Q4 2023 indie Semiconductor Inc Earnings Call

Cause it could cause actual results of differ materially from expectations.

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.

All year ended December 31, 20, twenty-two as well as other public reports with the S. C C.

Finally, the results and guidance discussed today are based on non-GAAP financial measures such as non-GAAP gross margin non-GAAP operating income loss.

<unk> net income loss and non-GAAP EBITDA. These metrics may exclude corresponding GAAP measures certain of the following items depreciation and amortization sure based compensation acquisition related expenses inventory cost realignments.

Gain or loss from change in fair values non-cash interest expense.

An income tax benefits are expenses.

Complete reconciliation to gap and the definition for the above items. Please see our queue for earnings press release, which was issued in advance of this call. It can be found out our website at www Dot N D. Send me Dot Com I'll now turn the call over to Donald.

Thank you Ashish and welcome everybody.

The N D team delivered another quarter of solid revenue and gross margin performance.

Tapping of a third consecutive year in which we have more than doubled our toppling once again massively outpacing our peer group and entering the unique distinction of being the fastest growing semiconductor company in the world based on our last two years of revenue performance car Morgan Stanley.

Despite the challenging macro backdrop in queue for we achieve record revenue delivering sales growth of 112% year over year, and 16% sequentially to just over $70 million with 50 basis points of gross margin expansion on a year over year basis to 52.7%.

We also substantially not or are operating loss to less than $1 million on an EBITDA basis.

While we navigate automotive industry weakness in the short term stemming from rising interest rates slowing in market car sales.

<unk> consumer transition to semiconductor content ridge electric vehicles and inventory rebalancing across the automotive industry are.

Our design when momentum has continued unabated and.

And reinforces our confidence and indeed business model.

I'm proud of a N D teams absolute relentlessness and the substantial progress we've made to date towards our financial goals in the face of these headwinds.

Entering 2024, we expect these dynamic to persist dumping in Q1, but with a recovery in Q2 and returned to strong growth by Q3 and Q4 of this year.

The context automotive markets are forecasted to slow after experiencing a strong 2023.

According to an updated S&P global assessment from last month, and 20 twenty-two light vehicle production totaled 83 million units up 7% year over a year.

About 20 twenty-three was up 9% to 90 million vehicles.

But S&P global is now, indicating the first signs of the market shrinking in this production year.

In particular, we are seeing real time weakness across the China E vehicle market as their luxury vehicles are are the seasonally adjusted annual rate came in at 20.6 million for January.

Don't versus 21.7 reported in December marking the fifth consecutive months of the claims [laughter] well the fundamental landscape for E vs over the medium and longer term remains robust.

Shorter term E vehicle industry trends are certainly deteriorated given reduced by or incentives concern overcharging infrastructure and the saturation of early adopters.

The shift in or near term outlook reflects the softness compounded by the cancellation of a high profile North American William Adas program, which you may recall was pushed out from last year through no fault of Indian.

Despite the setback it won't result in a permanent loss of revenue as we fully expect to participate in their next equivalent project.

Moreover, we've.

We've won substantial subsequent business with this way of leveraging the same indie vision product line, which will more than offset this loss and the medium term.

So while we are seeing this airport and border industry demand the strategic opportunity for indie remains unchanged and is enormous.

Particularly as empty as the unique intersection of vehicle safety systems sensor fusion and where their newest product developments artificial intelligence to.

Towards Realising, our vision of the uncomfortable car.

Accordingly, we will continue to prudently invest remain aggressive on taping a new products as soon as possible maintain are disciplined cost control approach that balance that against addressing ever increasing tier one and OEM demand for our innovative older Tech solutions, including each of these exciting new technologies.

While incremental investments hamper profitability in the immediate term.

They will enable us to maintain our steep growth trajectory over the long run.

[noise] during in these technology leadership, and adding to our strategic backlog.

To that end during the quarter, we expanded our automotive camera video processor portfolio with the launch of a highly integrated system on chip that enables precision performance sensing capability at the vehicles edge well supporting driver viewing.

The government regulators, new car safety assessors and consumers demand higher performance safety features automakers are increasingly seeking camera based Ada solutions that support volume scalability across their vehicle classes.

