Navitas Semiconductor Q1 2024 Earnings Call Transcript

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May 9, 2024

There are 9 speakers on the call.

Operator

Thank you for standing by. My name is Benjamin, and I will be your conference operator today. At this time, I would like to welcome everyone to Navitas Semiconductor First Quarter 20 24 Results 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.

Operator

Thank you. I would like to turn the call over to Steven Oliver, Vice President of Investor Relations. Please go ahead.

Speaker 1

Good afternoon, everyone. I'm Stephen Oliver, Vice President of Investor Relations. Thank you for joining Navitas Semiconductor's Q1 2024 results conference call. I'm joined today by Gene Sheridan, our Chairman, President, CEO and Co Founder and Janet Cho, EVP, 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 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 Q1 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 performance of Navitas, including acquisitions. You can identify these statements by words like we expect or we believe or similar terms.

Speaker 1

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, 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 sections in our most recent 10 ks 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.

Speaker 2

Thanks, Steve, and thanks to all of you for joining us today. I'm pleased to announce Q1 revenue of $23,200,000 which reflects 73% year on year growth. These results reflect continued market leadership with our GaN technology displacing silicon in our BTech mobile charger market, but also expansion into home appliance and AI based data centers with continuing shipments of our leading edge Genesys technology into the industrial, EV, solar and energy storage segments. Let me give further specifics in each of our target markets. In data centers, AI is driving an unprecedented and accelerated increase in power requirements.

Speaker 2

Traditional data center processors required only 300 400 WAPs each last year, while NVIDIA's latest generation invented 700 WAPs and now the recently announced Blackwell chip set requires well over 1,000 watts. This 300% increase in power in just 18 months in combination with the EU driven titanium standard requires a 96% minimum energy efficiency creates a very big challenge for our power supply customers and a very big opportunity for Navitas. In the last 6 months, we've stepped up to that challenge, enabling server power supplies to increase from 3.2 kilowatts and 96 percent efficiency to 4.5 kilowatts at 97 percent efficiency, and now we are well on our way to 8 to 10 kilowatts at 97% to be delivered to customers later this year. These advances are attributable to our leading edge GaN Safe technology combined with our industry leading Gen 3 fast silicon carbide and our unique data center system design capability. We are pleased to announce 3 major design wins at some of the world's largest power supply companies.

Speaker 2

Taken in combination with over 30 customer projects now in development, in the coming quarters, we expect to enable GaN based data centers with AWS, Azure, Google, Supermicro, Inspur and Baidu. In total, we anticipate multiple millions in revenue this year and $10,000,000 to $20,000,000 in 2025, all being accelerated by these recent AI developments, which we expect to continue for years, if not decades to come. In EV, we are seeing a significant expansion in our customer pipeline given strong penetration into mainstream passenger battery EVs and also plug in hybrids, commercial EVs and even fuel cell hydrogen clean energy cars. Our EV system design team originally created a 6 point 6 kilowatt onboard charger platform, which is driving significant customer adoption. Recently, we've launched a 22 kilowatt OBC platform that enables 3x faster charging, while delivering double the power density, up to 30% greater energy savings and 40% lighter weight relative to comparable solutions on the market.

Speaker 2

These system capabilities are once again enabled by a combination of our Gen 3 fast silicon carbide and our Gamsafe industry leading technologies. We anticipate these platforms will drive considerable new revenues with additional silicon carbide customer projects ramping in the first half of twenty twenty five and GaN EV adoption on track to ramp in the second half of twenty twenty five. In total, we are now engaged with over 160 EV related customer projects across all major regions, which are expected to drive tens of millions of sales in 2025 and these projects have already increased our total EV pipeline by over 50% since we reported our $400,000,000 pipeline in December. In the Appliance and Industrial segments, we are also making excellent progress. Our latest motor optimized Danset CapReach now has over 15 customer projects in development with major wins at a European leader in hair care that will launch at the end of this year, a Tier 1 U.

Speaker 2

S.-based dishwasher supplier and 2 of the top European leaders in pumps and motors, which will all launch in 2025. All told, Gansets HackBridge total pipeline is now over $100,000,000 in home appliance. In more industrial applications, our latest Gen 3 FAST Silicon Carbide and GaN safe technology are achieving rapid adoption in over 25 customer developments with over $150,000,000 pipeline potential. Combining these together with other opportunities, our appliance and industrial pipeline has grown significantly beyond $360,000,000 that we reported in December. In solar and energy storage, we are seeing signs of recovery with 6 new wins across U.

