indie Semiconductor, Inc.

Good afternoon and welcome to Indy Semiconductor's third quarter of 2023 earnings call. At this time, all participants are in listen-only mode. 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 of Investor Relations. Mr. Gupta, please go ahead.

Thank you, Operator. Good afternoon and welcome to Indy Semiconductor's third quarter 2023 earnings call. Joining me today are Don McClimit, Indy's co-founder and CEO, and Tom Schiller, Indy's CFO and EVP of Strategy. Don will provide opening remarks and discuss business highlights, followed by Tom's review of Indy's Q3 results and Q4 outlook. Please note, we'll 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 a representative about views 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 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, 2022, as well as other public reports filed with the SEC. 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, non-GAAP net income loss, and non-GAAP EBITDA. These metrics may exclude from its corresponding GAAP measures certain of the following items. Depreciation and amortization, share-based compensation, acquisition-related expenses, inventory cost realignments, gain or loss from change in fair values, non-cash interest expense, and income tax, benefits, or expenses. For a complete reconciliation to GAAP and the definition for the above items, please see our Q3 earnings press release, which was issued in advance of this call and can be found on our website at www.indiesemi.com. I'll now turn the call over to Donald.

Thanks, Ashish, and welcome, everybody. I am pleased to report that Indy posted solid third-quarter results against a challenging macroeconomic backdrop with growth well above our addressable market, driven by increasing demand for our highly differentiated auto tech solutions. Specifically, during the quarter, we achieved all-time highs in revenue and gross margin, with our top line up 101% year-over-year and up 16% sequentially to $60.5 million, with gross margin expansion to 52.7%. Our outperformance of the automotive industry reflects Indy's world-class design team, extensive product portfolio, leadership customer base, including virtually every single automotive OEM in Tier 1, as well as our highly scalable supply chain, all augmented by our successful acquisition integrations. In fact, our commercial success has made Indy the fastest growing semiconductor company in the world, among 224 peers over the last two years, based on a recent assessment by Morgan Stanley. At the same time, and perhaps more importantly, Indy is the only semiconductor company from the 2021 IPO class that is expected to reach non-GAAP EBITDA break-even in the current quarter. Further, I'm delighted to report that our strategic backlog has increased to $6.3 billion, up from $4.3 billion last year and $2.6 billion in 2021. The $2 billion of incremental growth was led by computer vision, supported by our acquisition of GeoSemiconductor earlier this year, together with post-integration wins, including Bosch, which enabled the leading North American OEM, as well as Toyota. Combined with our radar wins, which should extend well beyond the CAT 10-year lifetime, the ADAS contribution alone is roughly $4.6 billion in total, with the balance heavily in user experience, followed by emerging electrification products. Importantly, all of these wins set the stage for Indy to exceed $1 billion in annual revenue by 2028. Our deepest investments have been and increasingly are within ADAS, as safety features have taken center stage within the automotive industry. As context, the AAA Foundation for Traffic Safety released a recent study that expects current ADAS technologies to prevent around 37 million crashes, 14 million injuries, and 250,000 deaths through 2050, translating to a 16% decline in both crashes and injuries and a 22% decline in fatalities. At Indy, we don't believe these statistics are anywhere near aggressive enough. Our mission is to empower automotive OEMs and Tier 1 suppliers with increasingly more sophisticated yet cost-effective safety semiconductors and software for the vehicles of tomorrow towards a truly uncrashable car and a day when we can ensure driver, passenger, and pedestrian safety. To that end, we are embarking on a unique sensor fusion strategy where we employ multiple modalities including radar, computer vision, lidar, and ultrasonic solutions to capture data in different environments and ranges and to enable a comprehensive and accurate perception of the car's surroundings. This multimodal approach creates redundancy and compensates for the limitations of individual sensors, enhancing system robustness and reliability, which is ideal for challenging driving scenarios where precision and timely response are critical for safety. For example, radar provides good sensing ability of objects crossing or coming into a vehicle's path across a range of weather conditions, but has limited depth precision and object recognition capability. Meanwhile, cameras are extremely capable for object recognition in the same way vision sensing is for humans, but have poor performance in adverse weather or lighting conditions. And while LiDAR excels in range and depth precision and is unaffected by poor lighting, it may be impeded by heavy rain or fog. We believe our sensor fusion approach, as opposed to today's discrete implementations, will yield significant advantages as no single technology will dominate the market due to the complexity and diversity of the ever-changing driving environment. In addition, sensor fusion can yield far greater power efficiency and cost savings by optimizing sensor configurations to achieve the requisite performance levels, enabling these technologies to rapidly scale down to entry-level vehicles. In short, we believe the potential for our sensor fusion product roadmap is enormous. When widely implemented, Level 3 autonomous driving will require over 40 sensors and cameras. But in the meantime, and this is important, because our business plan isn't dependent on autonomy, we expect rapid sensor and camera global proliferation in support of Level 2 and Level 2++ premium vehicles and cascading down to entry-level vehicles for teenage drivers. To this end, I'm proud to announce that during the