This requires a distributed processing approach divisions dancing with high levels of integration of low power consumption to meet the needs of mass market deployments again, according to S&P global shipments of automotive electronic control units incorporating vision based processing are expected to grow from 232 million units in 2022.

Two to nearly 400 million units by 2027 and based on our current engagements, we intend to capture a disproportionate share of this market.

We also continue to gain design when traction by securing major in cabin monitoring programs, leading automotive Oems, including B M. W.

Ford General Motors until you with them.

How's the global safety initiatives continue to evolve the demand for these monitoring system is intensifying positioning in cabin sensing solutions is critical elements to enable future automation features.

More recently, we entered into a strategic partnership with Dakota, a leading tier one supplier to bring AI based automotive camera solutions initially supporting two of the top five car oem's in the world and aimed at significantly enhancing vehicle safety.

Government regulates or the new car safety assessment programs are increasingly seeking to specify protection for vulnerable road users such as pedestrians and cyclists often referred to as V. R U, especially through backup and he met her applications.

Encap implemented the V. R U safety test protocol in 2020 and in the United States. The National Highway Transportation safety administration or Nitza.

Has this year proposed enhancements to the Encap protocol to provide consumers with information about crashworthiness and pedestrian protection of new vehicles.

As a result automakers are demanding camera based Ada solutions that provide not just passive viewing capability, but also intelligence answering to actively detect pedestrians via AI processing and taking corresponding action in.

In these upcoming generation of vision solutions incorporated proprietary unship neural processing hardware and software to enable real time data processing, such as object classification and detection of the vehicles edge, thereby offloading the central aid us compute processing requirements and alleviating the costs and power consumption of high speed data transfer across the.

[noise], leveraging picasso's near a decade long expertise as a high volume vision solution supplier in our field proven differentiated vision processing technology together, we can deliver breakthrough imaging an in camera object detection, particularly for challenging edge tensing applications.

Something for the first smart AI based camera solutions is set to commence later this year with volume production slated for 2025.

At the same time and just as importantly, I'm pleased to report that we have successfully sampled a radar baseband and mimic to our lead customer one of the largest contributors to our strategic backlog.

On track for a 2025 program round.

Shifting to use or expedience during the quarter, we launched new products, adding to our interior lighting and power management portfolios, leading global automakers to support Oems, increasing prioritization of a captivating in cabin environment.

Vehicles have become more than just a means of transportation morphing into a sophisticated environment equipped with an array of electronic devices and systems.

As a result, the need for reliable efficient and seamless power delivery has risen to the forefront.

Similarly, Williams are increasingly focusing on interior and exterior lighting solutions as it transcends just functionality within the modern vehicle, becoming a pivotal element of the use of expedience that shapes, the cabins ambiance and enhances visibility and safety.

Finally, and they electric vehicle area, we have extended our footprint of the leading north American vehicles, William securing two significant design wins in support of their future model years.

The two custom chipsets enable high speed smart networking within the vehicle.

In summary, despite the tactical market challenges, we're willing new programs and setting the stage for the next wave of above market growth towards sustained profitability.

I will now turn the call over to Tom for discussion of our queue for results and I would look.

Thanks Donald.

Revenue for the fourth quarter was up 112% year over year and up 16% sequentially to a record $70.1 million at the lower end of our guidance band and indicative of the week market environment, those still up more than tenfold within just three years.

Q for gross profit was $37 million translating into a 52.7 per cent gross margin.

50 basis points, you every year and consistent with our guidance.

Operating expenses were 39.4 million with R&D sequentially lowered at 29.4 million, reflecting a pause in tape out activity, well SG&A was down slightly quarter over quarter to $10 million.

And turn our queue for operating loss narrowed to $2.4 million versus a loss.

A 15.1 million in the year ago period.

Driven by higher revenue, improving gross margin and operating expense leverage.

Adding back $1.4 million depreciation our EBITDA loss was less than $1 million.

With net interest expensive 200000, or net loss was 2.6 million and we posted a one cent loss per share on a base of 181.6 million chairs again in line with our guidance and consensus estimates.

