Q2 2022 indie Semiconductor Earnings Call
Good afternoon, and welcome to M D semiconductors second quarter 2022 earnings call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
In the interest of time getting questions. Please only ask one question and one follow up question.
As a reminder, this conference call is being recorded.
Now I'd like to turn the call over to Ashish Gupta with Investor Relations Mr Gupta Chief.
Thank you operator, good afternoon, everyone and welcome to any semiconductors second quarter 2022 earnings call. Joining me today are dominant climate <unk> co founder and CEO , and Tom Schiller, and CFO and EVP of strategy.
I will provide opening remarks and discuss the business highlights.
Tom's review <unk> second quarter 2022 results as all of our third quarter outlook.
Please note we are making forward looking statements based on current expectations and assumptions, which.
Which are subject to risks and uncertainties. Please.
These statements reflect our views only as of today and should not be relied upon as representative of our views of any subsequent date.
Statements are subject to a variety of risks and uncertainties.
Could cause actual results to differ materially from expectation.
For further discussion of the material risks and other important factors that could affect our financial results. Please refer to our risk factors in our recent annual report on Form 10-K for the fiscal year ended December 31, 2021, the other public reports filed with the SEC.
Finally, the results and guidance discussed today are based on certain non-GAAP financial measures.
For a complete reconciliation to GAAP. Please see our Q2 earnings press release, which was issued in advance of this call and can be found on our website at <unk> dot com with that I'll turn the call over to Donald.
Thank you Ashish and welcome everyone.
I am pleased to report that indeed exceeded top and bottom line expectations and delivered another record quarter in Q2.
Driven by robust broad based demand for our highly innovative auto Tech solutions.
Our outperformance versus the automotive industry reflects the strength of these key tier one and OEM partnerships, our differentiated product portfolio.
Underlying intellectual property and our World class organization.
I'm, especially proud of our team's operational resiliency and ability to scale above our commitments amid persistent global supply chain headwinds.
Specifically during the second quarter, we once again substantially outpaced our addressable markets and grew revenue of 181% year over year, and 17% sequentially to a record $25 8 million.
While expanding gross margin to nearly 49%.
As we will outline our design win momentum is accelerating across Adas user experience and electrification applications setting the stage for the establishment of Andy semiconductor has an auto tech powerhouse.
On the Lidar front, we extended our <unk> Soc development program and added additional customers during the quarter.
Fact, we are now working closely with four partners for this design phase as we absorb their inputs and implement their suggestions.
Syria is a truly unparalleled lidar solution given the degree of system integration encompassing DSP analog mixed signal and firmware functionality augmented by <unk> World class leaders and associated technology.
Leveraging all of these capabilities, we are uniquely enabling a complete 200 dollar boom.
80% less than current discrete architectures.
As a result, we believe India can capitalize this key three dimensional imaging technology, which is pivotal to enabling the future of autonomous driving.
At the same time radar is gaining widespread market deployment for Adas ranging from adaptive cruise control to blind spot detection to lean monitoring to pedestrian detection applications.
Turning to IHS, the semiconductor total addressable market opportunity for automotive radar is $1 $8 billion. This year growing to $4 $3 billion by 2027.
Competitively lidar is expected to grow from $150 million to $630 million respectively.
To be clear, we are heavily investing and intend to gain share within both of these modalities. In addition to ultra sound and computer vision.
But it's worth recognizing that a low lidar has received intense investor attention to high profile listings of a dozen or so of companies. It is a future growth vector well radar is a large silicon opportunity today.
As the radar IC market was over consolidated over the past decade.
Customers, who are seeking an alternative source with leading edge multi gigahertz RF <unk>.
Analog power management, and microcontroller based digital capabilities as well as scalability and strict adherence to all key quality standards.
This encouragement from the rationale for our recent acquisitions of <unk> radar design team and analog devices familiar with division, bringing together field proven radar solutions over 250 million years of cumulative development.
205 related patents and applications as well as world class mixed signal Soc capabilities, ultimately, enabling indeed to capture our largest strategic program whenever.
Switching gears within the user expedience product area during the quarter, we launched a dual channel USB power delivery IC reduces component count simplifies designs and enhances reliability of in cabin vehicle charging systems.
This breakthrough product becomes part of the next generation of enhanced user experience applications adjacent to our existing car plate products and as the automotive industry's most integrated USB PD firmware based programmable controller.
We commenced sampling in Q2 and have already multiple customers staging high volume production ramps for early next year.
Further we announced the formal opening of our Dresden, Germany Engineering Center of Excellence. We now have over 100 engineers in the European region. The second largest vehicle market in the world accounting for approximately 20% of global production.
And we are similarly intensely focused on our expansion efforts in Asia.
