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spk00: Good afternoon, everyone, and welcome to Indy Semiconductor's second quarter 2021 earnings call. This call is being recorded. At this time, I would like to turn the call over to Pilar Borregas, head of global corporate communications for Indies. Thank you. You may begin.
spk01: Thank you, operator. Good afternoon, everyone, and welcome to Indy Semiconductor's second quarter 2021 earnings call. Joining me today are Donald McClymont, Indy's co-founder and CEO, and Tom Schiller, Indy's chief financial officer and executive vice president of strategy. Donald will provide opening remarks and discuss business highlights from the quarter, followed by Tom's review of Indy's second quarter results and third quarter outlook. Please note that we will be making forward-looking statements based on current expectations and assumptions. which are subject to risks and uncertainties. These statements reflect our views only as of today and should not be relied upon as representative about views as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion of the material risks and other important factors that could affect our financial results, please refer to our risk factors and our recent registration statement on Form S-1 and other filings with the SEC. Additionally, the results and guidance discussed today are based on our 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 IndySemi.com under the News tab. With that, I'll turn the call over to Donald.
spk05: Thanks, Pilar, and welcome, everyone. We're excited to be kicking off our inaugural conference call as a publicly traded company. As many of you know, in December of 2020, we announced our intentions to enter into a definitive agreement with ThunderBridge Acquisition II for a business combination that would result in the combined entity continuing as a publicly listed company. On June 10th, we successfully closed the strategic transaction. We start this next chapter from a position of strength and with significant secular tailwinds. Having founded INDI in 2007, we have a long heritage and history of innovation. We've established a global footprint and developed key relationships with a dozen tier one customers and multiple international OEMs. As a private company, we shipped more than 100 million units, demonstrating our ability to scale in the future. Equally important, our debut as a public company comes at a time when powerful market dynamics are playing out at a macro level, specifically. The global automotive semiconductor market is forecasted to grow from 33 billion in 2020 to 59 billion by 2025, according to IHS. Automakers are supporting large-scale investments in next-generation vehicles, for example, Ford recently committed to $22 billion in EVs through 2025 and another $7 billion in autonomous cars, while Volkswagen has similarly announced plans to boost its investment in electric and autonomous technology to $86 billion over the next five years and ultimately has publicly committed to cease selling internal combustion engine cars by 2035. With regard to Indy, Our served addressable market is expected to grow from $16 billion in 2020 to $38 billion by 2025, at a 19% compounded annual growth driven by several megatrends spanning the user experience in connected car, safety systems, and electrification. Further, the average semiconductor content per car is anticipated to reach the level of multiple thousands of dollars per vehicle, up from approximately $500 today. Needless to say, the automotive landscape is undergoing a massive transformation, and India is at the heart of this. Our advanced technologies are directly addressing these market needs, and the step function increase in electronic performance and complexity required by our customers to help improve safety, facilitate seamless data connectivity, enhance the user experience, and accelerate electrification. Our second quarter 2021 revenue and margin results demonstrate how we are capitalizing on these opportunities and are delivering on our promises. Particularly during the quarter, we won a new EV product design with Vitesco, one of the largest European automotive tier ones. We expanded shipments of our highly integrated onboard telematics solution, secured record orders for ultrasound automatic park assist systems, ramped our advanced lighting controllers with multiple new OEMs, and extended our engagement with Marquardt, a global innovator of sensor technology in support of access solutions. Indy is well positioned to capitalize on the auto tech market as we singularly and intensely focus on developing innovative solutions for the automotive sector, create a one-stop shop for all sensor modalities including LIDAR, vision, radar, and ultrasound, continue to drive advanced roadmaps of our existing product lines, and expand our geographic design and development footprint to uniquely serve our customers' needs. In short, Indy is excited to be playing its part in empowering the auto tech revolution. I will now turn the call over to Tom for the discussion of our Q2 results and Q3 outlook.
