Shadi Mitwalli

Shadi Mitwalli, on behalf of Quinn Bolton at Needham & Company, questioned the Q3 guidance, which implies a seasonally down Q4, suggesting it might be conservative given the strong Edge AI momentum. He also asked about the growth outlook for the non-security camera portion of the IoT business.

Answer

CEO Fermi Wang explained that the implied Q4 seasonality is consistent with prior years and is influenced by consumer product cycles. Regarding the IoT segment, Wang acknowledged that new applications like drones, portable video, and edge infrastructure are driving growth. VP of Corporate Development Louis Gerhardy added that while the core security business is expected to grow well, the non-security IoT segments are now contributing very strong growth and are expected to outpace the security segment.

Shadi Mitwalli, on behalf of Quinn Bolton from Needham & Company, asked for an update on conversations with customers regarding their supply chains and inventory levels, and questioned the drivers behind the expected sequential decline in gross margin.

Answer

CEO Fermi Wang stated that customers report they are not building up inventory and are watching the geopolitical situation closely, which contributes to the uncertainty reflected in the guidance. CFO John Young explained that the quarter-to-quarter gross margin fluctuation is primarily driven by a combination of customer and product mix, which can vary based on ordering patterns.

Shadi Mitwalli, on behalf of Quinn Bolton, asked about the specific technology or IP beyond quantum repeaters that drove the Lightsynq acquisition and requested quantification of IonQ's current quantum network deployments and their respective providers.

Answer

Executive Chairman Peter Chapman explained that Lightsynq's quantum memory technology is also highly synergistic for IonQ's distributed quantum computing strategy, as it improves entanglement efficiency. CEO Niccolo de Masi added that the technology benefits all aspects of the company's roadmap. President and GM of Quantum Networking Jordan Shapiro stated that IonQ currently has four commercial quantum networks deployed with customers in defense (U.S. Air Force), enterprise/energy (EPB), and telecommunications (SK Telecom and Singtel).

Shadi Mitwalli of Craig-Hallum Capital Group LLC, asking on behalf of Needham, inquired how the ID Quantique acquisition complements the earlier Qubitekk deal, the technological differences between the two, and the drivers behind the strong 2025 revenue guidance, including its expected quarterly cadence.

Answer

Executive Chair Peter Chapman and SVP of Engineering Dean Kasman detailed the synergies and differences. Both firms are in quantum network deployment, but IDQ brings unique technologies like QRNG and single photon detectors, plus a strong European and Asian presence with partners like SK Telecom, complementing Qubitekk's U.S. base. An executive confirmed the 2025 revenue guidance is back-half weighted, consistent with historical patterns, and is supported by a strong pipeline across an expanded set of solutions.

Shadi Mitwalli, on behalf of Quinn Bolton at Needham & Company, inquired about how the NKT Photonics partnership supports commercialization and asked for an outlook on operating expenses given recent growth and new partnerships.

Answer

SVP of Engineering and Technology, Dr. Dean Kassmann, explained the NKT partnership is crucial for securing robust, stable lasers for large-scale manufacturing and 24/7 system operation. CEO Peter Chapman emphasized that this partnership is key to reducing overall system cost and size. CFO Thomas Kramer stated that current-year OpEx guidance is unchanged and that 2025 guidance will be provided in the next call, highlighting a focus on disciplined investment in high-impact areas.

Shadi Mitwalli, on behalf of Quinn Bolton, asked for the reason behind the flat gross margin guidance for Q4 despite an expected revenue decline. He also inquired about Navitas's observations in the automotive market, particularly regarding geographic trends.

Answer

CEO Eugene Sheridan explained that gross margins are expected to remain flat because the mobile business, which has seen margin expansion, continues to be strong, offsetting revenue softness in higher-power markets. On the automotive market, Sheridan noted an encouraging pickup in pure EV demand and continued design win momentum for both onboard and roadside chargers, which he believes will accelerate as charging infrastructure expands.

Asked about the accounting treatment for the onshore MRAM strategic award, the reasons for flat sequential gross margin despite higher licensing revenue, and for a technical clarification on the differences between the PERSYST, Unisys, and Agilysys product families and their target markets.

Answer

The strategic award is recognized as 'other income' because it does not meet the criteria for revenue under ASC 606. Gross margin was held back by the under-absorption of fixed costs at the Chandler fab due to lower demand for Toggle products. The company detailed its product lines: PERSYST is for high-endurance, fast data logging in industrial and automotive applications; Unisys is a unified code/data memory for applications with fewer writes like automotive and FPGAs; and Agilysys is a forward-looking research project for high-speed, low-power AI applications.

Shadi Mitwalli, on behalf of Quinn Bolton, asked about the accounting rationale for recognizing the DoD strategic award as 'other income' instead of revenue, questioned the drivers behind flat gross margins, and requested a detailed breakdown of the PERSYST, Unisys, and Agilysys product families and their target markets.

Answer

Interim CFO Matthew Tenorio explained that the DoD award did not meet the criteria for revenue recognition under ASC 606, necessitating its classification as 'other income'. He also attributed flat gross margins to the under-absorption of fixed costs at the Chandler fab due to lower Toggle product demand. Executive Sanjeev Aggarwal detailed the product families: PERSYST for high-endurance data logging; Unisys for unified code and data memory in automotive and industrial applications; and the forward-looking Agilysys for high-speed, low-power AI solutions.

Asked for clarification on the new auto award, the timing of the $10M fee recognition, and the composition of the remaining revenue needed to meet the full-year guidance.

Answer

The new award is the same one mentioned in March. The full $10M fee is recognized in Q2, with more development revenue expected later in the year. The remainder of the 2024 revenue guidance will be a mix of NRE and sample sales from other potential OEM projects, which is why there is a wide range.