Recall, we announced that we launched a strategic presence in both Japan, and Korea 90 days ago.
Subsequently, we were able to secure wireless charging and advanced lighting design wins with major Japanese and Korean OEM brands, including Honda Hyundai Kia as well as sharpen in China.
These wins are significant given we have historically not had any foothold that Honda.
And we've been underrepresented at Hyundai Kia.
Given the massive sales channels, we are open for in these current and future product offerings.
We look forward to sharing our annual strategic backlog update next quarter.
And providing similar updates on new customer wins and product launches going forward.
Finally, and at a higher level the shift to electrification is accelerating amid the higher oil price environment and long term transition to cleaner technologies.
According to Cox automotive.
<unk> sales grew more than 75% in the first half of 2022.
While overall U S auto sales were down more than 17% over the same period.
In fact, according to a recent AAA survey, 25% of Americans say they plan on buying an electric vehicle is their next car purchase fares.
Further data from recurrent and automotive market intelligence firm as indicated that consumer interest in buying an electric vehicle is towards 70% since January particularly for younger generations and with only 5% penetration of new vehicle sales in the U S.
The shift has only just begun while Germany and the Netherlands are seeing significant increases in penetration with fully electric vehicles, and they're capturing 14% and 24% of respective new vehicle sales year to date through the end of June .
The electrification megatrend benefits, India and a few ways.
First we have strong relationships with an increasing number of strategic EV Oems and are gaining design win traction there.
Secondly, and more tangibly.
We are supporting the Tesco one of the largest European automotive tier ones.
And in EV specific application.
And third and more generally.
Our broader auto tech portfolio tends to gain a substantially higher attach rate to newly designed electric vehicles, given our degree of innovation and power efficiency critical to maximizing vehicle range.
Between our addressable Adas user experience in electrification applications.
<unk> forecasts average content per vehicle to increase from $500 today to up to $7000 in some luxury vehicles over the coming decade.
And our customer base and our product portfolios are perfectly aligned to capitalize on this deep content growth trajectory.
With that ill now.
And I will turn the call over to Tom for a discussion of our results and outlook.
Thanks, Donald Indeed delivered strong second quarter results once again, achieving the top end of our forecast range exceeding analysts' expectations.
In fact, Q2 represents our fifth consecutive quarter of outperformance versus planned post in its IPO last summer.
Revenue for the period was up 181% year over year, and 17% sequentially to a record $25 8 million.
Gross profit was $12 5 million translating into a $48.
6% gross margin up 650 basis points year over year, and 120 basis points sequentially and above our 48% guidance.
Operating expenses were $29 $5 million against our outlook for $30 million R&D.
R&D investments for $22 million as we accelerated product development.
While SG&A of $7 5 million supported our expanded sales reach and the last element of public company infrastructure, including our global ERP system for our enhanced scalability.
As a result, our operating loss was $17 million.
Interest and other expenses yielded 100000 and taxes were negligible.
In turn our net loss was $16 9 million with a loss per share of <unk> 11.
On a base of $148 7 million shares.
Any better than consensus estimates.
Turning to the balance sheet.
During the quarter, we invested $4 9 million in working capital, including $2 2 million for inventory.
To ensure supply and support of our stronger second half growth plan.
We licensed the key IP block for another $2 2 million.
Our capital expenditures were $1 3 million for additional lab equipment and expanded it infrastructure.
Finally, we made $6 million in deferred acquisition related payments to on semi and city semiconductor exiting the period with $164 $1 million in cash.
Looking forward based on our strong order visibility from new products and customer ramps, we expect to continue to substantially outpace in these addressable markets.
Specifically for the third quarter of 2022, we anticipate topline growth on the order of 140% to 150% year over year.
At the midpoint of this range and he will be on a roughly $120 million annualized revenue run rate and for the first time, we plan to deliver gross margin in the 50% range.
We are planning a moderate operating expenses were $23 million in R&D and $8 million of SG&A.
Below the line, we anticipate a pickup of 300000 of net interest income and no taxes.
Assuming 149 million shares outstanding we expect a net loss of <unk> 11 per share once again <unk> better than consensus expectations.
More importantly, given the depth of our design win pipeline demonstrated scalability and planned operating leverage as our revenue growth and gross margin expansion far outpace our cost structure we.
We are on track to reach profitability in the second half of next year, marking another key step towards achieving our target model of 60% gross and 30% operating margins by 2025.
On that note I'll turn the call back to Donald for his closing comments.
Thanks, Tom.
Or is Q2 was another solid quarter of performance for the Endy team.
Even with leading automakers in the U S Europe , and Asia reporting down unit volumes. During the first half of this year, we are delivering exceptional results and guidance far outpacing industry peers, which we expect to continue over the planning horizon.
