Business Wire | Nov 10, 2021 04:23PM EST

Transphorm Announces Fiscal Second Quarter 2022 Financial Results

Nov. 10, 2021

GOLETA, Calif.--(BUSINESS WIRE)--Nov. 10, 2021--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 March 31, 30, 2021 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 184 10,150 interest

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, 4 4 2021 and March 31, 2021, respectively

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 Operations (unaudited)

(in thousands except share and per share data)

Three Months Ended September Six Months Ended September 30, 30,

2021 2020 2021 2020

Revenue, net,including related $ 11,303 $ 1,929 $ 14,519 $ 8,258 parties

Operating expenses:

Cost of goods sold 2,239 2,043 4,806 3,291

Research and 1,591 1,071 3,414 2,665 development

Sales and marketing 825 547 1,512 1,075

General and 2,714 2,688 5,457 4,746 administrative

Total operating 7,369 6,349 15,189 11,777 expenses

Income (loss) from 3,934 (4,420 ) (670 ) (3,519 )operations

Interest expense 220 191 424 380

Loss in joint 1,092 1,943 2,582 3,799 venture

Changes in fairvalue of promissory (1,629 ) 709 (605 ) 2,367 note

Other income, net (1,729 ) (523 ) (1,999 ) (1,055 )

Income (loss) 5,980 (6,740 ) (1,072 ) (9,010 )before tax expense

Tax expense - - - -

Net income (loss) $ 5,980 $ (6,740 ) $ (1,072 ) $ (9,010 )

Net income (loss) $ 0.15 $ (0.19 ) $ (0.03 ) $ (0.25 )per share - basic

Net income (loss) $ 0.14 $ (0.19 ) $ (0.03 ) $ (0.25 )per share - diluted

Weighted averagecommon shares 41,196,139 35,156,918 40,918,203 35,146,277 outstanding - basic

Weighted averagecommon shares 41,362,489 35,156,918 40,918,203 35,146,277 outstanding -diluted

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.

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 (44 ) 74 cash equivalents

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 $ 500 $ - contract

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20211110006370/en/

CONTACT: Investor Contacts: Shelton Group Brett Perry | Leanne Sievers 1-214-272-0070 | 1-949-224-3874 sheltonir@sheltongroup.com

CONTACT: Company Contact: Cameron McAulay Chief Financial Officer 1-805-456-1300 ext. 140 cmcaulay@transphormusa.com