Kopin Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 9, 2023

There are 10 speakers on the call.

Operator

Good day, and welcome to the Navitas Semiconductor Q3 'twenty three Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. And finally, I would like to advise all participants this call is being recorded. Thank you.

Operator

I'd now like to welcome Stephen Oliver, Vice President of Corporate Marketing and Investor Relations to begin the conference. Stephen, over to you.

Speaker 1

Good afternoon, everyone. I'm Stephen Ochova, Vice President of Corporate Marketing and Investor Relations. Thank you for joining Navitas Semiconductor's 3rd 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, The recorded webcast will be available for approximately 30 days following the call.

Speaker 1

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 Q3 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 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.

Speaker 1

Important factors that can affect Neverpass' business including factors that could cause actual results to differ from our forward looking statements are described in our earnings release. Please also refer to the Risk Factors section in our most recent 10 ks and 10 Qs.

Speaker 2

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 displace legacy power silicon In traditional markets and enable and accelerate new energy markets. Our Q3 revenues increased to $22,000,000 up 22% quarter on quarter up 115% from Q3 of last year.

Speaker 2

On a non GAAP basis, gross margin also continued to increase for the 4th 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' dramatic growth stories was recognized for the 2nd year running by Deloitte, including our company in their Fast 500 list. With annual revenue increasing over 2,000 percent 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.

Speaker 2

Our GaN Safe technology launched last quarter sets 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 GaN Safe Breaks the glass ceiling that has prevented Gallium Nitride from entering the 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're also launching our Generation 4 GaN Sense half bridge ICs, which are our most integrated GaN devices, replacing dozens of components with a single GaN to reduce footprint, simplify design and enable switching frequencies up to 2 megahertz and 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.

Speaker 2

This quarter, we're also launching a new generation of our Genesect technology called Gen 3 FAST with switching performance up to 50% better than competition. Together, Gen 3 fast silicon carbide and GaNEST based 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 4th 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 current in both directions. This bidirectional GaN allows the replacement of up to 4 discrete power transistors providing similar functionality, While dramatically reducing component counts, costs and complexity and delivering the speed and efficiency benefits of gallium nitride.

Speaker 2

We believe this invention has the potential to create innovative advances in energy storage, grid infrastructure, motor drives and many other emerging 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 OEMs, Xiaomi and Oppo, as they are rapidly expanding their use of GaN in a broader range of 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.

Speaker 2

In addition, we just announced a major win as Navitas scan 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 GaN SENSE 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 $10,000,000 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 phone carbide are displacement technology versus legacy silicon MOSFETs and IGBTs, 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 twenty twenty four based on our pipeline and customer activity, we expect our revenue growth in solar to exceed that of the industry in 2024 and beyond.

Speaker 2

It's a similar story in EV. While some OEM forecasts have been tempered, we are experiencing significant increases in our customer pipeline Our EV system design center has 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 achieves such high performance by integrating both our latest Gen 3 fast silicon carbon devices 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.

Speaker 2

The customer pipeline in appliance and industrial is also growing significantly as major OEMs initiate GaN or silicon carbide programs to meet regulatory requirements Heat pump technology. As mentioned earlier, our Gen 4 GaN centrifuge ICs are application optimized And a big draw for 100 to 1000 watt home appliance applications with Gen 3 fast, silicon carbide and GaN state power SSDs Looking across all of our target markets, the system benefits derived from GaN and sodium carbide are amplified by long term secular tailwinds. These include electrical energy source conversion from fossil fuels to renewables, gas powered vehicles transitioning to all forms of electric transportation and the intense and rapidly accelerating power demands of AI and edge Computing. Additional momentum is provided by continued energy efficiency and noise pollution regulations. While we're not immune to some market slowdowns as displacement technologies in traditional markets and its accelerating and enabling technologies in new energy markets, We expect Navitas' GaN and sold carbonate revenues to far exceed market growth rates in 2024 and for years to come.

Speaker 2

You can hear more about our growth plans at our exciting in-depth in person Investor Day held in conjunction with our new headquarters 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.

Speaker 3

Thank you, Gene. In my comments today, I will first take you through our Q3 results and then I'll walk you through our outlook for the Q4 And some of the market dynamics we're seeing. Revenue in the Q3 of 2023 was again well above our guidance, Growing 115% year over year and 22% sequentially to $22,000,000 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.

Speaker 3

Our pipeline continues to grow and has added a new record and we continue to experience strong bookings as evidenced by entering the 4th quarter Nearly fully booked. Before adjusting expenses, I'd like to refer you to the GAAP to non GAAP reconciliations in our press Gross margin in the 3rd quarter increased to 42.1 percent from 41.5% in the Q2 of 2020 3% 38.4% in the Q2 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 lead the industry. 3rd quarter total operating expenses were $17,900,000 comprising SG and A expense of 7,400,000 dollars and R and D of $10,500,000 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 $8,700,000 compared to a loss from operations of 10,300,000 In the Q3 of 2022, our weighted average share count for the Q3 was 175,100,000 shares.