Indeed, the next generation of automobiles are showcasing technologies focused on enhanced safety capabilities better in cabin features as well as more environmentally friendly powertrains with extended range.
Our differentiated portfolio of semiconductor and software solutions.
Our positioning Indy to gain a disproportionate share of what is fast becoming close to a $50 billion serviceable market opportunity for India.
We look forward to updating you along the way that concludes our prepared remarks, operator, let's open the call for questions.
Thank you Sir at this time, we will be conducting a question and answer session.
I would like to ask a question please crystal.
One on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
All participants using speaker equipment, it may be mistaken to pick up your handset before pressing the star Keith and just a reminder, please only ask one question and one for Christian one moment Keith will be powerful.
The first question comes from C. J P Silva from Roth Capital. Please proceed with your question CCG.
Hello, Donald Hello, Tom Congratulations on the progress here.
Thanks, So so I just wanted to kind of ask a general question I know you covered it but on the call, but the auto supply chain availability. What are you seeing here at the updated situation easing and just or not and just what the impact on India and these kind of immune to that dynamic that's what makes sense.
Well I mean generally speaking our progress is really defined by by share gains and content increases in the automobile space. So I mean, it's no secret that the unit volume is down but.
We've been able to write that out.
And meet our planned numbers as we set out in front of us.
We do see some spot areas in our supply chain, so that the input to our business. If you like easing certainly easier than it was a year ago.
And the output from our business.
Supply chain of our end customers and there are still some disruption also.
The so-called Goldman School phenomenon, which is really the key thing which is slowing.
Unit.
The shipments from from the Oems.
But as far as we can tell there's still no shortage of demand so nobody's immune to it but.
I think I think we've written the bumps pretty well.
Okay.
The demand in that great and then.
Caring for various.
Sensor companies that perhaps is it a focus on model year, 2006, which LTE plus L. Three which you could pull it back would be decisions being made in the second half of this year or next year or first half next year and ramping in 'twenty or what what what position what do you think randy's positioning among increasing sensing that would go into the LTE.
<unk> plus L. Three models, what can we expect in terms of your traction and penetration there.
You can assume it's extremely strong we've made heavy investments in oil sands modalities.
Which will be required for the various levels of.
Autonomy and Adas features.
We take a view that we.
We rightsize our products for each individual application so you'll find us.
And high end cars and also you'll find those in high volume cars were.
The features are deployed in sort of mid and lower tier tier models. Indeed.
We've gone through a lot of the selection processes already in the business that we've talked about publicly so we're on track to see those things deploy and in the timeframe that we specified when we when we came out with financials.
Sure.
And then maybe a question just I know you sort of put a press release out on the chip Zack can you just kind of summarize what you think that might mean for Andy you know versus the world Cree the chips that are being signed up.
And the government.
It's a good tailwind for for the whole industry and especially also for ourselves.
But our carve outs, who are of course, the focus is manufacturing, but there are carve outs, which are focused on.
While design also and we expect that given that our focus is very heavily centered around one of the U S. S. Key industries, we should be a good candidate to benefit from that so.
Yes, I mean for US we view it as a positive.
Thank you. The next question comes from Ross Seymore from Deutsche Bank. Please go ahead Ross.
Hi, guys. Thanks for let me ask a question congrats on the strong results.
I wanted to talk to us about the comfort you have with getting to the.
Breakeven flat profitability in the back half of next year, you guys have long set that as your target you've executed very very strongly to it I just wanted to see what are the primary bridges between here and there.
From the revenue side it looks like the revenue has to basically double from your third quarter. This year to your third quarter next year to get you in that ballpark range. What are some of the key drivers and your comfort behind those drivers to obtain that growth.
Yes.
The results speak for themselves, we're still executing to our plan and every quarter. We've made the correct amount of progress that we expected as we went and we have strong belief that that will continue to happen.
We have very good visibility of.
Our backlog and our outlook into <unk>.
That's a 223.
Youre right I mean, we have to double one more time, we've done it twice already so there is nothing that I can see in front of us that would inhibit.
That happening for us in <unk>.
Arms of the products.
It's very well diversified across basically the whole gamut of product portfolio.
Brought to market with.
Within that environment, we're pretty well diversified we're not depending on one customer one product.
With that in mind.
The risk is pretty well mitigated so we feel pretty good about it.
Great. Thanks for those details I guess, that's my one follow up one for you Tom on the gross margin just keeps marching higher I know thats part of the plan, but as we think about the ability to grow going forward.
What's the pace, we should think about there.
Yes, it's pretty linear it's driven by obviously our mix shift continues to improve we're seeing better second and third generation pricing.
And <unk>.
Product margins and then also as these newer higher value programs layer and we're benefiting from that as well.
So all of those dynamics get us there.
Perfect. Thank you.