spk04: Thanks, Donald. Indy delivered solid top and bottom line performance in the second quarter, ahead of analysts' expectations. Revenue was up 148% year-over-year to a record 9.2 million, reflecting increasing demand for our highly integrated auto tech solutions. Gross profit was 3.9 million, translating into a 42.1% gross margin, up 140 basis points from the same period a year ago. Operating expenses were 13.4 million, an increase from 6 million in the June 2020 quarter, as we more than doubled down on R&D and SG&A to accelerate product development, extend our market reach, and implement public company infrastructure. Operating loss was $9.6 million versus analyst consensus estimates for a $10.2 million loss. Interest and other expenses were $300,000, yielding a net loss of $9.9 million. Turning to the balance sheet, we closed our merger with ThunderBridge Acquisition II on June 10th with gross proceeds of $400 million, comprised of $250 million from cash and trust, plus $150 million in pipe investment. We exited Q2 with $354 million, reflecting retirement of Indy's long-term debt and settlement of the vast majority of transaction expenses. Now to our Q3 2021 outlook. Despite global supply chain tightness, we anticipate top-line outperformance to a record Indy sales level with sustained gross margin expansion in the third quarter of 2021. Specifically, we expect 30% sequential revenue growth as we approach a $50 million annualized revenue run rate and gross margin of roughly 43%. We are also planning for operating expenses to be 20 million as we further increase product development investment in response to pent-up customer demand. Accordingly, assuming no other net expense or taxes below the line and 135 million shares outstanding, we expect a net loss of approximately 11 cents per share. Finally, and perhaps most importantly, Solid bookings coupled with new program ramps are setting the stage for Indy to nearly double revenue in 2021, demonstrating one of the highest immediate growth trajectories within auto tech. On that note, I'll turn it back to Donald for his closing comments.
spk05: Thank you, Tom. In closing, we couldn't be more excited about Indy's future. We have market leadership positions in several of the highest growth automotive segments, and our innovative portfolio serves several key megatrends, namely ADAS and autonomous vehicle, connected car and user experience, and electrification. With past success in delivering leading-edge technologies, we plan to apply the same core principles and follow the cultural values that got us here to continue building a world-class organization and an absolute auto tech powerhouse. That concludes our prepared remarks. Operator, let's open the call for Q&A.
spk00: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you limit yourself to one question and one follow-up question. Our first question is from Suji De Silva, your line is open. Please go ahead.
spk06: Hi, Tom. Congratulations on the strong start here. No problem. And so then the customer base, why don't you give us a sense, Tom or Donald, how it's grown maybe in the last three to six months or whether the incremental growth is coming from more program wins of the existing customers, just to give us a sense how that dynamic is playing out.
spk05: Well, the simple answer is it's both. We included new customer ads through the quarter, but also you get the best return sometimes from additional business of the existing customers, and so in short, it's really both.
spk06: Okay, great. And then, Donald, you had a lot of product announcements during the quarter, all very impressive opportunities, lighting and other things. Maybe you could tell us which of those represent perhaps the highest unit volume runners today, if that's a helpful thing to understand, and which ones might be on the come in 12 months to kind of see how they layer on?
spk05: Well, you can assume that we're seeing growth in all areas at this point. We're not really breaking out the exact contribution of each product at this point as a policy. But for sure, all of the products that we announced are deploying and are beginning to generate revenue. So, I mean, the demand for all of them has been very strong.
spk06: Okay, helpful. We'll watch those closely. And then lastly, maybe the competitive landscape you could talk about. Just saw announcements or discussions of something like a combination between Vionier and Qualcomm. And just maybe you can kind of reset us on the competitive landscape and what those kind of actions may mean to someone like you or whether – Indy is differentiated enough that those are a different area than Indy's target.
spk05: Yeah, I mean, you know, we're a pretty unique company in the space. I believe strongly we're really the only company that's totally focused on automotive. And to that end, we don't really feel that we have direct competition for the opportunity that's out there today. The Qualcomm and projected combination, if they get it closed, is interesting because it's kind of a vendor buying its own customer and will have some interesting dynamics. But from our side, it's largely neutral to anything we might be doing.