Speaker 2

S, Europe and Asia for solar optimizers, microinverters, inverters and energy storage applications, all expected to start ramping in 2025. In particular, a major microinverter leader has publicly committed to a major transition to GaN that will ramp in the first half of twenty twenty five, which we expect represents tens of millions of annual revenue potential. In total, our solar and energy storage pipeline has also increased significantly beyond the $250,000,000 we reported in December. In mobile and consumer markets, we continue to see strength as all major mobile OEMs across smartphone, tablet and notebooks continue to adopt GaN to replace silicon in a growing percentage of their chargers, especially those at 65 watts and above, a sweet spot for our GaN ICs. In Q1, we added over 20 new fast chargers into production, taking the total released customer products to over 450.

Speaker 2

This includes 10 of the top 10 mobile OEMs across smartphone and notebooks. Notably, Xiaomi launched another 2 smartphone models, the Mi 14 Ultra and the CV4 Pro using our Gen 4 GaN Sense ICs to support ultra fast charging. And Lenovo launched the ThinkBook 170 Watt desktop 5 port charger and docking station with Gen 4 GaNSense. Finally, I'm excited to announce that all new GaNIC family we call GaN SLAM. GaN SWIM offers all the impressive features of our existing GaN Sense technology such as integrated drive and lossless current sensing, but also slims down the solution by integrating additional external components, further simplifying the system design and reducing customer manufacturing costs.

Speaker 2

GaN SWIM is a major step forward that could increase our GaN TAM by enabling lower system cost compared to silicon design for many applications. JAN SWAM targets applications under 500 watts across mobile, consumer and home appliance. While the formal product launch will not occur until June, we started sampling just 2 months ago and already have over 20 customer projects in development and added over $20,000,000 to our pipeline. We anticipate over $10,000,000 in new revenue for 2025 from our GaN Slim product line. Overall, we have not yet observed any signs of a broader market recovery in the second half of the year, and this may translate to a more moderated growth in 2024.

Speaker 2

Nonetheless, we're very pleased with the significant success and adoption of our latest industry leading technologies, Gansense, Gansense heparagized seeds, Gen3 fast silicon carbide and our newest Ganswing family, all of which are driving important increases in our customer pipeline that is increasing nearly 30% from December to $1,600,000,000 Much of that existing opportunity and pipeline growth is coming from new 2025 production programs across all major regions and markets, which is increasing our confidence for strong diverse growth for 2025 and beyond. With that, let me turn it over to our CFO, Janet Cho to discuss the financials.

Speaker 3

Thank you, Jean. In my comments today, I will first review our Q1 financial results and I'll take you through our outlook for the Q2. Revenue in the Q1 of 2024 grew 73% year over year to $23,200,000 slightly above the midpoint of our guidance range. While we are experiencing similar macroeconomic factors as others, in certain of our end markets such as EV, industrial and solar, our mobile business was strong in the Q1, demonstrating the benefits of our smaller, faster, more energy efficient technology as we continue to gain significant traction in mobile and consumer charging applications. Before addressing expenses, I'd like to refer you to the GAAP to non GAAP reconciliations in our press release earlier today.

Speaker 3

In the rest of my commentary, I will refer to non GAAP expense measures. Gross margin in the Q1 was 41.1 percent, the same as the Q1 of 2023 due to mobile market product mix, as we continue to see strength in that part of our business. Total operating expenses for the Q1 were $21,300,000 comprised of SG and A expenses of $8,500,000 and R and D expenses of $12,900,000 This expense increase of 20% year over year is much slower than our revenue growth as we sharpen our focus on profitability, while continuing to emphasize investments in new products, technologies and emerging markets. The sequential growth was primarily driven by higher payroll taxes and annual salary increases. As expected, we sequentially increased our R and D to support significant new product development like Gansolin and many others planned to launch in this year and next.

Speaker 3

Putting all this together, the loss from operations for the Q1 of 2024 was $11,800,000 compared to a loss from operations of $12,300,000 in the Q1 of 2023. Our weighted average share count for the Q1 was 180,000,000 shares. Turning to the balance sheet. It remains very strong with high levels of liquidity. Cash and cash equivalents at quarter end were $129,700,000 and we continue to carry no debt.