Thank you. The next question comes from Anthony Stoss from Craig Hallum. Please proceed with your question Anthony.
Hey, guys my congrats nice execution, particularly on the guide as well for September .
I wanted to follow up on your comments about the new power IC USB PD controllers.
Youre lending customers pretty quickly can you maybe share shed some more light on why it's a breakthrough.
Why you are winning these these deals as quickly as you are and then I had a follow up after that.
Well.
Okay.
<unk> offers a level of performance, which wasn't previously available in an integrated product.
It's.
A coming together of our digital technology, our digital controllers or firmware based controllers and sort of embedded arm subsystems together with some pretty extreme power management to go along with that.
There is some very tricky problem to solve when you get to those power levels to charge up to 100 watts in some cases.
And it's been a very successful development for us Nobody's as integrated as we are and we're seeing that bear out and the customer reaction.
The backlog filling up.
Got it and then lastly, just in the press release and your prepared remarks, you talked about on Dave.
On day et cetera on the lighting design and wireless charging.
Can you discuss kind of what you expect time wise.
<unk> related is this I mean.
You said there were big contracts I'm just curious.
Okay.
They will contribute in 2023.
There'll be a ramp over a period of course, but.
What we're seeing in the market is in some cases, some acceleration of the design win flow, perhaps driven a little bit by some of the supply chain constraints.
And so yes, we do see.
That will be a faster time to revenue that were we're typically used to.
Okay.
Thank you. The next question comes from Cody Acree from Benchmark. Please proceed with your question Cody.
Yes. Thank you guys for taking my questions and congratulations on the progress.
Maybe just a follow up on the last question just the size or scale of the design wins that youre talking about.
Getting here and ramping into 2023.
Any color you can provide to that.
I mean, we typically don't release specific numbers, but they are material.
Okay.
Okay.
Yes.
And I guess also.
Chinese activity can you just talk about what's happening there for the year standpoint and.
What do you see happening in the overall China market.
I mean, the overall, China market is very buoyant.
Of course there.
The foreign joint ventures push we serve over there for companies such as Volkswagen and General Motors et cetera also.
Also the local companies.
A very buoyant.
Sort of portfolio. If you like of E vehicle companies, who are extremely hungry for four feature ads because in that market the sort of build in Brussels are really key in order to drive sales for them. So.
We see it as very buoyant at the moment, we see.
A fair bit of backlog coming from from that place across the board for a lot of our products.
And are you.
From a backlog standpoint constraints.
Limiting your performance.
I mean, not not as such.
<unk>.
The management of our supply chain has been pretty good through us.
You will recall from previous quarters.
Things were super tight we've managed to manage through that.
It hasn't been an easy task. So we've had to be on top of our game in order to do that you will have seen that we invested a little in inventory.
Quarter, two to mitigate some risk there, but at this point.
I think we're being pretty good.
Thank you. The next question comes from Craig Ellis from B Riley Securities. Please proceed with your question Greg.
Yeah, Thanks for taking the questions and congratulations on the momentum in the business guys. Donald I wanted to start following up on your comments that.
With Syria year now engaged with for our partners. So the question is this given.
Color a quarter ago, where you indicated that there was a pretty broad interest in empower. These four partners selected can you provide some color around the pace of advancement with each and what's the company's capacity to take on additional partners beyond these initial four.
Well I mean, we picked.
The most probable to providers revenue of course.
We did receive.
A large amount of interest in the product when it was launched and we have to be selective about who we work with.
So so basically we chose what we consider to be the.
Cream of the crop and would give us access to the largest volume design wins in the business win.
When they when they come to fruition.
We have an excellent team in place.
We do like to focus on.
Key execution as opposed to spreading ourselves pretty faint, but we can scale, if we need to and if we find opportunities which are compelling.
Yes.
From what you see so far and I know, it's early days in terms of.
Your engagement with customers, but how does the engagement so far.
Are you feeling with the ability to start shipping for revenue in the 2025 timeframe.
Yes, I mean its good.
It's a growing market developing as we go.
But at this point I think.
I mean really nothing has changed for us by way of the plan that we set out at the end of 2021.
We're marching towards that we haven't really had a lot of.
It kind of surprises in that sense at least from a negative perspective.
But we're really worried about so.
Bristol marching to the same client same pipeline that we set out two years ago basically.
Thank you very much Sir ladies and gentlemen, we have reached the end of our question and answer session and I would like to turn the call back to management for closing remarks. Thank you.
Well, thanks, everyone look forward to seeing you at the upcoming Investor events this quarter and see you at the same time same place in the quarters time.
Okay.
Thank you. This concludes today's conference call you may disconnect. Your lines at this time and thank you very much for your participation.
Yeah.
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Yes.
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Alright.
Yes.
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