Q4 2024 Indie Semiconductor Inc Earnings Call
Speaker Change: [music].
Yeah.
Speaker Change: Good afternoon, and welcome to indeed, Semiconductor's fourth quarter 2024 earnings call.
At this time all participants are in a listen only mode.
Speaker Change: 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.
Speaker Change: Thank you operator, good afternoon, and welcome to any semiconductors fourth quarter 2024 earnings call. Joining me today are Dominic climate and these co founder and CEO, Roger ball, any CFO and Mark Tyndall head of corporate development and Investor Relations Donald will provide opening remarks and discuss business highlights.
Speaker Change: Followed by Rogers, a review of <unk> Q4 results and Q1 outlook.
Speaker Change: Please note that we'd be making forward looking statements based on current expectations and assumptions, which are subject to risks and uncertainties.
Speaker Change: These statements reflect our views only as of today and should not be relied upon as representative of our views.
Speaker Change: As of any subsequent date.
Speaker Change: These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.
Speaker Change: Our 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.
Speaker Change: 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.
Donald: And can be found on our website at Www Dot Indeed, Inc. I will now turn the call over to Donald.
Donald: Thanks, Ashish and welcome everybody. Let me first have your financial performance within the context of the overall automotive market environment before focusing on India business achievements.
Donald: During the fourth quarter of 2020 for India 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.
Donald: Last quarter I highlighted the uncertainty in the automotive market in the near term challenges impacting the automotive industry. This market context did not meaningfully change through the fourth quarter. That's the sequential growth in our Q4 results demonstrated in these resilient business performance. However in recent weeks market uncertainty is actually accelerating.
Donald: And pending tariffs have exacerbated the challenging market situation, adding to the ongoing inventory and end customer demand issues traditional manufacturers can 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, <unk> recently told suppliers.
Donald: But the update for their mainstay F 150 model range scheduled for 2027 will now be delayed to 2028 as a result.
Donald: That said the long term megatrends of Adas and Kevin user experience in electrification do remain very strong in India is ideally positioned to capitalize on those markets.
Speaker Change: 2025 will be an important year for Andy as we begin realizing the benefits of our multiyear investments across our product portfolio with multiple ramps in power delivery in car networking ultra sorting and Trudeau detection vehicle access vision based driver an occupant monitoring and our key corner radar program later in the year.
Speaker Change: Spoken at length about the key drivers for these mega trends previously principally global regulation for vehicle safety reduced emissions and an accelerating consumer desire for more immersive and cabin user experiences. The key takeaway is that India is unique amongst its peers with its ability to deliver outsized market growth across these megatrends by lever.
Speaker Change: Aging a class, leading highly differentiated and diverse product and technology portfolio.
Speaker Change: Now, let me share some of the notable business progress, which we achieved in the fourth quarter, our vision products targeting multiple Adas applications continued to gain strong traction with multiple global customers I'm excited to share that our flagship <unk> vision processor was recently selected for both front sensing an occupant monitoring.
<unk> by a large Korean OEM for a new E vehicle platform starting production in 2027. Additionally, we had several design wins for <unk> in China for our multichannel sensor applications <unk> low power low latency and fast initialization capabilities set us apart from incumbents for.
Speaker Change: <unk>, which are now rapidly growing in popularity with China Oems.
Speaker Change: 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 structure tier one led system validation production ization phases with the first production commencing later this year.
Speaker Change: Turning to our flagship 77 gigahertz radar program, our lead customer continues to successfully progress through their production validation and remains on track for a production launch with multiple Oems. The initial shipments will begin in late 2025. Additionally, I am pleased to share that engineering samples for a 120 gigahertz radar solution and carbon.
Speaker Change: Occupant monitoring applications have recently been received and tested and we have already successfully demonstrated these two multiple lead customers eliciting extremely positive feedback. According to S&P global mobility ultrasonic in radar based automotive sensing will represent a $6 billion market opportunity in 2029 up from 4 billion.
