Q1 2025 Indie Semiconductor Inc Earnings Call
Anthony Stoss, Ross Seymore, Ashish Gupta, Craig Ellis, Donald McClymont
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Speaker Change: Good afternoon, and welcome to Indy Semi-Deconductive, first quarter 2025 earnings call. At this time, all participants are on the listen only mode. A question at the session will follow the formal presentation.
Speaker Change: As a reminder, this cost was being recorded. I will now turn the call over to Ashish Gupta Investor Relations. Mr. Gupta, please go ahead, sir. Thank you, operator. Good afternoon. Welcome to Indy Semi Conductors' first quarter 2025 earnings call. Joining me today are Donald McClymont, indie CEO and acting CFO , and Mark Tindall, out of corporate development and investor relations.
Speaker Change: Donald will provide opening remarks and discuss business highlights. Mark will then provide a review of these Q1 results in Q2 Outlook.
Speaker Change: Please note that we are making forward-looking statements based on current expectations and assumptions for subject to risks and uncertainties.
Speaker Change: These statements are fucked our views only as of today and should not be relied upon as representative above views as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results different materially from expectations.
Speaker Change: For material risks and other important factors that can affect our financial results, please review our risk factors in our annual report on Form 10K for the fiscal year ended December 31, 2024, 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.
Speaker Change: For a complete reconciliation to gap and the definition of non-GAAP reconciling items, please see our earnings press release which was issued in advance of this call and can be found on our website at www.indie.ink. I'll not turn the call over to Donald.
Donald: Thanks Ashish and welcome everybody. Let me first review our financial performance within the context of the overall automotive market before focusing on Indy's business achievements.
Donald: During the first quarter, indie achieved total revenue of $54.1 million, representing a relatively robust performance given the current automotive market sentiment.
Since our previous earnings call back in February
Donald: The global macroeconomic environment has changed dramatically. It's important to note upfront that the new U.S. trade policies and resulting tariffs on imported automobiles and vehicle parts, which were announced in early April , have had minimal direct impact on indie's operations to date.
Donald: Our Asian manufacturing partners ship very little directly to the US, and we maintain a globally diversified supply chain that provides significant resilience against such policy shifts. The only exception being some photonics components from our Canadian facility, which were marginally affected.
Donald: While our direct exposure is limited, tariffs are impacting overall market sentiment and creating uncertainty across the automotive industry.
Donald: Multiple OEMs have recently announced the reduction in vehicle production, temporary leoves or pose shipments to the U.S.
Donald: We expect other OEMs to follow. Consequently, we anticipate vehicle prices for US consumers may increase by several thousand dollars, which could ultimately lead to a drop in end vehicle demand.
Donald: While we are not fully immune, our diverse product portfolio and new product ramps should mitigate any broader market challenges.
Donald: Automotive Market Analysts, including S&P Global Mobility, are now forecasting a reduction in global vehicle sales of 1.3 million in 2025.
Donald: In the specific case of the US, imports of vehicles, engines and parts represent $458 billion in global trade, and the planned tariffs will impact over half of the vehicle sold in the US, with analysts forecasting that average US vehicle prices will increase by over 9% in 2025.
Speaker Change: I spoke last quarter about how 2025 will be an important year for India as we introduce new products, and our customers ramp our solutions across our multiple ADA sensing and user
Speaker Change: Despite the challenging market backdrop, we continue to secure new design wins across a global consumer-based leveraging our highly differentiated and innovative technologies.
Speaker Change: Notably, Vision and Radar design winds are on track to round production in the second half of 2025 and continue through 2026.
Speaker Change: Now let me turn to our notable business progress and key achievements during the first quarter.
Speaker Change: Edas is the major long-term focus for indie and a core driver of our future growth.
Speaker Change: Our engineering expertise and innovation across analog and mixed signal design and world leading in-house algorithmic expertise.
Speaker Change: sets us apart from our peer group, enabling an unrivaled product portfolio across all ADAS sensing modalities, including radar and vision. First, our flagship 77GHz radar solution is progressing well with excellent feedback from our lead tier one customer, with on-road testing results demonstrating compliance to all key performance specifications.
