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Transphorm Announces Fiscal Second Quarter 2022 Financial Results

Delivers Continued Strong Growth and Record Product Revenue

Transphorm, Inc. (OTCQX: TGAN)—a pioneer in and global supplier of high reliability, high performance gallium nitride (GaN) power conversion products, today announced financial results for the company’s fiscal second quarter of 2022 ended September 30, 2021.

Fiscal Second Quarter and Recent Highlights

  • Product revenue increased sequentially for seventh consecutive quarter and grew 30% year-over-year to a quarterly record;
  • Continued momentum on adaptor and fast-charger market penetration, including partnerships with leading controller and integrated driver makers;
  • Completed transaction to transition ownership of AFSW wafer-fab facility in Aizu Wakamatsu, Japan;
  • Strategic partner, Yaskawa, converted $15.6M of debt to Transphorm common stock at $5.00 per share in October 2021;
  • Awarded $1.4 million GaN development contract by Defense Advanced Research Projects Agency (DARPA);
  • Achieved automotive qualification of SuperGaN Gen IV multi-kilowatt class power FET device;
  • Closed $5.0 million private placement for strategic investment by Sino-American Silicon Products (SAS) a multi-billion dollar public company in Asia; and
  • Closed $33.0 million private placements in November 2021 comprised of follow-on investments of $5 million by KKR and $10 million by Sino-American Silicon Products (SAS) as well as participation by institutional investors.

“During the September quarter, we continued to ramp device shipments in support of expanded design-ins going into production, resulting in another consecutive quarter of growth and record product revenue,” commented Primit Parikh, Transphorm’s President and Co-founder. “Product revenue in the first half of fiscal 2022 has exceeded the revenue contribution from products for the full fiscal year of 2021, driven by growing traction with our GaN devices in fast chargers and adaptors as well as high-power gaming, server and crypto-mining applications. Additionally, we continued to lay the foundation for significant future growth highlighted by the recently achieved automotive qualification of our SuperGaN Gen IV FET device. With strong customer momentum and strong blue-chip strategic partnerships, we expect continued product revenue growth in the coming quarters.”

Cameron McAulay, CFO of Transphorm, stated, “Through a series of successful transactions over the past few months, we have significantly strengthened our balance sheet and cash position while also realizing a $50 million increase in shareholder equity since June 2021. In part as result of our stronger financial position, we believe the Company is now positioned to meet the qualification requirements for uplisting Transphorm’s common stock to the NASDAQ, an ambition we will continue to pursue aggressively in the coming months.”

Fiscal Second Quarter 2022 Financial Results

Revenue for the fiscal second quarter of 2022 increased sequentially and year-over-year to $11.3 million, compared to $3.2 million in the fiscal first quarter of 2022 ended June 30, 2021, and $1.9 million in the fiscal second quarter of 2021 ended September 30, 2020. The sequential and year-over-year increase was driven by a combination of licensing revenue related to ongoing development work with a manufacturing partner as well as record product sales from ramping shipments of GaN devices for a broad range of power conversion applications, including fast chargers and adapters, gaming, data center and crypto-mining.

Operating expenses on a GAAP basis were $5.1 million in the fiscal second quarter of 2022, compared to $5.3 million in the prior quarter and $4.3 million in the fiscal second quarter of 2021. Fiscal second quarter 2022 operating expenses consisted of R&D expenses of $1.6 million and SG&A expenses of $3.5 million. On a non-GAAP basis, operating expenses in the fiscal second quarter of 2022 were $4.5 million, compared with non-GAAP operating expenses of $4.6 million in the prior quarter and $3.5 million in the fiscal second quarter of 2021.

GAAP net income for the fiscal second quarter of 2022 was $6.0 million, or $0.15 per share, compared to a GAAP net loss of ($7.1) million, or ($0.17) per share, in the prior quarter and a GAAP net loss of ($6.7) million, or ($0.19) per share, in the fiscal second quarter of 2021. On a non-GAAP basis, net income for the fiscal second quarter of 2022 was $3.6 million, or $0.09 per share, compared to a non-GAAP net loss of ($5.3) million, or ($0.13) per share, in the prior quarter and a non-GAAP net loss of ($5.3) million, or ($0.15) per share, in the fiscal second quarter of 2021.

