Jack Egan

Jack Egan sought clarification on the long-term drivers of gross margin expansion, specifically whether it would be primarily from end-market mix or technological innovation, and asked about the industry's SiC supply/demand balance outside of Navitas' focus areas.

Answer

CFO Todd Glickman and CEO Chris Allexandre confirmed that both end-product mix (high-power replacing mobile) and technological innovation (optimized processes, yields, packaging, higher ASP products) would drive margin expansion. Chris Allexandre noted that SiC oversupply is mainly for EV-focused vendors at lower voltages, while Navitas' focus on 1.2kV+ for grid and PSUs prioritizes reliability and performance over supply scale.

Jack Egan asked about the long-term drivers of gross margin expansion, specifically whether it will be primarily driven by end-market mix or technological innovation with higher ASPs, and sought commentary on the industry-wide SiC oversupply in automotive/industrial markets.

Answer

CFO Todd Glickman stated that gross margin expansion will be a combination of both end-product mix (high-power markets having higher margins) and further expansions through optimized processes, yields, and packaging costs for new products. CEO Chris Allexandre added that growth from all high-power markets (performance computing, grid infrastructure, AI data center) will contribute, with grid infrastructure bringing higher ASP/margin products. Regarding SiC oversupply, Chris Allexandre noted it's a concern for vendors focused on lower-voltage EV markets, but Navitas' focus on 1.2kV for PSUs and 2kV+ for grid prioritizes reliability and performance over supply scale.

Jack Egan requested a breakdown of the factors driving the Q3 revenue decline and asked if the NVIDIA collaboration has increased engagement with other data center customers.

Answer

CEO Gene Sheridan stated that the Q3 sequential decline was driven by roughly equal contributions from three factors: the impact of China tariffs on US-made SiC products, the strategic reduction in mobile business, and a broader industry slowdown delaying new project ramps. He confirmed the NVIDIA announcement has opened more doors with other customers, including those exploring similar high-voltage data center architectures.

Jack Egan inquired about the breakdown of the design win pipeline between silicon carbide (SiC) and gallium nitride (GaN), and the reasons for the recent decline in R&D spending relative to SG&A.

Answer

CEO Eugene Sheridan stated that while near-term revenue is GaN-heavy, the design win pipeline is well-balanced between GaN and SiC, particularly for combined use in EV and data centers. He also clarified that Q1 SG&A was elevated due to one-time expenses and that the forward-looking split is expected to be approximately 55% R&D and 45% SG&A.

Jack Egan questioned the reason for the silicon carbide distributor disengagement, the company's comfort with its current cash balance given the burn rate, and the source of the latest operating expense synergies.

Answer

CFO Todd Glickman clarified the distributor disengagement was separate from cost-cutting and was due to the partner's lack of performance and failure to pay. He stated that with over two years of cash available, there is no organic need to raise capital. Glickman also explained the latest cost savings were found separately from the Q4 workforce reduction and were related to realizing synergies from prior acquisitions.

Jack Egan asked about GaN's adoption in 48-volt data center intermediate bus converters against cost-effective silicon. He also inquired about the potential impact of liquid cooling in data centers on the demand for power semiconductors.

Answer

CEO Eugene Sheridan stated that Navitas sees a significant opportunity to push frequency and efficiency with its new low-voltage GaN, creating a strong value proposition over silicon, especially when combined with the new Infineon partnership. Regarding liquid cooling, Sheridan positioned it as a necessary enabler for the entire data center industry, arguing that it accelerates the demand for more power, higher energy savings, and greater power density, making it a net benefit for power semiconductor companies.

Jack Egan asked for clarification on the power and general mature guidance, specifically if the 'flat to slightly down' outlook for 2026 is mainly due to reduced capacity investments, partially offset by tailwinds like higher utilization, one-time upgrades, and Chinese build-outs. He also inquired if the trend of memory companies signing unusually long LTAs with their customers is trickling down to Axcelis in terms of longer lead times or discussions with customers.

Answer

Russell Low (President and CEO, Axcelis Technologies) confirmed that the outlook for power and general mature is influenced by China's careful capacity additions and non-Chinese customers needing to increase utilization before buying new tools, with recovery opportunities expected in 2027. Jamie Coogan (EVP and CFO, Axcelis Technologies) clarified that while purchase orders for memory have short lead times, Axcelis receives multi-quarter long-range forecasts from customers that are historically sound, indicating confidence in memory recovery. He added that the company is positioning its balance sheet to take advantage of potential incremental opportunities in 2026 if customers free up more fab space.