We exited the quarter with $151.7 million of cash and equivalents down $9 million versus Q3, primarily related to increase they are capex to expand our internal test capacity.

Partially offset by a decline in inventory.

Turning to our outlook for the first quarter of 2024, we expect any revenue to be up 38% year over year, but down 20% sequentially, reflecting seasonality and current industry softness with gross margin in the 52 per cent range.

In terms of operating expenses were planning for $34 million in R&D, driven by accelerated product development activities and 10 million of SG&A.

Below the wine, we anticipate 400000 of net interest expense and no taxes.

Assuming 186 million shares outstanding, including the full 7.7 million shares related to the retirement of 27 million warrants that we closed in November we expect an eight cent net loss per share.

From a full year 2024 perspective, we expect revenue to be in the 275 to 300 million dollar range up 29% at the mid point.

Based on our new program and design when pipeline, we expect key one to represent a trough quarter with top line recovering Q2, and a resumption of outsize revenue growth in Q3, and four yielding a profitability baseline on an EBITDA basis and the second half of this year ahead of our signal.

<unk> 2025 radar and vision ramps.

On that note I'll turn the call back to Donald first closing comments. Thanks.

Thanks, Tom.

In conclusion, we posted record Q4, and 20 twenty-three results demonstrating the strength of our business model through a challenging operating environment.

Well, so we can control the weather our strategic focus remains unwavering where.

We're building an absolute auto tech powerhouse with innovative ada's user experience and electric vehicles solutions positioning.

Positioning us to effectively navigate current market conditions.

Capitalized on the $48 billion serviceable opportunity, which is just ahead of us and most importantly to create great shareholder value.

That concludes our prepared remarks, operator, that's open the call for questions.

Thank you.

Ladies and gentlemen, leaving and I'll be conducting a question and answer session.

If you would like to ask a question. Please press stock and one on your telephone keypad.

A confirmation until one will indicate your line isn't the question queue.

You'll neighborhoods star and do if you'd like to remove your question from the queue.

All participants using speaker equipment, it may be necessary to pick up your handset before but I think this talkies.

Ladies and gentlemen, we would expect you to restrict to one question and one follow up question participant.

One moment, please while people for questions.

First question is from Fuji Desilva withdrawn M. Kim. Please go ahead.

Hi, Donald Hi, Tom So maybe you could provide some color on the the the demand weakness you're seeing if that's broadly across all geographies, where there's any geography color there and any specific color on the sort of the programs or applications that may be are being impacted EEV 90 V that kind of thought thank you.

Well, we're seeing that the overwhelming reason for the majority of it is just the inventory digestion.

Which is broadly across across the market.

We do see some specifics in the China you vehicle market.

Which.

Or or.

Or kind of the vanguard of what we saw coming across the market.

But but generally speaking, it's really abroad inventory correction that we're seeing.

Okay and.

And then to understand follow up on that you can talk about a program.

That I believe are canceled coming to the next program can you just clarify that and talk about what he was seeing kind of a broader trend of decisions and programs for maybe the model years, 25, 26, or seven being a delayed or or or you know pushed out or whether those decisions or continue to be made head of those those model ramps.

No.

To answer the last part of your question farce absolutely not this is one program Ah 50 that we're working on.

And it just happened to be a program, where there was an ambitious goals that for it and the engineering execution on the customer side, you know it didn't pan out for for their business schools. So.

It was a major program for them.

In this case I would say, it's something that very rarely happens in the automotive industry at all and even with us with a relatively smaller customer base. It's still an extremely rare thing. So it's it's for sure not a trained.

Okay. Thanks Donald.

Thank you.

Next question is from Craig Ellis would be writing Securities. Please go ahead.

Hi, This is <unk>, calling in for Craig Gallus, Thanks for taking my questions.

Provided a nice view on this local demand as you see it I was wondering if you could provide any color on how you're seeing.

The gross margin trajectory going forward.

Yeah. So we expect gross margin expansion from here. In fact this is just an air pocket in terms of market demand.

But as you've seen in the past we've done a very good job sequentially expanding margin and that just comes from improving mix and lowering costs, improving yields et cetera, and that's going to continue. So we expect after Q1 trough to begin to expand gross margin again towards 60%.