Speaker Change: North American, Chinese and European OEM feedback to our lead customer indicates the product has been extremely well received. Initial production orders and shipments by our customer with these OEMs remains firmly on track for late 2025.
Speaker Change: Equally important during the first quarter, momentum remains strong for our vision portfolio, featuring our class-leading proprietary image signal processing.
Speaker Change: Firstly, we secured a new design win for our flagship IND-880 processor with Valeo, a leading European Tier I, for NCAB and monitoring, including thermal sensing capability, for a North American OEM targeting production deployment in 2028.
Speaker Change: In addition, we were awarded an emitter design win for IND880 with a Korean OAM targeting trucks and buses with first on the road deployments commencing at the end of this year.
Speaker Change: Last quarter, I mentioned our growing success in China for vision applications such as emitter and in cabin monitoring.
Speaker Change: I'm pleased to report our traction continues with further wins for our GW5 Vision Processor, including at Mercedes China, with YF Tech, the largest emitter supplier in China, and an in-cabin monitoring win for BYD targeting production, starting in the fourth quarter of this year.
Speaker Change: And finally, our global partnership with Bosch continues. We were recently selected for an additional high volume in cabin monitoring deployment with Toyota.
Speaker Change: To emphasize the importance of the product lines, we anticipate that each of the radar and vision portfolios will generate well in excess of a hundred million dollars incremental annual revenue.
Finally,
Speaker Change: We highlighted last quarter that we see growing applications for our existing products in automotive adjacent segments, particularly in industrial, that we plan to exploit. And please to share that our Photonix group have already secured notable design wins for our existing high-performance laser products for industrial and quantum communications applications, which offer tremendous potential for the future.
Speaker Change: Challenging and dynamic market conditions which we cannot control have become part of doing business within the automotive market in recent times. What is key is that Indy has maintained a laser focus on developing market leading solutions and deep commercial partnerships to address the long term and substantial automotive semiconductor opportunity.
Speaker Change: And in this regard, I am pleased to share that India has now shipped greater than 500 million ships cumulatively since our inception.
Speaker Change: This is a fantastic testament to the incredible value our solutions bring to tier ones and OEMs alike, and to our global operations and customer support expertise.
Well, we expect sentiment to remain volatile.
Speaker Change: We continue to expect vehicle semiconductor content will grow strongly beyond today's average $1,000 per vehicle, propelled by global safety and emissions regulations and underlenting consumer demand for the best in cabin user experiences. Indies positioning as a supplier of compelling differentiated solutions to address the transformative automotive mega-throwns remains robust.
Mark Kendall: I will now turn the call over to Mark for a review of our Q1 results and Q2 outlook.
Mark Kendall: Thank you, Donald, and good afternoon everyone. In this first quarter revenue of $54.1 million increased 3.3% from a year ago, who was marginally below the midpoint of our revenue outlook, while the non-GAAP gross margin of 49.5% was within expectations.
Mark Kendall: R&D expense was $30.8 million with SG&A of $11.1 million, bringing total operating expenses to $41.9 million consistent with our outlook.
Mark Kendall: As a result, our first quarter non-GAAP operating loss was $15.1 million.
Mark Kendall: With next interest expense of $1.6 million, our net loss was $16.7 million and loss per share was $8.00 on a base of $211.5 million shares.
Mark Kendall: Turning to the balance sheet, we exited the first quarter with total cash, including restricted cash of $246.9 million, down from $284.5 million in the fourth quarter, reflecting a natural reduction of $37.6 million during the quarter.
Mark Kendall: Tash usage in the quarter was higher than normal, primarily driven by payment and collection timing related factors specifically $10 million related to accounts payable and $11 million for accounts receivable, which we expect will normalize.
Mark Kendall: Moving to our outlook, with current market uncertainties impacting the overall automotive environment for the second quarter of 2025, we expect to deliver. Revenue within the range of 50 to 53 million dollars or 51.5 million dollars at the midpoint. [inaudible]
Mark Kendall: Based on the anticipated product mix, we expect second quarter gross margins to be in the range of 48-50%
Mark Kendall: We expect off-ex of $39.8 million with approximately $29 million of R&D expense and $10.8 million of SGNA expense.