Jack Egan asked for clarification on the 'down slightly' guidance for power and general mature segments, confirming if it's mainly due to lower capacity investments offset by tailwinds like higher utilization and Chinese build-outs. He also inquired if the trend of memory companies signing long-term contracts with their customers is trickling down to Axcelis in terms of longer lead times or customer discussions.

Answer

Russell Low, President and CEO, confirmed that the 'down slightly' outlook for power and general mature reflects careful capacity additions in China and non-Chinese customers needing to increase utilization before new tool purchases, with recovery anticipated in 2027. Jamie Coogan, EVP and CFO, clarified that while purchase order placement for memory systems has short lead times, Axcelis receives sound multi-quarter long-range forecasts from customers, indicating positive demand and preparation for acceleration into 2027.

Jack Egan from Charter Equity Research, Inc. questioned if tariff pull-ins boosted CS&I revenue and if the quarter's elevated share repurchases indicate a new, higher baseline for buybacks.

Answer

EVP & CFO James Coogan clarified that strong CS&I revenue was driven by customer upgrades, not material tariff pull-ins. Regarding buybacks, he stated the company was opportunistic and expects to repurchase shares at a rate above its historical ~$15M quarterly baseline, but did not commit to a specific future amount.

Jack Egan questioned whether the strong book-to-bill was primarily from non-memory segments, given the short lead times of memory customers. He also asked for the rationale behind keeping full-year OpEx flat despite an expected revenue decline.

Answer

CFO James Coogan confirmed that the Q1 bookings profile largely mirrored the revenue split, which was weighted towards general mature and power, not memory. Regarding OpEx, both Coogan and CEO Russell Low emphasized the decision to maintain spending is a strategic investment in R&D and product roadmaps to ensure the company is well-positioned with innovative products for the eventual market recovery.

Jack Egan of Charter Equity Research asked for details on the significant sequential growth in CS&I revenue and questioned if emerging weakness among silicon carbide device makers could risk the company's second-half 2025 outlook.

Answer

EVP and CFO James Coogan explained the CS&I strength was broad-based, driven by customers using the slowdown to upgrade existing tools for efficiency, a trend often seen in Q4. President and CEO Russell Low added this is a focused strategy. Regarding SiC risk, Coogan noted that Axcelis's broad customer base mitigates reliance on any single customer's performance. Low emphasized that different customers are at different stages—building capacity, optimizing yield, or transitioning to new architectures—which diversifies demand.

Jack Egan asked about the company's use of Chinese components in its supply chain and requested clarification on the relative importance of the automotive, industrial, and consumer end-markets for the general mature segment.

Answer

CFO James Coogan stated that the company actively manages its supply chain to localize where possible and maintains a strong supply base outside of China. CEO Russell Low confirmed that automotive, industrial, and consumer are all significant drivers for the general mature segment but could not quantify the specific contribution of each, noting all three have been weak recently.

Jack Egan inquired about updates on MPS's packaging innovation designed to double current density to 3 amps per millimeter squared, asking about its timeline. He also asked about the OpEx implications of MPS's shift from a silicon supplier to a system provider, specifically regarding new teams, R&D, and SG&A leverage.

Answer

Michael Hsing, CEO and Founder, confirmed that products utilizing the new packaging innovation are being sampled and are expected to ship this quarter, having already been qualified by customers. Bernie Blegen, EVP and CFO, explained that MPS has maintained R&D efficiency despite evolving from an analog design house to incorporating digital and software engineers, and now packaging expertise, without necessarily increasing costs or compressing operating margins. Tony Balow, VP of Finance, added that the Investor Day model already accounted for this transition, projecting slower OpEx growth than revenue.

Jack Egan inquired about updates and timelines for MPS's packaging innovation designed to double current density to 3 amps per millimeter squared. He also asked about the OpEx impact of shifting from a silicon supplier to a system provider, specifically regarding new teams, organic growth, R&D, and SG&A leverage.