Speaker 3

Accounts receivable declined to $22,200,000 compared to $25,900,000 in the prior quarter. Inventory increased to $33,200,000 compared to $23,200,000 in the prior quarter. The inventory increase reflects additional strategic purchases of silicon carbide materials and increases to support major product launches and customer program runs later in the year. Moving on to guidance for the Q2, we currently expect revenues of $20,000,000 plus or minus $500,000 At the midpoint, this represents year over year growth of more than 10% compared to the $18,100,000 we reported in the Q2 of 2023, and the guidance is down sequentially from the Q1 due to decreased demand in our EV, solar and industrial markets, partially offset by projected continued strength in the mobile market and the initial ramp for data centers. Gross margin for the Q2 is expected to be approximately 40%, plus or minus 50 basis points, as our mix continues to lean more towards the mobile market in the near term.

Speaker 3

As we move through the year, we expect margin improvement will align with growth in higher margin markets. In total, our non GAAP operating expenses in the second quarter are expected to be approximately $21,500,000 and this excludes stock based compensation and amortization of intangible assets. Although we will continue to invest in growth oriented initiatives, particularly in R and D, we expect growth in operating expense dollars will be modest during 2024. In closing, while we're not immune to some of the same macro trends seen by others, we continue to deliver growth that significantly outpaces the overall power semiconductor market. We're very pleased with the customer reception and adoption of our new products, expansion of our customer pipeline and the outlook for much faster growth as some of our end markets recover.

Speaker 3

Operator, let's begin the Q and A session.

Operator

Thank you. We will now begin the question and answer

Speaker 2

session.

Operator

And your first question comes from the line of Kevin Cassidy with Rosenblatt Securities. Please go ahead.

Speaker 4

Yes. Thank you for taking my question. Congratulations on the great results. And also congratulations Gene for a well deserved nomination as a finalist for Entrepreneur of the Year in LA. Congratulations.

Speaker 2

Thank you, Kevin.

Speaker 4

It's exciting news what you're showing about data center. And we did we hosted a tour of a CoreSite data center and the clear message from the management team was they need more power. And yes, it looks like there's a definite demand from data centers and pretty exciting that you're winning the designs now, and you're going to start seeing revenue. Is this revenue going to be accretive to gross margin right away? Or does it take a while to get the volumes up to get to gross margins that would be above corporate average?

Speaker 2

Yes. Good question, Kevin. And it's accretive straightaway running above the average, I think typical of any of the industrial markets, especially with the new products like GaNSafe and Generation 3 Fast doesn't carbate and we expect them to be accretive on gross margin straight away. And as I mentioned in my remarks, a few $1,000,000 ramping already started this first half, but ramping more significantly in the second half and $10,000,000 to $20,000,000 anticipated at this point for next year.

Speaker 4

Okay, great. And can you give us a ballpark for the dollar content, like if there's a dollar content per watt or per kilowatt for Navitas?

Speaker 2

Yes, it's going to depend a lot per power as you said. But depending upon power level, you could probably assume $15 to $50 It's in that kind of range and it's going up as the power level goes up. Our design center delivered a 3.2 kilowatt last year, more recently 4.5 kilowatt and we're trying to push that to 5.5 kilowatt with customers and now we're working on an 8 kilowatt to 10 kilowatt. With each of those that content going up and up on the 8 to 10, it's probably in that $50 range, dollars 40 range.

Speaker 4

Okay, great. Thanks for those details.

Speaker 1

You bet.

Speaker 4

Okay, back in the queue. Thank you. Okay.

Operator

Your next question comes from the line of John Tanwanteng with CJS Securities. Please go ahead.

Speaker 5

Yes, it's actually Charlie Stratos for John. Just a couple of questions for you. When do you expect to see a normalization in demand? Is There's

Speaker 2

a good chance Q2 is a bottom It's a good chance Q2 is a bottom. It's a little early to call as we don't have perfect visibility on Q3. But I think the general consensus in the industry from our peers who are seeing a lot more dramatic degradation, I'd say, in revenue than we are in the first half, is that by summer it could turn. So we're looking forward to those signs to confirm growth. But right now as we said in our remarks, we would be a little bit more moderate in our growth expectations compared to the 40% to 50% we indicated last quarter.

Speaker 5

Great. And just one more question for me. Have pipeline opportunities identified in December converted to designs yet or orders at the expected rate?

