INDI - NASDAQ

Good afternoon, and welcome to the indie Semiconductor’s Fourth Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I will now turn the call over to Ashish Gupta, Investor Relations. Mr. Gupta, please go ahead.

Thank you, operator. Good afternoon, and welcome to indie Semiconductor’s fourth quarter 2024 earnings call. Joining me today are Donald McClymont, indie’s Co-Founder and CEO; Raja Bal, indie’s CFO; and Mark Tyndall, Head of Corporate Development and Investor Relations. Donald will provide opening remarks and discuss business highlights, followed by Raja’s review of indie’s Q4 results and Q1 outlook. Please note that we’ll be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect our views only as of today and should not be relied upon as representative of our views as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For material risks and other important factors that could affect our financial results, please review our Risk Factors in our annual report on Form 10-K for the fiscal year ended December 31, 2023, as well as other public reports filed with the SEC. Finally, the results and guidance discussed today are based on consolidated non-GAAP financial measures such as non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss per share. For a complete reconciliation to GAAP and the definition of the non-GAAP reconciling items, please see our Q4 earnings press release, which was issued in advance of this call and can be found on our website at www.indie.inc. I’ll now turn the call over to, Donald.

Thanks, Ashish, and welcome, everybody. Let me first review our financial performance within the context of the overall automotive market environment before focusing on indie’s business achievements. During the fourth quarter of 2024, indie achieved total revenue of $58 million coming in at the midpoint of our guidance and marking our second quarter of sequential revenue growth as well as another quarter of outperformance versus the industry as we continue to gain market share. Last quarter, I highlighted the uncertainty in the automotive market and the near-term challenges impacting the automotive industry. This market context did not meaningfully change through the fourth quarter, thus the sequential growth in our Q4 results demonstrated indie’s resilient business performance. However, in recent weeks, market uncertainty has actually accelerated. Impending tariffs have exacerbated the challenging market situation, adding to the ongoing inventory and end customer demand issues. Traditional manufacturers could be particularly impacted by cross-border tariffs between the U.S. and Mexico or Canada, with component parts sometimes crossing the border up to half a dozen times. As an example, Ford recently told suppliers that the update for their Mainstay F-150 model range scheduled for 2027 will now be delayed to 2028 as a result. That said, the long-term megatrends of ADAS in-cabin user experience and electrification do remain very strong and indie is ideally positioned to capitalize on those markets. 2025 will be an important year for indie as we begin realizing the benefits of our multi-year investments across our product portfolio with multiple ramps in power delivery, in-car networking, ultrasonic intruder detection, vehicle access, vision-based driver and occupant monitoring and our key corner radar program later in the year. I have spoken at length about the key drivers for these megatrends previously, principally global regulation for vehicle safety, reduced emissions and an accelerating consumer desire for more immersive in-cabin user experiences. The key takeaway is that indie is unique amongst its peers with its ability to deliver outsized market growth across these megatrends by leveraging a class-leading, highly differentiated and diverse product technology portfolio. Now, let me share some of the notable business progress, which we achieved in the fourth quarter. Our vision products targeting multiple ADAS applications continue to gain strong traction with multiple global customers. I’m excited to share that our flagship iND880 Vision Processor was recently selected for both front sensing and occupant monitoring applications by a large Korean OEM for a new e-vehicle platform, starting production in 2027. Additionally, we had several design wins for iND880 in China for multi-channel sensor applications. iND880’s low power, low latency and fast initialization capabilities set it apart from incumbents for applications which are now rapidly growing in popularity with China OEMs. Finally, the major driver monitoring design wins for General Motors, Toyota and Ford that we shared last year for our Vision products continue on-track through the normal structured Tier 1 LED system validation and productionization phases, with first production commencing later this year. Turning to our flagship 77 GHz Radar program, our lead customer continues to successfully progress through their productionization and remains on-track for production launch with multiple OEMs. The initial shipments will begin in late 2025. Additionally, I am pleased to share that engineering samples for our 120 GHz Radar solution for in-carbon occupant monitoring applications have recently been received and tested, and we have already successfully demonstrated these to multiple lead customers, eliciting extremely positive feedback. According to S&P Global Mobility, ultrasonic and radar-based automotive sensing will represent a $6 billion market opportunity in 2029, up from $4 billion last year, and we anticipate capturing further wins for our solution, which features the industry’s most advanced technologies. In this segment, by virtue of operational frequency and the innovation of integrated antennas, indie is a clear leader in the market, allowing us to address not only the automotive segment, but also emerging industrial mobility applications. Looking into our medium-term future, we see ever growing applications for our automotive products, particularly Vision, Radar and LiDAR in industrial spaces, including robotics and manufacturing automation, which we plan to exploit. Turning to in-cabin user experience, we are able to announce a major win for our vehicle intrusion detection system with a major German OEM, which will commence full production ramp up in the second half of this year. Switching to electrification, a major milestone for the company in the fourth quarter was the announcement of our first product independently certified to the highest automotive functional safety level, ASIL-D, as defined by the ISO standard. This certification is a testament to indie’s rigorous internal development processes and also the silicon design innovation deployed to ensure a safe and predictable chip response in the event of a failure. The independent assessment and certification of this solution brings confidence to our customers’ mission critical powertrain use case and highlights indie’s ability to deliver the most demanding of applications. Finally, our Photonics business continues its class-leading product innovation in the LiDAR field, announcing the fourth quarter and in-house optical component integration capability for those customers needing turnkey photonic solutions for automotive and mobility sensing applications. We also announced our latest proprietary technology innovation for single frequency lasers, bringing exceptional wavelength stability and spectral purity, which require very high brightness, color reproducibility and contrast ratio. Despite challenging market conditions, the megatrend driven vehicle semiconductor content growth will easily outpace vehicle production, driving the average semiconductor content per vehicle in 2025 beyond $1,000 and two times to three times its value for premium vehicles and e-vehicles. In this context, with our unrivaled product portfolio, indie remains incredibly well-positioned to benefit from this semiconductor value growth over the long-term. M&A has always been an important element of our strategy to enhance our technology and IP portfolio. Given our current strong balance sheet, we continue to appraise multiple opportunities focusing on our core business areas. I will now turn the call over to Raja, for a discussion of our Q4 results and Q1 outlook.