Speaker Change: 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 on the innovation of integrated antennas, India as a clear leader in the market, allowing us to address not only the automotive segment, but also emerging industrial mobility applications looking at.
Speaker Change: Our medium term future, we see ever growing applications for our automotive products, particularly vision radar and lidar and industrial spaces, including robotics and manufacturing automation, which we plan to exploit.
Speaker Change: 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.
<unk> Asos D as defined by the ISO standard. This certification is a testament to indeed 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 highly.
Speaker Change: And the ability to deliver the most demanding of applications.
Speaker Change: Finally, our photonics business continues its class, leading product innovation and the Lidar field announcing the fourth quarter and 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.
Speaker Change: <unk> wavelength stability and spectral purity, which require very high brightness color reproducibility and contrast ratio.
Speaker Change: <unk> challenging market conditions, the mega trend driven vehicles semiconductor content growth will easily outpaced vehicle production driving the average semiconductor content per vehicle in 2025 beyond $1000 and two to three times its value for premium vehicles and E vehicles in this context with our unrivaled product portfolio, India remains incredibly well positioned to be.
From the semiconductor value over the long term M&A has always been unimportant 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 Roger for a discussion of our Q4 results and Q1.
Speaker Change: Okay.
Roger Ball: Thanks, Donald despite the challenging backdrop, indeed delivered strong execution in 2020 for growing revenue sequentially through the year, while maintaining healthy gross margins above 50% our fourth quarter revenue grew seven 5% sequentially to $58 million consistent with the midpoint of our outlook and demonstrating continued outsized growth in our <unk>.
Roger Ball: Market non-GAAP gross profit was $29 2 million or 54% 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 of $43 4 million consistent with our outlook as a result, our fourth quarter non-GAAP.
Roger Ball: Operating loss was $14 2 million, an improvement of 16% sequentially with net interest expense of $1 2 million or net loss was $15 4 million and loss per share was <unk> <unk> on a base of $205 7 million shares.
Roger Ball: 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 three 5% and an effective strike price of $8 six after.
Roger Ball: Taking into account the cap call feature.
Roger Ball: 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 move.
Roger Ball: Moving to our outlook as.
Roger Ball: As we look to 2025 were generally positive as we see significant growth drivers from our new product launches in the second half of the year and beyond however, we recognized market uncertainties exist around inventory levels.
Speaker Change: Chris and the broader macroeconomic environment, which present heightened industry headwinds impacting the slow production ramps. Consequently in Q1 2025, we expect to deliver revenue within the range of 52, and a half to $57 5 million or $55 million at the midpoint down 5% sequentially, but up.
Speaker Change: 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.
Speaker Change: 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 eight <unk> net loss per share.
Speaker Change: 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 that we had initiated and all.
Speaker Change: 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 dollars 24 up $44 million to our Q1 2025 outlook of $42 million, we look forward to providing further updates regarding this initiatives and forthcoming.
Speaker Change: Quarters with that I'll turn the call back to Donald for his closing remarks. Thanks.
Donald: Thanks, Roger as we closeout 2024, and these 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 ramp at <unk>.
Donald: Global Oems are compelling and uniquely differentiated product offering underscores <unk> strong position to deliver long term growth above market forecasts, ensuring we have the semiconductor port of call for automakers and tier ones globally that concludes our prepared remarks operator. Please open the line for questions.
Donald: Thank you we will now be conducting a question and answer session.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue. You May press starts to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the correct.
Speaker Change: One moment, please while we poll for question.
Speaker Change: Our first question comes from the line of Sushi de Silva with Roth Capital Partners. Please.
Speaker Change: Proceed with your question.
Speaker Change: Hi, Donald Raj M work, maybe you could talk first about the second half twenty-five ramp I think some new products coming on which one which those products do you expect.
Speaker Change: We 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 of 'twenty five.