spk00: Our next question is from Anthony Stoss with Craig Hallam. Please proceed.
spk02: Hey, Donald. Hey, Frances Wall of Strong Growth. Donald, I wanted to follow up on you know, an item in the press release where you're talking about record orders for parking assist. I'm curious if you can elaborate a little bit more on that and maybe love to hear if there's new customers being added for that product. And then one for Tom on the, you know, higher OPEX for September, the 20 billion, is there any particular programs that you guys are now keyed in on? Is it LIDAR? Is it kind of across the board? Any help you could give us on where that's directed to be helpful? Thanks.
spk05: Yeah, so with respect to the parking assist, that refers to our ultrasound SOCs, which we've had in the market for a little while. But as you know, it takes a long time to ramp an automotive, and we have added new sell-through customers through our existing Tier 1s into the OEMs. By sell-through, I mean OEM customers. And that is driving our order book today, quite simply.
spk04: And then on the latter part of your question, it is more R&D-oriented and particularly in the ADAS product area, as well as it's the first full quarter we'll have of public company infrastructure costs.
spk02: Got it. And then maybe as a follow-up, just big picture-wise, now that you have this cash, Donald, I'd love to hear if there's several OEMs that were kind of waiting in the wings, waiting to see if you guys would be able to survive, and now that you have cash, clearly you can. I'd just love to hear your thoughts on kind of new engagements or the strategic backlog now that you've got plenty of cash.
spk05: Yeah, I mean, the response has been phenomenal. The customer base was strong before, and to some extent we were quite limited by our balance sheet as a private company. And with that off the table now, the programs that we have access to that we can bid on and have very strong chance to turn over are phenomenally larger than what we had in place before. So, yeah, I mean, it's been a huge advantage for us in terms of that. The strategic backlog, obviously, as we announced design wins here, has increased. We won't really quantify that at this point, but it's kind of the thin end of the wedge and watch this space for more to come.
spk00: Our next question is from Ross Seymour with Deutsche Bank. Please proceed.
spk03: Hi, guys. Echoing the others, giving you congrats, making it public, and strong first quarter and guide. You mentioned about the shortages in your press release. Despite the global supply chain tightness, you guys are still delivering growth. I just wondered, Donald, if there's any update. Are you guys seeing any direct implications on your side or even any indirect parts where you could shift your components but something else from the supply chain was a gating factor in either your quarter or guide?
spk05: I didn't catch the first part, Ross.
spk03: I just wanted to see if the shortages across the industry were impacting you either indirectly or directly.
spk05: I mean, not at present. I mean, the supply chain is very tight. It does demand careful controls and management from our side. So it's not a trivial problem to solve at the moment, but we are navigating it pretty well, I would say. I would say there's not much inventory in the channel, and so far we haven't really been strongly hit by perhaps factories being shuttered because of other component unavailability. So I would say, generally speaking, so far so good. It is an ongoing situation which we have to manage, but so far I would say we're reasonably happy with the situation.
spk03: Good to hear on that. I guess for my follow-up, you mentioned in the press release about an EV product design win at, I think you said, one of the largest European automotive Tier 1s. Can you just talk a little bit about the timing of when that would ramp and some of the functionality? I know you talked about charging controllers and diagnostic solutions, et cetera. I assume it's for that functionality, but any additional color even on the timing or size of that? It seems like opening up a new area that... Not really.
spk05: We'll keep that confidential for the time being until we're closer to the mark. Obviously... automotive ramps take several years, so it won't be next quarter or the quarter after that. It isn't actually directly related to the two application areas that you mentioned, but it is germane directly to the propulsion aspect of the e-vehicle platform.
spk00: And that concludes the Q&A session. I will now turn the call back over to Donald McClimat.
spk05: Well, thanks, everybody, for joining us today. Look forward to seeing you at the upcoming investor conferences and the non-deal roadshows. So looking forward to continuing the story.
spk00: Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
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