quarter, we secured a key initial computer vision win via a directed buy from a leading North American automotive OEM. This program is set to wrap in 2025 and is a meaningful contributor to the increase in our strategic backlog. In addition, we expanded our automotive camera video processor portfolio with the commercial release of a highly integrated system on chip that enables both viewing and sensing capability simultaneously. As government regulators, new car safety assessors, and consumers demand higher performance safety features, automakers are increasingly seeking camera-based ADAS solutions that enable volume scalability across their vehicle classes. This demands a distributed intelligent architectural approach to sensing and high levels of integration coupled with low power consumption to meet the demands of mass market deployments. Our next generation camera solution was developed to address these challenging design requirements According to S&P Global, shipments of automotive ECUs incorporating vision-based processing are expected to grow from 232 million units in 2022 to nearly 400 million units by 2027, and we plan to capture a disproportionate share of this volume. Shifting gears to radar, during the quarter, I'm pleased to report that we sampled our first product to our lead customer, and leveraging our acquisition of silicon radar earlier this year, we launched the world's first commercially fully integrated 240 GHz radar front-end silicon transceiver, expanding our portfolio of short-range, high-precision and millimeter-wave radar solutions. As a complement to the well-deployed use of 76 to 81 GHz radar for long-range automotive sensing, recent safety initiatives such as the European New Car Assessment Program, or NCAP, are driving the use of higher-frequency radar for new and emerging vehicle dynamics and monitoring applications, including assessment and control of air-spring-based suspension settings, real-time road surface quality, and hazard assessment to dynamically adapt ride quality and even fine-grade monitoring of gas tank levels. On the LiDAR front, we continue to make progress with our Surya SOC, with direct OEM engagements including system demos, on-site technology workshops, and joint performance evaluation and exploration with a leading Japanese carmaker, amongst others. We also entered a development contract with a leading aerial mobility OEM. Being conservative, we have yet to record any LiDAR wins within our strategic backlog, but based on the degree of inbound design interest in Surya, we fully expect material contributions by this time next year to drive to a leadership position as a merchant LiDAR semiconductor supplier and scale dramatically throughout the back half of this decade. To accelerate this timeline, during the quarter, we acquired Exelos, a Swiss photonics company, specializing in the design of high performance optical semiconductors. Exelos super luminescent LEDs for fiber optic gyroscope and viewing applications such as head-up display, backed by 59 global patents, complement our laser and silicon photonics products. In addition, Exelos semiconductor optical amplifier capability meaningfully augments our FMCW LiDAR product line. We look forward to updating you on our progress with this highly innovative design team, particularly as we leverage their skill sets across our global customer base spanning ADAS and user experience applications. Speaking of user experience, during the quarter we further ramped our entire portfolio led by highly integrated lighting, motor control, and charging solutions at leading global automators as OEMs prioritize an immersive in-cabin experience. As vehicles transform into extensions of your personal living spaces, the emphasis on creating a seamless, intuitive, and comfortable passenger environment has never been greater. reflecting a paradigm shift in consumer preferences towards a holistic user experience. Such advancements underscore the importance of integrating technology with comfort, eliminating cumbersome cables, and promoting a clutter-free environment. I'm also pleased to report that we continue to ramp our advanced lighting solutions with OEMs around the world and captured an additional wireless charging solution win at a leading North American carmaker. Our Qi 2.0 solution boasts the highest level of integration available, merging MCU and flash with additional features like a boost DC-VT converter, wireless charging inverter, and associated power feds. Specifically, via our integration, we are enabling a more than 50% reduction overall wireless charging system boom and a roughly 50% smaller PCB area compared to previous solutions, and we are enhancing the charging efficiency and reliability as demanded by automotive requirements at the same time. Finally, in the electric vehicle area, despite headlines to the contrary, long-term secular tailwinds remain intact as EV sales increased for the 13th consecutive quarter. Electric vehicle sales volumes set another record in Q3, as total sales of battery-powered vehicles jumped past 300,000 for the first time in the U.S. market. Year-to-date EV sales through September reached just over 873,000, putting the market firmly on track to surpass the 1 million mark for the first time ever. likely later this month. In fact, in the third quarter, EV sales were up 50% versus the prior year in the U.S., with EV penetration rates nearly 8% of new vehicle sales. And per the Wall Street Journal, the share of U.S. consumers who say they are thinking about buying an EV is now above 50% versus just 38% in 2021. These impressive figures highlight the growing consumer preference for sustainable transportation supported by a wide range of available EV models and competitive pricing strategies. The potential for the EV sector is still massive, based on continuous advancements in technology, a rapidly expanding charging infrastructure, and the market elasticity generated as battery costs decline. Given Indy's customer engagements, spanning market leaders including Mio, Ford, Rivian, General Motors, BMW, Mercedes, Xiaopeng, BYD, Hyundai, Nissan, Li Auto, and Volkswagen, we are especially well-positioned to capitalize on this secular shift. I'll now turn the call over to Tom for a discussion of our Q3 results and Q4 outlook.