Speaker 3

Turning to the balance sheet, it remains very strong with high levels of liquidity. Cash and cash equivalents at quarter end were 176 improved as we continue to focus on working capital efficiency. Inventory declined to $15,900,000 Compared to $18,900,000 in the prior quarter and days of inventory outlook continued 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 $2,000,000 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 Q4, we currently expect revenues ranging between $25,000,000 to $26,000,000 At the midpoint, this represents substantial year over year growth of 106% over the 12 $300,000 we recorded in the Q4 of 2022 and an expected 16% sequential increase over the Q3 of 2023.

Speaker 3

Our guidance is based on continued silicon carbide capacity expansion, 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, we'll have increased 108% over 2022, which is consistent with what we indicated at the beginning of this year. Gross margins for the 4th quarter are expected to improve to approximately 42.5 percent plus or minus 30 basis points. In total, our non GAAP operating expenses in the 4th quarter are expected to be approximately $20,000,000 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.

Speaker 3

To put that in perspective, compared to the Q4 of 2022, At the midpoint of our guidance, we expect revenues in the Q4 of 2023 to grow 106%, Yet operating expenses based on our guidance are expected to grow only 18% over the same period. For the Q4 of 2023, we expect our weighted average share count to be approximately 179,000,000 shares, Stock based comp to be approximately $12,000,000 and amortization of intangible assets to be approximately $4,800,000 In closing, we are extremely pleased with the results for the quarter and 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 solo markets And we aren't 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 and A session.

Operator

And your first question comes from the line of Quinn Bolton of Needham and Company. Your line is open.

Speaker 4

Hey, guys. 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 or are there specific target end markets for each platform or do these platforms kind of address most of the end markets you're targeting?

Speaker 2

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. GaN Sense Half Bridge, the generation 4 GaN Sense Half Bridge that we're just launching It's very targeted on mobile and consumer at the higher power range, 100 watts to maybe 500 watts. Bidirectional GaN, the 4th platform, that's the newest So technology announcements, so the actual products we'll be launching next year.

Speaker 2

And it's 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 Semiconductor ones, very fast, very efficient, very reliable, could be into 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.

Speaker 4

I guess I wanted to I'd 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 GaN FET that you've developed? Just a little bit more color would be helpful.

Speaker 2

Yes, yes, definitely. So a number of power semiconductors can be bidirectional in The problems are not bidirectional and blocking the current. So if you truly have a circuit that requires you be able to block in both directions, With silicon, whether it's an IGBT or a superjunction or even existing GaN and silicon carbide, you have to put them back to back. So one can be blocking in one direction while the other one is following the current and vice versa. So you end up doubling up the components.

Speaker 2

If you want the same performance, we're actually doing this all monolithically with a single chip. And if you want the performance, the way the kind of math or performance works out, It could be replacing not only 2 back to backs, but even 4 back to backs for the same performance with a single chip in a fraction of the size Cost and the great energy efficiency and speed you get with gallon nitride.

Speaker 4

Got it. Thank you. I'll jump back in the queue.

Speaker 2

Yes. Thank you, Quinn.

Operator

Your next question comes from the line of Jack Egan of Charter Equity Research. Your line is open.

Speaker 5

Hey guys, thanks for taking the questions. 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 and epi uniformity, so I was just curious about your primary rationale for in sourcing epi Taxi, 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?

Speaker 2

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 1. 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 For 2 other suppliers.

Speaker 2

So we think we've got the capability to do it. And number 1 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 They're buying outsourced, EPI.

Speaker 5

Got it. That makes sense. And for the new GaN since ICs, the PR said that they're Expected to contribute $10,000,000 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?

Speaker 2

Yes, that is a great question. I actually do believe that's all incremental. I'll clarify, it's $10,000,000 annualized starting to ramp throughout Next year, so it wouldn't necessarily be $10,000,000 for the full year, but this is also emerging developing things. We've just started sampling the products in the last Few months launching at this quarter, so we expect those numbers to grow over time. Got it.

Speaker 2

Okay. Thanks. That's helpful. You bet.

Operator

Your next question comes from the line of Joe Moore of Morgan Stanley. Your line is open. Great.

Speaker 6

Thank you. I wonder 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?

Speaker 2

Yes, definitely. Thanks, Joe. Yes. Smartphones, 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.

Speaker 2

Xiaomi and Oppo are the 2 that we highlighted. We've traditionally had a very strong relationship with both of them, very high market share 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 ship 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 nitrate. 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.

Speaker 2

So I think a lot of it is just conversion or 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 Success we're having at Samsung with the S23, that's already driving second half revenue growth as well.

Speaker 6

Yes. And I did 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?

Speaker 2

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.

Speaker 2

It is being sold as I believe in inbox or at least an optional inbox. So when you go to buy that S23 from our experience, the attach Traits 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 case here.

Speaker 6

Okay. Thank

Operator

Your next question comes from the line of Jon Tanwanteng of CJS Securities. Your line is open.