Thanks, Donald. Despite the challenging backdrop, indie delivered strong execution in 2024, growing revenue sequentially through the year while maintaining healthy gross margins above 50%. Our fourth quarter revenue grew 7.5% sequentially to $58 million consistent with the midpoint of our outlook and demonstrating continued outsized growth in our target markets. Non-GAAP gross profit was $29.2 million or 50.4% and flat sequentially in-line with our outlook. R&D expense was $31.5 million with SG&A at $11.9 million bringing total operating expenses to $43.4 million consistent with our outlook. As a result, our fourth quarter non-GAAP operating loss was $14.2 million, an improvement of 16% sequentially. With net interest expense of $1.2 million our net loss was $15.4 million and loss per share was $0.07 on a base of 205.7 million shares. Turning to the balance sheet. In December, we issued $218.5 million of 2029 convertible notes, which yielded net proceeds of approximately $188 million after accounting for the cost of issuance and the capped call. The notes carry a coupon of 3.5% and an effective strike price of $8.06 after taking into account the capped call feature. Accordingly, we exited the fourth quarter with total cash of $284.5 million up from $107.2 million from the prior quarter. Our strengthened cash position improves our ability to capitalize on potential acquisitions while providing ample capital for general corporate purposes. Moving to our outlook. As we look to 2025, we’re generally positive as we see significant growth drivers from our new product launches in the second half of the year and beyond. However, we recognize market uncertainties exist around inventory levels, tariffs and the broader macroeconomic environment, which present heightened industry headwinds impacting the slope of production ramps. Consequently, in Q1 2025, we expect to deliver revenue within the range of $52.5 million to $57.5 million or $55 million at the midpoint, down 5% sequentially, but up 5% versus the prior year period. Based on the anticipated product mix, we expect Q1 gross margins to be in the 49% to 50% range. We expect OpEx of $42 million with approximately $31.5 million of R&D expense and $10.5 million of SG&A expense. Below the line, we expect net interest expense of approximately $1.3 million with no cash tax expense. Assuming the midpoint of the revenue ranges and with 211 million shares outstanding, we expect an $0.08 net loss per share. While our outlook for Q1 is down sequentially, we remain optimistic and committed to our plan. We continue to move forward with heightened operational discipline, remaining squarely focused on delivering highly innovative and differentiated offerings to our customers and fully expect to emerge stronger from the challenging market backdrop. Finally, on the last call, I mentioned we had initiated an OpEx review to drive improved operational efficiencies across the company. I’m pleased to report to-date this program has resulted in a $2 million reduction in our run rate quarterly non-GAAP operating expenses when comparing Q3 2024 of $44 million to our Q1 2025 outlook of $42 million. We look forward to providing further updates regarding these initiatives in forthcoming quarters. With that, I’ll turn the call back to Donald, for his closing remarks.

Thanks, Raja. As we close out 2024, indie’s competitive position continues to strengthen through our focused execution and expanding technology leadership. While navigating temporary industry dynamics, we are prepared for a transformative 2025 with multiple growth catalysts including our flagship radar program moving to production and vision processor ramps at major global OEMs. Our compelling and uniquely differentiated product offering underscores indie’s strong position to deliver long-term growth above market forecasts, ensuring we are the semiconductor port of call for automakers and Tier 1s globally. That concludes our prepared remarks. Operator, please open the line for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Suji Desilva with Roth Capital Partners. Please proceed with your question.