Gotcha, and similarly are you thinking about any opex lovers or would would that some of them might be something that we could expect to see.

He grow out of second quarter.

Okay.

Opex at this stage, we've reached critical mass so we're making tactical investments here and there to accelerate product development, that's happening in the current quarter, but from there it's a relatively flattish profile and that creates the operating leverage them too.

Profitability in the back half of this year and then of course beyond that towards our 30 per cent target model.

Thank you.

Our next question is from the line of Anthony stars with Craig Hallum Captains. Please go ahead.

Hey, guys, maybe if you can give us some color on kind of expected new programs coming in line Q2, Q3 Q for that gives you the confidence for kind of a steep ramp in Q3 and Q4 and then also it was my follow up probably for Ya Donald again, I think the the larger radar when your prior statements were Q4, where Q.

[noise] one of 2025 now you're seeing 2025 do you still expect it to be in Q1, 23, five or is that getting pushed as well.

No that's still remains on <unk> on track.

I'm in the process of semantics of of the notes that we made in the in the prepared remarks or nothing has changed in that respect.

In fact, we did announce that we had.

The sample these programs and as you know from a familiar experience in this market.

The back of the program is largely broken once you get the first silicon and the rest of it is really exit execution of of maybe more of the details are ramping into production. So we're we're pretty happy where where that program is right now.

And we do expect some material avenue from from that to come in on the schedule that we originally airlines.

In terms of what we're ramping romping across the board that are that are vision programs that are ramping that our user experience programs that are ramping throughout this year not right and of course that will be will be late this year and early next year, but yeah. I mean, it's still fundamentally across the board and all of the the others project areas that were that were.

Yeah. Thanks, guys were taking my questions I guess, given the magnitude of the decline in Q1, what is giving you confidence that that that you're going to see a ramp to support your your fiscal year outlook I guess <unk>.

What are you expecting sequentially as you put some through the year.

I mean, where we have programs romping through the year of course, which is Ah has been typical of us through our entire public existence and as I just mentioned in an answer to the previous question for sure.

We do expect the market to recover and I I think you will see that message coming from from multiple companies in the same space with us that they are seeing.

Through that period of recovery.

I mean in particular is in the market, we did see what I would describe as fairly dramatic in your pockets.

We've tried to be conservative in the way that we've we've guided Q1 and the net result, we're pretty confident about a recovery in queue too and a return to the to the plan and can see Q4.

And I guess Donald is that confidence banks by firm orders today, and I guess, what's the the flexibility and cancel the ability of those orders I guess, how much volatility are you building and your cue to expectations.

Well like I say, we've tried to build in as much conservatism as we possibly can I mean this.

Has been a fairly certain segments of fairly violent disturbance in the market.

But.

We do expect that with the recovery that we're seeing.

Coupled with a conservatism that we built and we feel we feel pretty confident about where we can get through in the second half and and Q2 into indeed.

Alright, Thank you guys.

Thank you.

Next question is from the line of John can one pay but C.

<unk> J S Securities. Please go ahead.

Hi, This is Justin on for John Thanks for taking the questions.

How does the updated outlook and packed your expectations for cash flow and your capital needs.

Well between now and what Donald just outlined in terms of the back half of the year Cashflow will probably will resemble our operating loss. So you can assume somewhere in the 35 to 40 million dollar range of cash usage.

Between now and then until we're beginning to generate cash that is.

And of course, we just exited with north of 150 million in cash.

So that leaves us with ample cushion.

Okay. That's helpful. I appreciate the color and then so I got one more can you talk about the scale of the wins that you have in Q4, and you know try to size them for us if any of them are significant.

Well the one that will weed singular is the the design win for <unk>, who are European base tier one and such.

Supply with this particular program two of the.

Largest European Oems.

Program that we've been working on for quite some time and.

But I wouldn't say it was the largest program that we have one in the history of the company, but certainly in the top five.

Okay. Thanks, a lot I appreciate the question.

Thanks.

Ladies and gentlemen, as there are no further questions that concludes the confidence of Indy 70 conduct Hill.

Thank you for your participation you may now disconnect your lines.

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