn't quote -- or their total mobile charger shipments -- probably Xiaomi and Oppo, of course, are in a better position to talk about how much they're shipping and where there might be a bottom overall, but we're certainly the beneficiary of significant conversion from silicon to GaN. So it's hard for me to quantify the 2, but clearly, the predominant factor is conversion from legacy silicon over to our Gan ICs.
And is it fair to assume that linearity of bookings that you've kind of ramped through the quarter? And is that fair? I mean, because it sounds like you guys are really hitting your stride here.
What do you mean by linearity maybe? Or could you clarify?
Well, if you think about what your total bookings are for the quarter, you could have 1/3, 1/3, 1/3 or it could have ramped 20, 40, 50 or something like that as 20, 30, 50 bookings ramping through the quarter.
Yes. I mean I think it's fair to say, while we started the quarter pretty heavily booked up, as Ron said, we -- I also mentioned we continue to get sort of short lead time upside orders, especially from the mobile guys and they historically don't give you a ton of advance notice. But we'd certainly like to be more linear. So we're apparently building everything we can in the back of the quarter just because that's when some of these upsides orders are also coming in early in the quarter kind of within cycle time, putting pressure on us to try to ramp up faster.
And then, Ron, you talked about the cash balance. How much cash would you -- do you feel like you need to have on the balance sheet to run the company? Could you talk about appetite for further acquisitions going forward? And if so, what kind of is in your sweet spot?
Yes. Sure. Good question. Well, with respect to the balance sheet and cash, clearly, we have enough cash and have been consistent to certainly run the business to operating breakeven and execute on our epi expansion that we've talked about before.I think beyond that, our need to approach the capital markets, raise equity or debt would be tied to a transaction such as an acquisition. So today, though, we feel really good about the balance sheet and where we stand with cash, no debt. I think we're being much better with working capital, being efficient with working capital, certainly efficient with our CapEx. So we're certainly comfortable with the balance sheet and where it sits today.
Your next question comes from the line of Kevin Cassidy of Rosenblatt Securities.
Congratulations on the great results. And I came on the call a little late, so if I'm repeating a question, I apologize. But have your costs come down as you've mentioned tripling the capacity with TSMC? And then also, there's just lots of news in the press about silicon carbide wafers, substrates coming down in price. Are you able to benefit from that? And is that helping gross margin expansion?
Yes. I think it's certainly a driver. I mean we're coming out of an environment where I think people are dealing with cost increases, right. what we saw TSMC on GaN and other places throughout the whole industry. So I don't see reversing that dramatically, that quickly. I think costs are reasonably stable. I think prices are reasonably stable. So I don't think it translates into big gross margin jumps. I think where we can capitalize on cost reductions, obviously, in-house epi is one example. The yield is getting a bit better than even we expected with the great yields that Ron talked about.We're generally going to try to use that for better pricing power to drive market share and continue the great growth and adoption rates as a general approach. But with that said, we're also committed to our margin expansion plans as we've always talked about, and we continue to balance the 2.
And I guess I would assume that 4 major new tech platforms that you have are all going to be margin accretive?
Yes, exactly. We generally expect any new products, especially big ones like these, we're going to be highly valuable in bringing our margins up, accelerating that margin expansion and delivering margins that are well above whatever the corporate average is at the time.
Your next question comes from the line of Jack Egan of Charter Equity Research.
I just have one quick one. I was curious about the inventory write-off that you had in the quarter. Was that just kind of like a one-time thing? Or could it be implying that there's some risk of obsolescence with some of your products? I could see also how -- see -- how that's just the technology moving so fast that things become obsolete pretty quickly. But I'm just curious on your thoughts on that.
Yes, Jack, good question, and you nailed it. You answered the question for me almost. So the write-off had to do with older generation Gen 1, Gen 2 product. And our customer base, as we want them to, is moving very quickly to -- [ of ] our Gen 3, Gen 4 and beyond products, and that's happening right now. And you try to make -- kind of balance that transition, and it's hard to do, and so what we ended up this quarter as we look out over the next 12 to 15 months.We had some older generation product on the books, and the right thing to do is take a reserve against it. So it's a one-time thing against those products. And again, it's something we evaluate every quarter. But that's what drove it. So it's really about a transition in next gen products.
[Operator Instructions] And as there are no further questions, I would like to thank our speakers for today's presentation, and thank you all for joining us. This now concludes today's conference. You may now disconnect.