Mark Kendall: The lower the line, we expect net interest expense of approximately $1.8 million with no cash tax expense.
Mark Kendall: Assume the midpoint of the revenue ranges and with a base of 215.2 million shares we expect and each same net loss per share.
Mark Kendall: While our outlook for the second quarter is flat year on year and modestly, down sequentially, we remain confident in and committed to our innovation and growth objectives.
Mark Kendall: As Donald described earlier, the fundamental automotive semiconductor market trends are strong and persist despite the macro situation.
Mark Kendall: We continue to focus on ramping in the customers with innovative value-add solutions in particular for ADAS that allow them to bring differentiated technology to market while we maintain strong operational discipline. As always, we will remain nimble while navigating the current headwinds and emerge stronger better position to maximize in the market's tremendous inherent opportunity.
Mark Kendall: We mentioned on our last earnings call that we were in a review of our operating expenditure with the objective to reduce and accelerate our path to profitability.
Mark Kendall: Given the current uncertain automotive market environment, this mandate has increased in strategic importance.
Mark Kendall: We have now completed this review and just initiated the execution of a plan for a series of restructuring measures, where we will exit some of our lower margin and less attractive product lines in addition to other cost reductions across the company.
Mark Kendall: We expect to see initial benefits from lower effects in the second quarter.
Mark Kendall: Meaning for benefits in the third quarter with full reductions hitting the P&L in the fourth quarter where we expect to achieve a quarterly reduction of approximately 8 to 10 million dollars per quarter or approximately 32 to 40 million dollars on an annualized basis.
Mark Kendall: This reduced level of op-ex will allow us to reach break even of a revenue base of approximately sixty-five million dollars per quarter
Mark Kendall: However, I do not distress none of our strategic ADAS programs will be impacted by these restructuring actions
Mark Kendall: We will continue to invest across hardware design, software and marketing resources, ensuring both our key radar and vision programs will ramp on schedule at our global OEM customers through 2025 and 2026.
Mark Kendall: We believe prudent expense management, a healthy cash position and ramping programs position in the incredibly well to navigate current conditions and execute on the vast majority of our pipeline.
Mark Kendall: This balanced approach will support our return to a strong growth profile as design wins ramp through 2025 and beyond. With that, I'll turn the call back to Donald for his closing comments.
Mark Kendall: The global trade dynamics have become unpredictable and we have seen this manifest as a wait-and-see conservatism across our broad customer base.
Mark Kendall: However, despite current challenges, the fundamental trend of increasing semiconductor content in vehicles continues unabated
Mark Kendall: indie technology leadership and innovative and expanding product portfolio ensures that we are well positioned to emerge stronger from the current global trade and economic turbulence.
Mark Kendall: No other semiconductor company has a product portfolio as broad as Indies to meet the diverse needs of the automotive mega trends, and this empowers Indie to capitalize on the enduring market opportunity.
Mark Kendall: That concludes our prepared remarks. Operator, please open the line for questions.
Speaker Change: Thank you. We will now conduct 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.
Speaker Change: You may press star 2 if you would like to remove your question from the queue. For participants using speak equipment, it may be necessary to pick up your handset before pressing this star keys. Once again, that's star 1 at this time. One moment while we pull far first question.
Speaker Change: The first question comes from Craig Ellis, with B. Riley Securities, please proceed.
Speaker Change: Yeah thanks for taking the question and all the color on the call guys. Donald I wanted to follow up with the comment you made in your prepared remarks.
Speaker Change: of regarding vision and radar being on track to ramp in the second half of the year. One, I was hoping you could provide a little bit more qualitative color on the breadth of the ramp and the types of programs that you might be involved in, but also
Speaker Change: Some quantitative color give us a sense for how significant that ramp in the back half of the year would be. Thank you.
Speaker Change: So, I mean, we have many minutes as we've spoken about it over several quarters.