Speaker 2

Yes, it varies by market. Of course, mobile and consumer tends to be shorter term, and you can see those adoption rates happen faster. For some of the other markets, they're still developing data center ramping later this year. I did mention a large percentage of the $1,600,000,000 that we've added to it since $1,250,000,000 and was already there are concentrated in 25 programs, which is why we're so bullish across each of the markets in the conversion rate and indicated tens of 1,000,000 of new revenue in most of the key markets that we targeted.

Speaker 4

Thank

Operator

you. Your next question comes from the line of Jack Egan with Charter Equity Research. Please go ahead.

Speaker 6

Hey, guys. Thanks for taking the question. So you mentioned that some automotive weakness might be contributing to some slower near term growth. But I thought automotive was more kind of on the long term spectrum and that it wouldn't really kick in for a while. So is that more reflective of actual fewer shipments near term or is it more just customers kind of slowing their development process?

Speaker 2

Yes. No, great question, Jack. And it's definitely today we're only shipping silicon carbide into EVs. So we have ongoing production there. And with the slower growth rates recognized in the overall industry, Beth created some pockets of inventory, some slowdown in the production pull through from customers.

Speaker 2

With that said, we haven't seen any delays in new programs. We announced the joint labs with Shinri and Geely. Those guys are shipping into major OEMs like Hyundai, BYD, Volvo, Honda. Those programs are all tracking for 2025 ramp. We're also still on track for GaN to go into EVs for the first time in the second half of twenty twenty five.

Speaker 2

So we don't see much slowdown at all in the overall pipeline. It's actually growing probably the biggest. We highlighted 50% growth. So from $400,000,000 to $600,000,000 we don't see slowdown of the programs, but we certainly feel some slowdown in the short term just on the production, shift through.

Speaker 6

Got it. Okay. And then just sticking on the automotive side, this quarter last quarter, you've heard quite a few companies in the automotive supply chain, at least on the semiconductor side. They've talked about sentiment kind of shifting away from fully electric vehicles and a bit more towards hybrids. And so I understand that that long term that would probably be a negative development for silicon carbide since I don't think you really need or really can use silicon carbide and the traction of a hybrid.

Speaker 6

But for some of the smaller lower power slots like DC DC converter, is there still an opportunity for GaN or SiC for hybrid?

Speaker 2

Yes, that's right. We've observed the same trend. While there's a bit of a slowdown on battery EV in the near term, we've seen plug in hybrid pickup, commercial EV still going strong and I mentioned those in my remarks. The content is pretty solid. Battery EV can be up to $400,000 or $500 of GaN or floating carbide and wideband gap content.

Speaker 2

But the plug in hybrids can also depending upon the configuration they can be $200 to $300 So it's very significant albeit smaller, it's very significant and we've got a number of nice projects in the pipeline that we added.

Speaker 6

Got it. That's helpful. Thanks guys.

Speaker 2

Thanks Jack.

Operator

Your next question comes from the line of Quinn Bolton with Needham. Please go ahead.

Speaker 7

This is Nick Goa on for Quinn Bolton. Thanks for taking my questions. Can you talk more about your appliance segment? Any details on the performance embedded in the quarter and guide? Are you still on track to hit the 10,000,000 per year run rate exiting the year?

Speaker 2

Yes, good questions. Thanks for focusing on that. Appliance is maybe not as sort of exciting or sexy as some of the other segments, but really promising progress. I highlighted 4 major wins, just in the last quarter, one of which includes that leading European hair care product that's still on track to ramp at the end of the year and that's expected to be $10,000,000 a year as it ramps starting this year and throughout next year, but we also added the dishwasher a leading dishwasher name. These guys don't want us to release the names yet.

Speaker 2

We'll release them as

Speaker 1

soon as we could, but you

Speaker 2

can probably guess at some of these. And 2 really top pump and motor leaders in Europe. Not surprisingly, Europe tends to be leading in high energy efficiency home appliances. So that business actually is pretty stable. We didn't highlight it too much in the short term, but we did say going into Q2 it's pretty stable.

Speaker 2

And then I think we're going to see a nice growth towards the end of the year and definitely next year. That pipeline by the way was $360,000,000 in December and has grown since then. So we're pretty bullish on Home Appliance and Industrial Markets.