Speaker Change: Well, we have multiple products ramping in multiple different spaces as we mentioned in the prepared remarks.
Speaker Change: 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 and we expect to see the first revenue from our radar product also.
Speaker Change: But in addition to that there are many products in the user experience space, which will contribute so.
Speaker Change: We feel that we have a very nice.
Speaker Change: <unk> pipeline, which is now already in many cases.
Speaker Change: Beginning to ramp or has even begun to ramp and we feel generally generally pretty good about what's going to happen in the second half of the year.
Speaker Change: Okay.
Speaker Change: Alright, and Donald's specifically on the corner radar program I know you talked about $1 billion of lifetime value.
Speaker Change: 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 how do we think about the first few years as we kind of track towards that billion dollar lifetime value materializing.
Speaker Change: Well.
Speaker Change: It will.
Speaker Change: Over an extended period that are multiple Oems or tier, one who will who will benefit from the technology and we will benefit from the revenue.
Speaker Change: I would expect.
Speaker Change: I ran through 'twenty six 'twenty seven even into 'twenty eight.
Speaker Change: And actually even in a 29%.
There'll be a long window of new design wins that will add.
Speaker Change: We don't really sub segments. So we don't really talk about the.
Speaker Change: The general.
Speaker Change: Month by month quarter by quarter and year by year ramp per product, but it is going to be very significant.
Speaker Change: And the.
Speaker Change: The $1 billion of lifetime value is.
Speaker Change: Maybe even a little bit on the conservative side.
Speaker Change: Okay I appreciate that color Donald thanks.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Craig Ellis with B Riley Securities. Please proceed with your question.
Mike: Yes. This is Mike.
Speaker Change: <unk> Macquarie on four for Craig Alice I wanted to ask about kind of the Opex management program that you guys have going on.
Speaker Change: Of course.
Speaker Change: I think a $2 million reduction.
Speaker Change: And into Q1, and you said that youre going to kind of keep working on this.
Speaker Change: I assume that the bulk of these opex management reductions have already happened in Q1 or is it something that is.
Speaker Change: Kind of just getting started and it's going to need more aggressively about the roster here.
Speaker Change: Hey, My ear. This is Roger yeah definitely more to come on that I mean, just a couple of reference points here.
Speaker Change: Q4, Opex was $43 4 million right. We provided guidance for Q1 at 42, So that's $1 $4 million sequential improvement and from here I expect to see.
Speaker Change: $1 million to $2 million.
Speaker Change: And run rate reductions as we approach the second half late 'twenty five.
Speaker Change: Okay, yes. Thank you.
Speaker Change: And just sort of shifting gears now.
Speaker Change: I wanted to ask about kind of the impact of of geopolitics.
Speaker Change: It takes and.
And all of these tariffs kind of going on at the same time.
Speaker Change: Are these impacts sort of necessarily short term are they are they started being felt and kind of maybe the first and second quarters and not really affecting long term design ends or are there some broader challenges.
Speaker Change: Does that answer and say a market like China.
Speaker Change: Hum.
Speaker Change: At this point I would say the turbulence is short term because the nature of the tariffs and how are they going to be imposed are still not fix the threat of whats what could happen as well.
Speaker Change: It's causing some short term uncertainty in clothing.
Speaker Change: Certain Oems, particularly too.
Speaker Change: Pause some of their planning processes in case, they have to relocate the geography of where they actually produce things.
Speaker Change: How things work with China in the long term.
Speaker Change: It really kind of depends on.
Speaker Change: There their reaction to what might happen.
Speaker Change: All that being said.
Speaker Change: Our supply chain and we manufacture in China for China, and we manufacture outside of China for for outside of China.
Speaker Change: We should be all set in that sense.
Speaker Change: When the modules manufactured in China, where <unk>.
Speaker Change: Under tariffs under the last Trump administration.
Speaker Change: Our tier one customers, where we're able to move that production to other other geographies. So we kind of went through that already.
