indie Semiconductor - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 revenue was $58.0M, up 7.5% q/q and at the midpoint of guidance; Non-GAAP gross margin held flat at 50.4%; Non-GAAP loss per share improved to $0.07 as Non-GAAP operating loss narrowed to $14.2M.
• Q1 2025 guidance: revenue $52.5–$57.5M (midpoint $55M), down 5.2% q/q but up 5.1% y/y, with Non-GAAP gross margin of 49–50%; OpEx targeted at ~$42M, net interest expense ~$1.3M, and ~($0.08) EPS on ~211M shares.
• Management highlighted 2H 2025 ramps as key catalysts (Vision processor wins at a large Korean OEM and multiple Chinese OEMs; 77GHz Corner Radar production later 2025; 120GHz in-cabin radar samples), with ADAS programs “on track” for initial volume shipments in 2H 2025.
• Liquidity strengthened: the company issued $218.5M 3.5% 2029 converts and ended Q4 with $284.5M in total cash; capped call implies an effective strike around $8.06, enhancing flexibility for M&A and operations.

What Went Well and What Went Wrong

What Went Well

• “In Q4, indie delivered growth despite a challenging market backdrop,” with revenue at $58.0M and Non-GAAP GM 50.4% (flat q/q) at the midpoint of outlook.
• Strategic/technical momentum: Vision processor design win at a large Korean OEM; multiple China Vision wins; validated 120GHz in-cabin radar samples; ADAS programs on track for 2H25; ASIL-D certification for an electrification ASIC.
• Cost discipline: Management initiated OpEx actions driving a $2M run-rate reduction comparing Q3’24 to Q1’25 outlook; Q1 guide implies OpEx ~$42M with R&D ~$31.5M and SG&A ~$10.5M.

What Went Wrong

• YoY top-line pressure: Q4 revenue fell to $58.0M vs $70.1M in Q4’23; YoY Non-GAAP GM compressed to 50.4% from 52.7%; GAAP net loss widened to $35.3M vs $14.6M in Q4’23.
• Macro/tariffs uncertainty: management cited accelerated uncertainty, inventory/demand issues, and potential cross-border tariff friction (example: F-150 refresh delay) weighing on near-term ramps.
• Q1 2025 ramps slower than anticipated: guide implies a 5.2% sequential decline to $55M midpoint due to market uncertainty and ramp timing.

Transcript

Operator (participant)

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.

Ashish Gupta (Head of Investor Relations)

Thank you, Operator. Good afternoon and welcome to Indie Semiconductor's fourth quarter 2024 earnings call. Joining me today are Don McClymont, Indie's co-founder and CEO, Raja Bal, Indie's CFO, and Marc Tyndall, head of corporate development and investor relations. Don 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've been 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 and 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 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.

Donald McClymont (CEO)

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 among 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 lead 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-cabin 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 customer's 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 in the fourth quarter an in-house optical component integration capability for those customers needing turnkey photonics 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 2x-3x this 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 our discussion of our Q4 results and Q1 outlook.

Raja Bal (CFO)

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-$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%-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 today 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 this initiative in forthcoming quarters. With that, I'll turn the call back to Donald for his closing remarks.

Donald McClymont (CEO)

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.

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we pull for questions. Our first question comes from the line of Suji Desilva with Roth Capital Partners. Please proceed with your question.

Suji Desilva (Managing Director and Senior Research Analyst)

Hi, Donald, Raja, and Marc. 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'll be coming online, programs and products in the second half 2025?

Donald McClymont (CEO)

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.

Suji Desilva (Managing Director and Senior Research Analyst)

Okay. All right. And Donald, specifically on the corner radar program, I know you talked about a billion-dollar lifetime value. What's the shape of the initial years of a 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 billion-dollar lifetime value materializing?

Donald McClymont (CEO)

It will ramp over an extended period. There are 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 2026, 2027, even into 2028, and actually even into 2029. There'll be a long window of new design wins that we'll add. We don't release subsegments, 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 billion-dollar lifetime value is maybe even a little bit on the conservative side.

Suji Desilva (Managing Director and Senior Research Analyst)

Okay. Appreciate that color, Donald. Thanks.

Operator (participant)

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

Raja Bal (CFO)

Yeah. This is Mayur Pupuri on for Craig Ellis. I wanted to ask about kind of the OpEx management program that you guys have going on. Of course, you realized, I think, a $2 million reduction in Q1, and you say 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 in Q1, or is this something that is kind of just getting started and it's going to be more aggressively felt throughout the year?

Hey, Mayur, this is Raja. Yeah, 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 a $1.4 million sequential improvement. And from here, I expect to see $1 million-$2 million in run rate reductions as we approach the second half, late 2025.

Mayur Popuri (Senior Research Associate)

Okay. Yeah. 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 wins, or are there some broader challenges to design wins in, say, a market like China?

Donald McClymont (CEO)

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 is 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 outside of China 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.

Mayur Popuri (Senior Research Associate)

Okay. Thank you so much.

Operator (participant)

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

Cody Acree (Equity Research Analyst)

Thanks, guys, for taking my questions. Let me start, Donald, with earlier this last week, I guess, with ADI's comments about an improving macro. Any comments 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 contra to what you're saying here?

Donald McClymont (CEO)

Yeah. 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. 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 SAR for the automotive market for this year, which we'd already planned into our guide.

Cody Acree (Equity Research Analyst)

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 2025 visibility that sounds like it has deteriorated in the last 90 days?

Donald McClymont (CEO)

Not specifically. With the exception of the tariffs, we saw some slower ramps for our new product introduction 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 2025 in our previous comments and outlooks.

Cody Acree (Equity Research Analyst)

All right. Great. Thank you, guys.

Operator (participant)

Thank you. Our next question comes from the line of Graham Johnson with UBS. Please proceed with your question. I'm sorry. Give me one second here. I apologize. Graham, you may proceed to ask your questions.

Graham Johnson (Managing Director)

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 Euro emission standards or in any other geographies you would call out? Thanks so much.

Donald McClymont (CEO)

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 well 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 to inventory in the channels, as I said before, 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 inventory, seeing as one of the areas is particularly worse for us than any other.

Graham Johnson (Managing Director)

Thanks. And then if I could have one follow-up on the model contractor revenue is 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.

Ashish Gupta (Head of Investor Relations)

Yeah, sure. So yeah, 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.

Graham Johnson (Managing Director)

Great. Thank you.

Operator (participant)

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

Anthony Stoss (Senior Analyst)

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, Ficosa, 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 been, or have they shrunk?

Donald McClymont (CEO)

No, nothing has changed in the programs. We're still on track exactly to the same schedule that we were a quarter ago for radar. 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.

Anthony Stoss (Senior Analyst)

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

Ashish Gupta (Head of Investor Relations)

Yeah. I mean, so we guided FIP 49%-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 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.

Anthony Stoss (Senior Analyst)

All right. Thanks, guys.

Operator (participant)

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

Will Gildea (Equity Research Associate)

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

Donald McClymont (CEO)

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 relocation of where they may manufacture things. It's more of a knock-on effect rather than a direct impact of our products are 20% more expensive or 20% less competitive.

Will Gildea (Equity Research Associate)

That's all for me. Thank you.

Operator (participant)

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

Donald McClymont (CEO)

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

Operator (participant)

Thank you. This concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.