Speaker 7

Hi, good afternoon. Thank you for taking my questions and very nice quarter. You guys mentioned some slowdown that you saw in particular end market solar, Hi and 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 in your business in other places just

Speaker 2

Yes. We haven't thanks, John. We haven't quantified that adverse impact, but There is 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 now for our projects.

Speaker 2

So Despite kind of a mixed market environment out there and Enquipit slowdowns in growth rates in some cases, we see this 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.

Speaker 7

Okay, great. Thank you. 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 help me understand what it means to

Speaker 3

Yes. So just very simply, when I say reference fully booked, as we look at Our revenue outlook for the quarter and 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.

Speaker 7

Got it. And then just a follow on to that, how do you improve the Going forward to drive that the growth that Jean just mentioned in the past comment?

Speaker 2

Yes. I could grab that one. So we mentioned early This year, maybe it was even late last year, we signed an agreement with Xfab for a 500% increase in capacity. That Obviously, it's a big deal that includes material and 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, but growing that capacity quarter by quarter appreciably throughout this year and next year.

Speaker 2

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.

Speaker 7

Got it. That's great color. Thank you, Gene.

Speaker 2

You bet. Thanks,

Operator

Your next question comes from the line of Quinn Bolton of Needham and Company. Your line is open.

Speaker 4

Hey, guys. Just had a quick follow-up. The earn out liability I think it was $70,000,000 on the balance sheet last quarter down to $30 something 1,000,000 this quarter. Just Wondering if you might be able to help us as we think about that earn out liability for the Genesysq acquisition. As liability comes down, Does that mean that the Genesys revenue outlook is negatively affected?

Speaker 4

Or what's the What should we be reading into kind of the Genesysq outlook as that liability comes down?

Speaker 3

Yes. Hey, Quinn, good question. Just as a point of clarification, with the Genesys acquisition, there was an earn out as part of the deal, but we're Past the period where that earn out ran. So what you see on the balance sheet today that earn out liability actually goes back to the IPO And that earn out liability goes up and down based on our stock price. So it has nothing to do with the Genesys acquisition And is only related to earn out related to the IPO.

Speaker 4

Got it. Thanks for the clarification, Ron.

Speaker 3

Yes, you bet.

Operator

Your next question comes from the line of Mark Lipikis from Jefferies. Your line is open.

Speaker 8

Hi, thanks for taking my question. A clarification, a couple of questions. So to 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 accurate interpretation of what you were qualifying for your growth in mobile?

Speaker 2

Yes, it's a good question, Mark. It's clearly adoption or conversion from silicon is the main driver. I actually Couldn't quote a bottom or their total mobile charger shipments, probably Xiaomi and Oppo, of course, are in 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 There is a conversion from legacy silicon over to organic ICs.

Speaker 8

Got you. Okay, that's helpful. And Is it fair to assume that, that linearity of bookings that you've kind of ramped Through the quarter and is that fair? I mean it kind of sounds like you guys are really hitting your stride here.

Speaker 2

What do you mean by linearity maybe or could you clarify?

Speaker 8

Well, if you think about What your total bookings are for the quarter? You could have a third, a third, a third or it could have ramped 20, 40, 50 or something like that as 20, 30, 50 bookings ramping through the quarter. Yes.

Speaker 2

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. I know they historically don't give you a ton of advanced notice. But we'd certainly like to be more linear. So we're building everything we can in the back of the quarter just because that's when of these upside orders are also coming in early in the quarter kind of within cycle time putting pressure on us to try to ramp up faster.

Speaker 8

Got you. 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? Thanks.

Speaker 3

Yes, sure. Good question. 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.

Speaker 3

I think we're being much better with working capital and being efficient with working capital, Certainly efficient with our CapEx. So we're certainly comfortable with the balance sheet and where it sits today.

Speaker 8

Fair enough. Thank you.

Operator

Your next question comes from the line of Kevin Cassidy of Rosenblatt Securities. Your line is open.

Speaker 9

Thanks and 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 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?

Speaker 2

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 TSMC on GaN and other places throughout the whole industry. So I don't see it reversing that dramatically that quickly.

Speaker 2

I think costs 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.

Speaker 2

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.

Speaker 9

And I guess I would assume that 4 major new tech platforms that you have are all going to be margin accretive?

Speaker 2

Yes, exactly. We generally expect any new products, especially big ones like these are 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.

Speaker 9

Okay, great. Thanks again. Thanks and congratulations again. There we go.

Operator

Your next question comes from the line of Jack Egan of Charter Equity Research. Your line is open.

Speaker 5

Hey guys, thanks for taking the follow-up. I just had one quick one. I was curious about the inventory write off I could see also how that's just the technology moving so fast that things become obsolete pretty quickly. But I'm just curious Your thoughts on that?

Speaker 3

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 And our Gen III, Gen IV 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.

Speaker 3

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. 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.

Speaker 5

Got it. That makes sense. Okay. Well, that's all for me. Thanks.

Operator

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.

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