Speaker Change: with many applications ranging from in-tabbing applications, provider monitoring, multi-pin monitoring, in-meters, and in the vision space. And now with our radar products, we're able to address world-forward facing encounter radars in that application.
Speaker Change: Each of these product lines that I mentioned, compared to Marx, have the strong potential to be significantly greater than a hundred billion dollars per year for us in each case.
Speaker Change: We've talked a lot about our strategic relationships with several Williams. We've called out to you in Bosch and prepared marks today and we are a little cautious as we look at it into the second hunt of the year because...
Speaker Change: That there has been turbulence in the market particularly the U.S. and European vendors.
Speaker Change: Strava, the market share with the increased competition coming from North China's peers.
Speaker Change: But that being said, we are making confidence in the peak of the ramp, tiling and steepness of the ramp is always a little hard to gauge but other than that we feel really good before we are with all of these movements.
Speaker Change: Got it, thank you, and then I'll ask the follow-up to Mark.
Speaker Change: The Operating Expenses are fully implemented, so can you please recap that? And then as we think about what that means for calendar 26 operating expense, not looking for guidance but just qualitatively
Speaker Change: How do we look at that base level of op-x versus what would go forward from 4Q? Thank you.
for Q4, approximately thirty-three minutes.
and then Flapshooter from the second half.
Sorry, it's a 2026, not a second half.
Ross Seymour: The next question comes on Ross Seymore with Delta Bank. Please proceed.
Ross Seymour: Hi guys, I just wanted to see the, I know the crystal ball is difficult into the second half of the year and the technology is good according to what you said for both radar and vision. Is the biggest wild card the slope of the curve, the volumes at the launch, and what are you seeing with your customers on that? Is it more the timing of the launch? Is it the volume of the launch? Is it both of them? I'm just trying to kind of gauge the aggregate uncertainty.
Ross Seymour: Yeah, I mean, I think it's exactly, as we said, it's loads steepness on the gradient of the run that is hard as a judge given the mark on certain things right now.
Ross Seymour: We're seeing the star points staying relatively fixed and the models that are talking to you in
Ross Seymour: I really want to go out as quickly as I can around and many appointments are going to subsequently happen after the verse.
Ross Seymour: of course runs the car. Again, we feel confident about the peak of the round and the releases at this point managing the gradient has been as we go forward.
Speaker Change: Then, maybe for Marker, or you've Donald as well, and the restructuring side of things, you know, I know it's a difficult decision to do any sort of cuts and you didn't want to cut into muscle as you said, but if we put it in terms of your pipeline, your backlog where you talked about that's roughly $7 million a few quarters ago, what sort of impact are these actions going to have on that number? [inaudible]
Speaker Change: It's very minimal. These are our programs which basically we have been spending road map dollars on developing further and the volumes have been somewhat disappointing. Mostly based and obviously not in the data space but in the other spaces that we invest in music experience.
Speaker Change: So, in the short term, there will be some NREs which disappear which are for small, probably less than a million dollars.
Speaker Change: and then some smaller impacts to the short-term liberty, again some worth the vision of two to three million dollars in a second half.
Speaker Change: But for the long term, we still expect to be able to execute on the vast vast majority of our strategic backbone.
Got it. Thank you.
Speaker Change: Thank you. The next question comes from Anthony Stoss with Craig Hallum. Please proceed.
Anthony Stoss: I just wanted to clarify one thing, the past year, saying your goal is to be EBITDA breakeven with the Q4 now with...
Anthony Stoss: I guess your breakeven would be dropped to 65 million and rarest you still expect to be even up breakeven in Q4.
They're not a follow-up.
Anthony Stoss: Okay. You're $7 billion a strategic backlog and no, you don't update that until November . But I'm just curious if there's anything that's been taken out or if you maybe just kind of quantitatively suggest that backlog is still growing.
Anthony Stoss: I mean, there's been some a few booths and dates in terms of timing and we have also called out some new wins in the prepared marks.
Anthony Stoss: So, and we will update in the fourth bar, but, you know, directionally we're still going in the right direction and adding to it as we progress.