Speaker Change: At this point is very much a short term.
Speaker Change: In fact, we see.
Speaker Change: Long term implementing implications were about a 100% sure about yet but at this point it doesn't seem that it would directly affect us.
Speaker Change: Okay. Thank you so much.
Speaker Change: Thank you all.
Speaker Change: Our next question comes from the line of Cody Acree with the Benchmark Company. Please proceed with your question.
Cody Acree: Thanks, guys for taking my questions.
Speaker Change: Let me start Donald with.
Speaker Change: Earlier this last week, I guess with Adi's comments.
Speaker Change: An improving macro.
Speaker Change: Any comments.
Speaker Change: Or if you've been able to look at their comments I guess.
Speaker Change: <unk> talked about a healthier inventory.
Speaker Change: And maybe a better macro demand curve, which seems to be a bit contrary to what you're saying here.
Speaker Change: Yeah, I mean, I think the feedback from from our peers is has been very mixed them very varied.
Speaker Change: You can find commentary from others, which.
Speaker Change: Would contradict what they're seeing.
Speaker Change: We can only really comment from from our own perspective.
Speaker Change: For sure inventory levels have significantly improved for us.
Speaker Change: And but that being said the macro environment is still is still choppy. The tariffs are just one aspect of.
Speaker Change: The backdrop that's.
That's causing uncertainty in the market I mean, we cited the example of the F 150 refresh being delayed by one year.
Speaker Change: These things are generally not helping and we still expect a fairly muted saar for the automotive market for for this year, which we'd already planned into our guidance.
Speaker Change: I guess Donald it doesn't sound like you have a lot of confidence that.
Speaker Change: This macro environment is likely to improve it doesn't sound like the <unk>.
Speaker Change: Tariffs are likely to come to any kind of conclusion anytime soon.
Speaker Change: If the inventory is not the major issue.
Speaker Change: If the macro is a lingering problem what does this say for the balance of your twenty-five visibility that sounds like it has deteriorated in the last 90 days.
Speaker Change: Hum not specifically with the exception of the tariffs.
Speaker Change: We saw some slower ramps for our new product introduction through through Q1.
Speaker Change: But we still remain very confident and very.
Speaker Change: Optimistic and very positive about the outlook for the remainder of 'twenty five.
Speaker Change: We have a lot of.
Speaker Change: Things in the pipe, which are going to contribute materially to the revenue as we 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 werent expecting the macro to significantly recover.
Speaker Change: 295.
Speaker Change: In our previous comments and outlooks.
Speaker Change: Alright, great. Thank you guys.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Grant Johnson with UBS. Please proceed with your question.
Speaker Change: Okay.
Speaker Change: I am sorry, one second here.
Speaker Change: Yes.
Speaker Change: Oh I apologize grant you May proceed to answer your questions.
Speaker Change: Hey, guys. Thanks could you just talk a little bit about what youre seeing by geography, and more detail or are there any areas where channel inventories are in relatively better shape and youre seeing a little more favorable trends and then the commentary about policy uncertainty, especially U S focused but are you also seeing uncertainty in Europe, given that portfolio emission standards or in any other geographies you would call out.
Speaker Change: Thanks, so much.
Speaker Change: And we're taking the last one first I mean, I would say in Europe.
Speaker Change: The concern on.
Speaker Change: Uh huh.
Speaker Change: And disruption in the market there is really due to some of the large European manufacturers, losing share to Chinese manufacturers and one of the most profitable markets.
Speaker Change: And that's caused knock on effect in some restructuring and some of them.
Speaker Change: Some of those companies, which have been well publicized.
Speaker Change: The.
Speaker Change: The macro events from.
Speaker Change: The U S focused stuff is very significant for us.
Speaker Change: So we have to make sure that we have mitigation plans in place for that because the U S has been largely a homefield market for us we've always traded well in Detroit.
Speaker Change: But as regards inventory and in.