Speaker 7

Okay. Thanks. And for my follow-up, gross margin guide coming in just a little bit weaker. Is that entirely driven by mix, driven by the mobile being a little bit better like you talked about in the comments?

Speaker 3

Thank you for your question. You're absolutely right. Our gross margin is heavily dependent on mix. We see very strong momentum going on in the mobile space. And but higher mix in mobile actually is margin diluted.

Speaker 3

We do anticipate margin expansion once we see growth in higher margin markets like EV, industrial and data center.

Operator

Your next question comes from the line of Richard Gould with Gould Tactical. Please go ahead.

Speaker 7

Hi. I just wanted to drill into the customer pipeline a little bit more. If I recall, about a year ago, I think that pipeline was a few 100,000,000 and then into the summer, it got up to, I think, dollars 760,000,000 And then by the year December 12 meeting, investor meeting in Torrance, California, it was $1,200,000,000 And I think last quarter you said it was north of that. And now at $1,600,000,000 it's really pretty remarkable. I was wondering if you could give a little bit of detail of how you scrub that and if you have any sense of what the conversion is ultimately into revenues?

Speaker 2

Yes. Good question. Thanks, Richard for bringing it up. So first of all, on definition, pipeline has a few important criteria. One is that it's a valid committed production program.

Speaker 2

There's a lot of R and D going on out there especially on gallium nitrate and solid carbide. So we always scrub it to make sure it's really a valid committed program. Number 2, we see a good technical fit for what they require for GaN or silicon carbide or for our products to make sure the technical fit is there. And then 3rd is the value prop and a strong opportunity and motivation from the customer to use the product. It's not confirmed design wins, it's not a contract, but we consider those to be qualified opportunities.

Speaker 2

And we track on qualified ones, but we don't report them in the 1,600,000,000. They have to meet that. And then within that 1,600,000,000 of qualified opportunities, we we're tracking them by stage as they go through evaluation, system design, design validation, preproduction and then into production. In terms of conversion, it's a little too early to call. I think on the mobile where we've seen mobile our conversion rates have been pretty high 30% or higher sometimes 40%.

Speaker 2

On the other markets, which are really just forming, some of those take 2 years to come to market or 18 months or 36 months, we're still seeing that rollout. So we won't be able to judge conversion rates a lot better in data center solar and EV later this year and into next year.

Speaker 7

And then when you of the $1,600,000,000 I guess you put that $1,600,000,000 in different buckets. One bucket would be purchase orders and production and then it goes from there all the way to perhaps just some new program that's just kind of been talked about, but you haven't really well, no, I guess if it's committed, it has to be committed to be part of the qualified, right?

Speaker 2

No, qualified meets the criteria I said. So it's committed production program, not committed to us, but the customer is committed to going to production. We have a good technical bid. We have strong value prop and high interest to use our product. But let me clarify too.

Speaker 2

It's a development pipeline. So once the products go to production, we actually remove them from the pipeline. So it's from the 1st qualification stage, committed production with high interest in technical fit to our product through to pre production. Once it goes to production, we then count that in our production forecast. So for that number to grow, the number of additional programs going into the pipeline needs to exceed those products that are going from the pipeline into production.

Speaker 4

Okay.

Speaker 7

Yes, that's remarkable. Thanks so much.

Speaker 2

One other clarification too, Richard. It's a lifetime estimate. So that's not an annual revenue. The lifetime of these programs we're trying to be super conservative. Some could in theory last 5 or 10 years, but we don't want to be too optimistic.

Speaker 2

So we generally assume about a 3 or 4 year lifetime for the more industrial markets and mobile consumer we assume they run for about 1 year. So you have to factor in the lifetime of the product when you're thinking about how that might translate into our revenue. You bet. Thanks, Richard.

Speaker 7

Your next

Speaker 2

You bet. Thanks, Richard.

Operator

Your next question comes from the line of Richard Shannon with Craig Hallum. Please go ahead.

Speaker 8

Hi, guys. Thanks for taking my question as well. Maybe I'll focus on one of the markets that's doing relatively better right now being in the mobile space here. I think a couple of quarters ago or maybe it was more than 2, you talked about a couple of your charger customers committing to like 30 percent usage of TAN here with higher levels of power. Your conversations you're having with both aftermarket guys and I guess more importantly on the OEM side here, what are you seeing in terms of commitment to ramp with the higher the 65 watt and above?