Speaker Change: Okay, then lastly, you know, I heard you talked about the radar being on track. It's a coast of still on track for kind of Q4 timeframe.
Speaker Change: And the radar is so largely on track. Ficosa have some challenges with their end customer so there's likely to be some delay in that program, but still in there.
Thank you for watching. See you next time. Bye. Bye.
Speaker Change: I mean, the comments on competition where are we.
Speaker Change: Were directed at the OEM level.
Speaker Change: There's no.
Speaker Change: Huge emergence of strong.
Speaker Change: Chinese Oems that you'll be taking share from U S and European manufacturers, particularly locally in China.
Speaker Change: Export markets.
Speaker Change: This increase my understanding is that we still see here in Phoenix is being strongly differentiated so we.
Speaker Change: We haven't seen enhanced competition from local Chinese of elements.
Speaker Change: Okay.
Speaker Change: Any comments, specifically around the direction of business happening in China, though.
Speaker Change: Sorry.
Speaker Change: Jason.
Speaker Change: Just the velocity of the business in China, what what's been happening recently around the tariff situation.
Speaker Change: I mean, we haven't.
Speaker Change: China.
Speaker Change: Really seen direct impact.
Speaker Change: As long as you use China for China.
Speaker Change: Employees directly into that market.
Speaker Change: And do you know.
Speaker Change: But the extension of some ups and downs, who will give you the Chinese new year.
Speaker Change: Their trajectory was still pretty strong.
Speaker Change: Yeah, I was thinking of a UAV.
Speaker Change: He is with Barclays.
Speaker Change: Along with me right now.
Speaker Change: Alright.
Speaker Change: Which is the nice so.
Speaker Change: Thanks.
Speaker Change: In spite of the challenges is the general economy.
Speaker Change: Our mortgages.
Speaker Change: As strongly.
Speaker Change: Our ability to gain share.
Speaker Change: Alright.
Speaker Change: Can you just talk about your channel inventory situation, both domestically and.
Speaker Change: Internationally.
Speaker Change: Are you seeing any changes impact your level of visibility.
Speaker Change: There wont be material changes in the last quarter or so.
Speaker Change: Hum.
Speaker Change: In this regard.
Speaker Change: Alright, Thank you guys.
The next question comes from Jon <unk> with CJS Securities. Please proceed.
Jon <unk>: Thank you for taking my question I was wondering if you could update us on your M&A plans you have some cash on the balance sheet.
Jon <unk>: Our opportunity set changed with the current uncertainty and volatility that's out there are you still planning to do.
Jon <unk>: You might know acquisition.
Jon <unk>: I mean.
Jon <unk>: This finds you wanted to be very conservative with our balance sheet. So.
Jon <unk>: In your initial opportunity that you'd be looking at.
Jon <unk>: Or pretty much firmly on exports.
Jon <unk>: Understood. Thank you and then just with the CTO CFO situation I was wondering if you could tell us.
Jon <unk>: What the plans and timeline there are before you feel that.
Jon <unk>: Yeah. So I mean, we're in the.
Speaker Change: Sir you may begin.
Jon <unk>: We're very engaged in that.
Jon <unk>: Okay.
Jon <unk>: We're talking to them.
Jon <unk>: No firm updates on the timeline right now, but what is the space.
Jon <unk>: Okay, Great and one last one for me I think you mentioned well over 100 million incremental annualized revenue I think from the design wins, you announced in the quarter is that what you said was there a timeframe for that.
Jon <unk>: Hmm mm.
Jon <unk>: <unk>.
Jon <unk>: So we what I talked about it.
Jon <unk>: Individual product lines.
Jon <unk>: The.
Jon <unk>: Annualized run rate minimum that we expect from those.
Jon <unk>: We didn't specifically.
Jon <unk>: Okay. Thank you.
Speaker Change: Thank you at this time I would like to turn the call back to management for closing comments.
Jon <unk>: Thanks, everybody for your time.
Speaker Change: You mentioned industrial conferences in law enforcement.
Speaker Change: Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Uh huh.
Speaker Change: [music].