Speaker Change: And the channels as I said before.
Speaker Change: We actually from our perspective, we can only comment really on what we see our inventory being in the channels that we think most of that has.
Has reduced there are still some isolated pockets, where some inventory so exists.
Speaker Change: 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 have to work through but.
Speaker Change: Nothing specific that I could pick out about inventory thing one of the areas, particularly worse for us than any other.
Speaker Change: And then if I could have one follow up on the municipal contract revenue is a little bit stronger in Q4 compared to prior quarters and I think that helps gross margin a little bit. So could you talk a little bit about your expectations for that for 2025 are for <unk>. Thanks.
Speaker Change: Yes, sure. So yes contract revenue has been relatively.
Speaker Change: Flat and if you look at the.
Speaker Change: The history of contract revenue has been coming down over time, and I think that trend will continue as we.
Speaker Change: Increasingly focus on standard products and less on custom Asics.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Anthony Stoss with Craig Hallum Capital Group. Please proceed with your question.
Speaker Change: Hey, guys.
Anthony Stoss: Donald I wanted to follow up on the radar launch I think.
Anthony Stoss: It had been planned kind of mid this year now you are saying late this year when you take a step back.
Speaker Change: Let me just follow up on that for a second here.
Speaker Change: Nothing changed that push it from kind of Q3 to Q4 and then also when you take a step back and look at.
Speaker Change: For Casa 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.
Speaker Change: So nothing has changed in the programs.
Speaker Change: So on track exactly to the same schedule that we were a quarter ago for radar.
Speaker Change: And indeed, the other programs.
Speaker Change: We were.
Speaker Change: We're not really into the deeper of the ramp yet to know for sure what what.
Speaker Change: The volumes are going to be but at this point, we still feel confident that theyre going to drive significant revenue.
As they sell through into the Oems, we see constant design wins on a per model basis with.
Speaker Change: With their end customers, which are only adding to the pile. So if anything we're seeing positive momentum in that space.
Speaker Change: And then a follow up for Raj on the gross margin.
Speaker Change: Expectations of 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 can attain that 55% gross margin level.
Speaker Change: Yes.
Speaker Change: We guided <unk> 49 to 50 for Q1, and that's really just a reflection of our expectation for product mix in Q1 and contract revenue kind of taking down as a percentage of total.
The good news is is that as the year progresses, we are going to have revenue incremental revenue growth and contributions.
Speaker Change: And in the Adas space and those are all highly accretive to our corporate average gross margins. So that those will definitely help whether we get 55 exiting 2025, I mean that remains to be seen but.
Speaker Change: We'll definitely see incremental improvements from here.
Speaker Change: Alright, thanks, guys.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Jon <unk> with CJS Securities. Please proceed with your question.
Will: Hi, This is will on for John how are you positioning to mitigate the impact of potential tariffs.
Speaker Change: Thanks.
Speaker Change: So.
Speaker Change: We don't see tariffs being levied necessarily on our products as they go to the tier ones for conversion into modules.
Speaker Change: Really what we're seeing is.
Speaker Change: <unk> effect on the uncertainty of Av.
Speaker Change: The planning capability of the Oems by virtue of the fact that they are having to anticipate tariffs on either raw materials are between geographies.
Speaker Change: And that's causing them to consider.
Speaker Change: Relocation of where they may manufacturer thing. So it is more of a knock on effect rather than a direct impact of our products are 20% more expensive are 20% less competitive.
Speaker Change: That's all for me thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: And we have reached the end of the question and answer session.
Speaker Change: Therefore now.
Ill turn the call back over to Donald for closing remarks.
Donald: Thanks, very much everybody for your time and see you at the investor conferences through the remainder of the quarter.
Donald: Thank you and this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Donald: Okay.
Donald: Yeah.
Donald: Yes.
Donald: [music].
Donald: Okay.
Donald: Okay.
Donald: Okay.
Donald: [music].