Cash and equivalents as of September 30, 2021 were $2.5 million, compared to $2.5 million as of June 30, 2021. In subsequent private placement transactions completed in early November 2021, the Company closed $33.0 million of equity financing at $5.00 per share from KKR and other strategic and institutional investors.

Conference Call

Transphorm will host a conference call today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to review the Company’s fiscal second quarter results and provide a business update. The conference call will be webcast live over the Internet, which can be accessed by all interested parties in the Investor Relations section of Transphorm’s website at www.transphormusa.com. Investors and analysts may also join the conference call by dialing: 1-888-440-4368 and +1-646-960-0856 for international callers and providing the conference ID: 8060388.

For those unable to attend the live webcast, a replay and the supporting presentation materials will be available on the day of the conference call and for approximately 90 days in the Investor Relations section of the Company’s website. Additionally, a telephone replay of the conference call will be available approximately two hours after the conclusion of the call and through November 17, 2021. The telephone replay can be accessed by dialing +1-800-770-2030 and entering the conference ID: 8060388.

About Transphorm

Transphorm, Inc., a global leader in the GaN revolution, designs and manufactures high performance and high reliability GaN semiconductors for high voltage power conversion applications. Having one of the largest Power GaN IP portfolios of more than 1,000 owned or licensed patents, Transphorm produces the industry’s first JEDEC and AEC-Q101 qualified high voltage GaN semiconductor devices. The Company’s vertically integrated device business model allows for innovation at every development stage: design, fabrication, device, and application support. Transphorm’s innovations are moving power electronics beyond the limitations of silicon to achieve over 99% efficiency, 40% more power density and 20% lower system cost. Transphorm is headquartered in Goleta, California and has manufacturing operations in Goleta and Aizu, Japan. For more information, please visit www.transphormusa.com. Follow us on Twitter @transphormusa and WeChat @ Transphorm_GaN.

Non-GAAP Financial Measures

This press release includes and makes reference to certain non-GAAP financial measures. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Transphorm believes that the presentation of non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. Transphorm believes that these non-GAAP financial measures provide additional insight into Transphorm’s ongoing performance and core operational activities and has chosen to provide these measures for more consistent and meaningful comparison between periods. These measures should only be used to evaluate Transphorm’s results of operations in conjunction with the corresponding GAAP measures. The non-GAAP results exclude the effect of stock-based compensation, depreciation, amortization, change in fair value of promissory note and other income in joint venture.

A reconciliation between GAAP and non-GAAP financial results is provided in the financial statements portion of this press release.

Forward-Looking Statements

This press release contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning the Company’s planned application to uplist its common stock to the NASDAQ, industry acceptance of GaN technology, and the Company’s pipeline and future anticipated growth. Forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as “may,” “will,” “should,” “would,” “expect,” “plan,” “believe,” “intend,” “look forward,” and other similar expressions among others. Statements that are not historical facts are forward-looking statements. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Actual results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation: risks related to Transphorm’s operations, such as additional financing requirements and access to capital; competition; the ability of Transphorm to protect its intellectual property rights; and other risks set forth in the Company’s filings with the Securities and Exchange Commission. Except as required by applicable law, the Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

Transphorm, Inc.

Condensed Consolidated Balance Sheets

(in thousands except share and per share data)

 

September 30, 2021

 

March 31, 2021

(unaudited)

(audited)

Assets

 

Current assets:

 

Cash and cash equivalents

$

2,488

 

$

9,500

 

Accounts receivable, net, including related parties

 

1,585

 

 

1,618

 

Inventory

 

4,774

 

 

2,223

 

Prepaid expenses and other current assets

 

1,329

 

 

953

 

Total current assets

 

10,176

 

 

14,294

 

Property and equipment, net

 

1,761

 

 

1,360

 

Goodwill

 

1,286

 

 

1,302

 

Intangible assets, net

 

765

 

 

914

 

Investment in joint venture

 

89

 

 

 

Other assets

 

259

 

 

274

 

Total assets

$

14,336

 

$

18,144

 

 

 

 

 

 

Liabilities and stockholders’ deficit

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and accrued expenses

$ 4,047

 

$ 3,140

 

Deferred revenue

607

 

505

 

Development loan

 

10,000

 