Answer

Michael Hsing, CEO and Founder, confirmed that products utilizing the packaging innovation are being sampled and are expected to ship this quarter, having already been qualified by customers. He explained that the shift to system-level products like modules aims to provide higher value to customers, increase ASPs, and ultimately improve net profit and company efficiency without necessarily increasing OpEx. Bernie Blegen, EVP and CFO, added that MPS has maintained R&D efficiency throughout its 10-year transformation, and new skill sets do not imply higher costs. Tony Balow, VP of Finance, reiterated that the Investor Day model already accounted for this transition, projecting OpEx growth slower than revenue.

Jack Egan asked about the main drivers for customers switching from lateral to modules or vertical power delivery in enterprise data, specifically which benefits (e.g., power density, efficiency, footprint) are most cited. He also inquired about the potential for module mix outside of enterprise data, given it's currently 10-15% of total revenues, and how high that mix could go in the future.

Answer

Michael Hsing (CEO and Founder) stated that MPS provides both chip and module solutions, and customers tend to stick with their initial choice. He noted that industrial and telecom markets are adopting modules, and surprisingly, the auto and semi-equipment industries are also showing increased adoption, expecting faster growth in the next couple of years for these segments.

Jack Egan of Charter Equity Research asked about the main drivers for customers in enterprise data switching from lateral to module or vertical power delivery with custom ASIC ramps, inquiring if any specific benefit like higher power density, efficiency, or smaller footprint is cited most frequently. He also asked about the broader module business, specifically how high the mix of modules outside enterprise data could go in the future, given it was 10-15% of total revenues last quarter.

Answer

Michael Hsing, CEO and Founder, stated that customers either commit to chip solutions or module solutions, and MPS provides both, without specifying a single main driver for the switch. Regarding modules outside enterprise data, Michael Hsing noted that modules similar to enterprise modules were developed in 2017. He observed that industrial market adoption, initially slow, is now picking up faster than telecom, and automotive and semi-equipment industries are also adopting them. He expects the rate of increase for this business to accelerate in the next couple of years.

Jack Egan inquired about the margin outlook for new accelerator ramps, asking if there's a structural difference in margin profiles for custom ASICs versus GPUs. He also asked if there are any signs of a broader analog cycle recovery, separate from MPS's specific design wins.

Answer

CFO Bernie Blegen stated there is no structural change to the company's margin model from new accelerator ramps. CEO Michael R. Hsing emphasized that MPS will not pursue low-margin business and competes on performance, not price, with new products carrying higher margins. Regarding the analog cycle, Blegen said it's impossible to separate MPS's performance from its new product ramps, which drive their growth story regardless of the macroeconomic environment.

Jack Egan from Charter Equity Research asked for more specifics on the datacom yield improvements, such as their source and whether they were one-time or ongoing. He also inquired about potential strategic changes in sales, marketing, or distribution.

Answer

CEO James Anderson described the yield improvements as coming from a range of both one-time and ongoing efforts across the entire manufacturing process, with a focus on yields and input costs. CFO Sherri Luther added that yield improvements were also a factor in the prior quarter. Anderson confirmed that the company is actively reallocating sales and marketing resources to areas with the greatest long-term growth and margin opportunities.

Jack Egan asked if the company is seeing a margin benefit from the higher mix of 800G transceivers, given historically range-bound segment margins. He also inquired about the long-term growth outlook for telecom, considering carriers' challenges in monetizing 5G.

Answer

CEO James Anderson confirmed that newer, higher-speed transceivers typically carry higher margins. CFO Sherri Luther added that the networking segment's profit did increase sequentially. On telecom, Anderson acknowledged the near-term monetization challenges and the company's cautious stance but affirmed a belief in long-term growth, particularly from data center interconnect (DCI), with more details planned for the Investor Day.

Jack Egan of Charter Equity Research requested a breakdown of device revenue by automotive versus industrial end markets and asked how this mix might evolve with the consolidation into the Mohawk Valley fab. As a follow-up, he inquired about the company's progress in developing thinner 350-micron wafers.

Answer

CFO Neill Reynolds explained that the revenue mix has become heavily weighted towards automotive but expects it to rebalance over time to a 70/30 EV-to-I&E split as the industrial portfolio transitions to Mohawk Valley. Executive Chairman Tom Werner added that they are developing 350-micron wafers, can provide samples, and will convert internal operations to the thinner substrate over time.