Hi, Donald, Raja, and Mark. Maybe you could talk first about the second half 2025 ramp, I think some new products coming on. Which of those products do you expect to have the most impact on incremental growth out of the ones that will be coming online, the programs and products in the second half of 2025?

Well, we have multiple products ramping in multiple different spaces as we mentioned in the prepared remarks. The larger ones that we always highlight of course the Vision products are high ASP and so relatively small volume has a big impact on the revenue. We expect to see the first revenue from our Radar product also. But in addition to that, there are many products in the user experience space which all contribute. So, we feel that we have a very nice pipeline, which is now already in many cases beginning to ramp or has even begun to ramp and we feel generally pretty good about what’s going to happen in the second half of the year.

Okay. All right. And Donald, specifically on the Corner Radar program, I know you talked about $1 billion lifetime value. What’s the shape of the initial years of, few years of ramp into that run rate starting the second half? How do we think about the first few years as we kind of track toward that $1 billion lifetime value materializing?

Well, it will ramp over an extended period that our multiple OEMs through a Tier 1 who will benefit from the technology and we will benefit from the revenue. I’d expect a ramp through ‘26, ‘27 even into ‘28 and actually even into ‘29. There will be a long window of new design wins that we’ll add. We don’t really sub-segments, so we don’t really talk about the general month-by-month and quarter-by-quarter and year-by-year ramp per product, but it is going to be very significant. And, the $1 billion lifetime value is maybe even a little bit on the conservative side.

Okay. Appreciate that color, Donald. Thanks.

Thank you.

Thank you. Our next question comes from the line of Craig Ellis with B. Riley Securities. Please proceed with your question.

Yes. This is Mayur Popuri on for Craig Ellis. I wanted to ask about kind of the OpEx management program that you guys have going on. Of course, you’ve resulted I think a $2 million reduction into Q1 and you said that you’re going to kind of keep working on this. Should I assume that the bulk of these OpEx management reductions have already happened into Q1 or is this something that is kind of just getting started and it’s going to be more aggressively throughout the rest of the year?

Hey, Mayur, this is Raja. Yes, definitely more to come on that. I mean, just a couple of reference points here. Q4 OpEx was $43.4 million, right. We provided guidance for Q1 at $42 million so that’s $1.4 million sequential improvement. And from here, I expect to see $1 million to $2 million in run rate reductions as we approach the second half late 2025.

Okay. Yes. Thank you. And just sort of shifting gears now, I wanted to ask about kind of the impact of geopolitics and all these tariffs kind of going on at the same time. Are these impacts sort of necessarily short-term? Are they sort of being felt in kind of maybe the first and second quarters and not really affecting long-term design-ins? Or are there some broader challenges to design-ins in say, a market like China?

At this point, I would say the turbulence is short-term because the nature of the tariffs and how they’re going to be imposed are still not fixed. The threat of what could happen is causing some short-term uncertainty and causing certain OEMs particularly to pause some of their planning processes in case they have to relocate the geography of where they actually produce things. How things work with China in the long term really kind of depends on their reaction to what might happen. All that being said, for our supply chain, we manufacture in China for China and we manufacture for outside of China. So, we should be all set in that sense. When the modules manufactured in China were placed under tariffs under the last Trump administration, our Tier 1 customers were able to move the production to other geographies. So, we kind of went through that already. At this point, it is very much a short-term impact we see. Long-term implications we’re not 100% sure about yet, but at this point, it doesn’t seem that it would directly affect us.

Okay. Thank you so much.

Thank you. Our next question comes from the line of Cody Acree with the Benchmark Company. Please proceed with your question.

Thanks guys for taking my questions. Let me start Donald with earlier this or last week I guess with ADI’s comments about an improving macro. Any comments or if you’ve been able to look at their comments, I guess, as they’ve talked about a healthier inventory and maybe a better macro demand curve, which seems to be a bit contrary to what you’re seeing here?

Yes. I mean, I think the feedback from our peers has been very mixed and very varied. You can find commentary from others, which would contradict what they’re seeing. We can only really comment from our own perspective. For sure, inventory levels have significantly improved for us. And but that being said, the macro environment is still choppy. The tariffs are just one aspect of the backdrop that’s causing uncertainty in the market. I mean, we cited the example of the F-150 refresh being delayed by one year. These things are generally not helping. And we still expect a fairly muted Saar for the automotive market for this year, which we’d already planned into our guide.

I guess, Donald, it doesn’t sound like you have a lot of confidence that this macro environment is likely to improve. It doesn’t sound like the tariffs are likely to come to any kind of conclusion anytime soon. If the inventory is not the major issue, if the macro is a lingering problem, what does this say for the balance of your ‘25 visibility that sounds like it has deteriorated in the last 90 days?