Revolving credit facility, including accrued interest

184

 

10,150

 

Unfunded commitment to joint venture

 

1,866

 

Accrued payroll and benefits

1,447

 

1,410

 

Promissory note

15,597

 

 

Total current liabilities

21,882

 

27,071

 

Revolving credit facility

12,000

 

 

Promissory note

 

16,128

 

Total liabilities

33,882

 

43,199

 

Commitments and contingencies

 

 

 

 

Stockholders’ deficit:

Common stock, $0.0001 par value; 750,000,000 shares authorized as of September 30, 2021 and March 31, 2021, and 41,664,020 and 40,531,996

shares issued and outstanding as of September 30, 2021 and March 31, 2021, respectively

 

 

 

4

 

 

 

 

 

 

4

 

 

 

Additional paid-in capital

 

150,843

 

 

144,201

 

Accumulated deficit

 

(169,475

)

 

(168,403

)

Accumulated other comprehensive loss

 

(918

)

 

(857

)

Total stockholders’ deficit

 

(19,546

)

 

(25,055

)

Total liabilities and stockholders’ deficit

$

14,336

 

$

18,144

 

Transphorm, Inc.

Condensed Consolidated Statements of Operations (unaudited)

(in thousands except share and per share data)

 

 

Three Months Ended September 30,

Six Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue, net, including related parties

$

11,303

 

$

1,929

 

$

14,519

 

$

8,258

 

Operating expenses:

 

 

 

 

Cost of goods sold

 

2,239

 

 

2,043

 

 

4,806

 

 

3,291

 

Research and development

 

1,591

 

 

1,071

 

 

3,414

 

 

2,665

 

Sales and marketing

 

825

 

 

547

 

 

1,512

 

 

1,075

 

General and administrative

 

2,714

 

 

2,688

 

 

5,457

 

 

4,746

 

Total operating expenses

 

7,369

 

 

6,349

 

 

15,189

 

 

11,777

 

Income (loss) from operations

 

3,934

 

 

(4,420

)

 

(670

)

 

(3,519

)

Interest expense

 

220

 

 

191

 

 

424

 

 

380

 

Loss in joint venture

 

1,092

 

 

1,943

 

 

2,582

 

 

3,799

 

Changes in fair value of promissory note

 

(1,629

)

 

709

 

 

(605

)

 

2,367

 

Other income, net

 

(1,729

)

 

(523

)

 

(1,999

)

 

(1,055

)

Income (loss) before tax expense

 

5,980

 

 

(6,740

)

 

(1,072

)

 

(9,010

)

Tax expense

 

 

 

 

 

 

 

 

Net income (loss)

$

5,980

 

$

(6,740

)

$

(1,072

)

$

(9,010

)

Net income (loss) per share - basic

$

0.15

 

$

(0.19

)

$

(0.03

)

$

(0.25

)

Net income (loss) per share - diluted

$

0.14

 

$

(0.19

)

$

(0.03

)

$

(0.25

)

Weighted average common shares outstanding - basic

 

41,196,139

 

 

35,156,918

 

 

40,918,203

 

 

35,146,277

 

Weighted average common shares outstanding - diluted

 

41,362,489

 

 

35,156,918

 

 

40,918,203

 

 

35,146,277

 

Transphorm, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

 

Six Months Ended September 30,

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

Net loss

$

(1,072

)

$

(9,010

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Inventory write-off

 

194

 

 

105

 

Depreciation and amortization

 

405

 

 

396

 

Provision for doubtful accounts

 

 

 

146

 

Licensing revenue from a related party

 

(8,000

)

 

(5,000

)

Stock-based compensation

 

1,008

 

 

688

 

Interest cost

 

108

 

 

(382

)

Loss in joint venture

 

2,582

 

 

3,799

 

Other income in joint venture

 

(1,455

)

 

 

Changes in fair value of promissory note

 

(605

)

 

2,367

 

Changes in operating assets and liabilities:

 

Accounts receivable

 

33

 

 

106

 

Inventory

 

(2,745

)

 

(392

)

Prepaid expenses and other current assets

 

124

 

 

(362

)

Other assets

 

15

 

 

87

 

Accounts payable and accrued expenses

 

657

 

 

483

 

Deferred revenue

 

102

 

 

178

 