Speaker 8

I mean, I can tell you from my perspective having multiple Navitas gifted chargers in my possession looking at one of them right here. I mean, the value proposition is so high. It seems like it'd be a fairly fast conversion. So what's what are you getting a sense in terms of those conversations and what's their pushback or delay in committing to something like that?

Speaker 2

Yes. No, those are great observations and thanks for appreciating the chargers as everybody usually does. So but you're right and you know it well, right? 30 watts and below is relatively slow charging. GaN doesn't bring that much of a value.

Speaker 2

Profit's already a pretty small key. You get into 50, 60 watts, that's pretty fast charging for a laptop and really fast for a smartphone. You get to 100 watts, now you can charge multiple devices super fast. And that's so as you go up in power that leads you right into the sweet spot of our GaNIC technology, while also increasing the GaN content from 1 chip to 2 chips or in many cases our GaN S and TapRidge, which is one of our most advanced products and one of the things I highlighted. So we continue to see the trend to faster and faster charging.

Speaker 2

I think it's an obvious and compelling thing. Consumers don't change overnight. But Xiaomi and Oppo are great examples. The Chinese tend to be early adopters and have been the most aggressive. Most of those products I mentioned about the Mi 14 Ultra, the CV4 Pro, these are all 100 watt and up really powerful products, super fast charging.

Speaker 2

We're seeing those same trends out of the other mobile leaders in the different regions, albeit at a bit slower pace. But I think what you're seeing from China is what you're going to see from the others. A lot of it actually comes down to battery technology. The battery technology needs to safely accept in your phone 30 watts or 65 watts or 100 watts. So it's not as simple as just switching from a 30 watt charger to 100 watt.

Speaker 2

You do need to advance that battery technology. The Chinese and others are certainly proving that you can safely accept 100 watts or more and that's 0% to 100% charge in under 15 minutes. So they're setting the example. I think it's just a matter of time you'll see that same trend. I'm already seeing it with Samsung is now up to 45 watts in their fast charger for example using our GaN technology.

Speaker 2

So those trends are solid and they're coming and that's going to lead them right into our GaN IC strength.

Speaker 4

Okay.

Speaker 8

I guess I didn't realize about the batteries. So thanks for that detail Gene. Yes. My second question is, just kind of the general competitive dynamics in both the material systems here. We've seen some more suppliers getting into the GaN space and increasing capacity, looking to be more aggressive.

Speaker 8

And then in the silicon carbide space, we've obviously seen a slowdown here. And so I guess I want to get any sense of any change in competitive dynamics, pricing, etcetera that you've seen here in the last 6 months in either of those materials?

Speaker 2

Yes. As much as if you take GaN, as much as there are various startups that pop up, I have to admit it doesn't feel like it's changed too much. It's primarily Navitas. We see Infineon and Infineon GaN systems. We see Power Integrations.

Speaker 2

We see InnoScience on the low end. And it trails off pretty quickly from there. So we haven't seen any change to ASP degradation or anything sort of unusual there. So surprisingly not much of a change in the competitive landscape. So looking carbide, you still have the big players of course the IDMs as you might call them.

Speaker 2

We're a small single digit market share player with a lot of upside, just 1% or 2% market share gains for us can really matter. Last year, things were really tight. So there's almost no ASP degradation. This year I'd say supply and demand with the softening of demand and some increase in supply, I'd say we now have sort of normal ASP degradation. But our focus tends to not be on obviously we're not a price leader.

Speaker 2

We're not going part to part. We're very focused on system value. In many cases, we're designing the system or co designing the system for the customer with the customer, especially in the data center space and the EV space.

Speaker 8

Okay, great. Thanks,

Speaker 2

Gene. Yes. Thanks,

Operator

And your next question comes from the line of Jon Tanwanteng with CJS Securities. Please go ahead.

Speaker 5

Hi. Just one quick follow-up. Can you provide us an update on cash burn when you think you might achieve breakeven?

Speaker 3

We think we can achieve operating margin level breakeven when revenue reaches $50,000,000 to $55,000,000 In addition to driving profitable growth as the new CFO on board, I'm sharply focused on driving working capital efficiency and improved process and systems. We remain very confident with our long term target financial model, which we laid out on Investor Day.

Speaker 5

Great. Thank you.

Speaker 3

Thank you.

Operator

We have no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect. For further comments or

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