Not specifically with the exception of the tariffs. We saw some slower ramps for our new product introductions through Q1. But we still remain very confident and very optimistic and very positive about the outlook for the remainder of 2025. We have a lot of things in the pipe, which are going to contribute materially to the revenue as we move through the year. So generally speaking, we still feel very good about it. And I think we’re consistent in saying that we weren’t expecting the macro to significantly recover through ‘25 in our previous comments and outlooks.

All right, great. Thank you, guys.

Thank you. Our next question comes from the line of Grant Joslin with UBS. Please proceed with your question.

Hey, guys. Thanks. Could you talk a little bit about what you’re seeing by geography in more detail? Are there any areas where channel inventories are in relatively better shape and you’re seeing a little more favorable trends? And then the commentary about policy uncertainty was mostly U.S. focused, but are you also seeing uncertainty in Europe given the portfolio emission standards or in any other geographies you would call out? Thanks so much.

Well, taking the last one first, I mean, I would say in Europe, the concern and disruption in the market there is really due to some of the large European manufacturers losing share to Chinese manufacturers in one of their most profitable markets. And that’s caused knock on effect and some restructuring in some of those companies which have been real publicized. The macro events from the U.S. focused stuff is very significant for us. So, we have to make sure that we have mitigation plans in place for that because the U.S. has been largely a home field market for us. We’ve always traded well in Detroit. But, as regards inventory in the channels, as I said before, we actually from our perspective, we can only comment really on what we see our inventory being in the channels and we think most of that has reduced. There are still some isolated pockets where some inventory still exists. We’ve seen some relative strength over the last couple of quarters in the China market, although there was some seasonality also in the first few weeks of this year, which we also had to work through. But nothing specific that I could pick out about inventories, saying that one of the areas is particularly worse for us than any other.

Thanks. And then if I could have one follow-up on the model. Contract revenue was a little bit stronger in Q4 compared to prior quarters and I think that helped gross margin a little bit. So, could you talk a little bit about your expectations for that for 2025 or for 1Q? Thanks.

Yes, sure. So yes, contract revenue has been relatively flat. And if you look, the history of contract revenue has been coming down over time. And I think that trend will continue as we increasingly focus on standard products and less on custom ASICs.

Great. Thank you.

Thank you. Our next question comes from the line of Anthony Stoss with Craig-Hallum Capital Group. Please proceed with your question.

Hi, guys. Donald, I want to follow-up on the Radar launch. I think it had been planned kind of mid this year. Now you’re saying late this year. When you take a step back or let me just follow-up on that for a second here. Did something change that pushed it from kind of Q3 to Q4? And then also when you take a step back and look at Bosch, [Vikasa] (ph) and the radar win, when they launch over the first 12 months, are they still kind of the expected revenue that you had thought they’d better have they shrunk?

So nothing has changed in the programs. We’re still on track exactly to the same schedule that we were a quarter ago for radar. And indeed the other programs, we’re not really into the deep part of the ramp yet to know for sure what the volumes are going to be. But at this point, we still feel confident that they’re going to drive significant revenue. As they sell through into the OEMs, we see constant design wins on a per model basis with their end customers, which are only adding to the pile. So if anything, we’re seeing positive momentum in that space.

And then a follow-up for Raja, on the gross margin expectations late this year. I think you guys have been targeting 55% for the December. With things kind of slowing a bit here, do you still think you can attain that 55% gross margin level?

Yes. I mean, we guided 49% to 50% for Q1 and that’s really just a reflection of our expectations for product mix in Q1 and contract revenue kind of ticking down as a percentage of total. The good news is as the year progresses, we are going to have revenue incremental revenue growth and contributions in the ADAS space and those are all highly accretive to our corporate average gross margins. So those will definitely help. Whether we get 55% exiting 2025, I mean that remains to be seen, but we’ll definitely see incremental improvements from here.

All right. Thanks guys.

Thank you. Our next question comes from the line of Jon Tanwanteng with CJS Securities. Please proceed with your question.

Hi, this is Will on for Jon. How are you positioning to mitigate the impact of potential tariffs? Thanks.

So we don’t see tariffs being levied necessarily on our products as they go to the Tier 1s for conversion into modules. Really what we’re seeing is a knock on effect on the uncertainty of the planning capability of the OEMs by virtue of the fact that they are having to anticipate tariffs on either raw materials or between geographies and that’s causing them to consider the location of where they may manufacture things. So it’s more of a knock on effect rather than a direct impact of our products are 20% more expensive or 20% less competitive.

That’s all for me. Thank you.

Thank you. And we have reached the end of the question-and-answer session. And therefore, I will now turn the call back over to Donald for closing remarks.

Thanks very much everybody for your time, and see you at the investor conferences through the remainder of the quarter.