Accrued payroll and benefits

 

37

 

 

249

 

Net cash used in operating activities

 

(8,612

)

 

(6,542

)

Cash flows from investing activities:

 

 

Purchases of property and equipment

 

(409

)

 

(46

)

Investment in joint venture

 

(3,081

)

 

(3,779

)

Net cash used in investing activities

 

(3,490

)

 

(3,825

)

Cash flows from financing activities:

 

 

Proceeds from stock option exercise

 

134

 

 

14

 

Proceeds from issuance of common stock

 

5,000

 

 

 

Net cash provided by financing activities

 

5,134

 

 

14

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

(44

)

 

74

 

Net decrease in cash and cash equivalents

 

(7,012

)

 

(10,279

)

Cash and cash equivalents at beginning of period

 

9,500

 

 

14,648

 

Cash and cash equivalents at end of period

$

2,488

 

$

4,369

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

Interest expense paid

$

316

 

$

762

 

Supplemental non-cash investing activity:

 

Equipment purchases

$

250

 

$

 

Supplemental non-cash financing activity:

 

Issuance of shares in connection with a service contract

$

500

 

$

 

Development loan reduction related to licensing revenue

$

8,000

 

$

5,000

 

 

Transphorm, Inc.

Reconciliation of GAAP and Non-GAAP Financial Information (unaudited)

(in thousands except share and per share data)

 

Three Months Ended

 

September 30,

2021

June 30,

2021

March 31,

2021

December 31,

2020

September 30,

2020

GAAP net income (loss)

$

5,980

 

$

(7,052

)

$(6,579

)

$(4,712

)

$

(6,740

)

Adjustments:

 

 

 

 

 

Stock-based compensation

 

511

 

 

497

 

513

 

705

 

 

584

 

Depreciation

 

134

 

 

123

 

123

 

130

 

 

119

 

Amortization

 

74

 

 

74

 

74

 

74

 

 

74

 

Changes in fair value of promissory note

 

(1,629

)

 

1,024

 

699

 

(927

)

 

709

 

Other income in joint venture

 

(1,455

)

 

 

 

 

 

 

Total adjustments to GAAP net income (loss)

 

(2,365

)

 

1,718

 

1,409

 

(18

)

 

1,486

 

Non-GAAP net income (loss)

$

3,615

 

$

(5,334

)

$(5,170

)

$(4,730

)

$

(5,254

)

 

 

 

 

 

 

GAAP net income (loss) per share - basic

$

0.15

 

$

(0.07

)

$(0.16

)

$(0.13

)

$

(0.19

)

Adjustment

 

(0.06

)

 

(0.06

)

0.03

 

 

 

0.04

 

Non-GAAP net income (loss) per share - basic

$

0.09

 

$

(0.13

)

$(0.13

)

$(0.13

)

$

(0.15

)

 

 

 

 

 

 

GAAP net income (loss) per share - diluted

$

0.14

 

$

(0.07

)

$(0.16

)

$(0.13

)

$

(0.19

)

Adjustment

 

(0.05

)

 

(0.06

)

0.03

 

 

 

0.04

 

Non-GAAP net income (loss) per share - diluted

$

0.09

 

$

(0.13

)

$(0.13

)

$(0.13

)

$

(0.15

)

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

41,196,139

 

 

40,637,213

 

40,274,660

 

35,719,749

 

 

35,156,918

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

41,362,489

 

 

40,637,213

 

40,274,660

 

35,719,749

 

 

35,156,918

 

 
 

 

Three Months Ended

 

September 30,

2021

June 30,

2021

March 31,

2021

December 31,

2020

September 30,

2020

GAAP operating expenses

$

5,130

 

$

5,253

 

$5,176

 

$4,524

 

$

4,306

 

Adjustments:

 

 

 

 

 

Stock-based compensation

 

472

 

 

470

 

475

 

657

 

 

567

 

Depreciation

 

134

 

 

123

 

123

 

130

 

 

119

 

Amortization

 

74

 

 

74

 

74

 

74

 

 

74

Total adjustments to GAAP operating expenses

 

680

 

667

 

672

 

861

 

760

Non-GAAP operating expenses

$

4,450

 

$

4,586

 

$4,504

 

$3,663

 

$

3,546

 

 

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