indie Semiconductor, Inc.

Good afternoon and welcome to Indy Semiconductor's first quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is 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 and welcome to Indy Semiconductor's first quarter 2025 earnings call. Joining me today are Dal McClymatt, Indy's CEO and acting CFO, and Mark Tindal, head of corporate development and investor relations. Dal will provide opening remarks and discuss business highlights. Mark will then provide a review of Indy's Q1 results and Q2 outlook. Please note that 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 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 material risks and other important factors that could 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. Finally, the results and guidance discussed today are based on consolidated non-GAP financial loss, non-GAP net loss, and non-GAP net loss per share. For a complete reconciliation of GAP and the definition of non-GAP reconciling items, please see our earnings press release which was issued in advance of this call and can be found on our website at .indy.inc. I'll now turn the call over to 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. During the first quarter, Indy achieved total revenue of $54.1 million, representing a relatively robust performance given the current automotive market sentiment. During the quarter, we saw weaker than expected demand at certain OEMs, coupled with a slower start to the year in China. Since our previous earnings call back in February, the global macroeconomic environment has changed dramatically. It's important to note upfront that the new US trade policies and resulting tariffs on imported automobiles and vehicle parts, which were announced in early April, have had minimal direct impact on Indy's operations to date. 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 more marginally affected. While our direct exposure is limited, tariffs are impacting overall market sentiment and creating uncertainty across the automotive industry. Multiple OEMs have recently announced a reduction in vehicle production, temporary layoffs, or paused shipments to the US. 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. While we are not fully immune, our diverse product portfolio and new product ramps should mitigate any broader market challenges. Automotive market analysts, including S&P Global Mobility, are now forecasting a reduction in global vehicle sales of 1.3 million in 2025. 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 vehicles sold in the US, with analysts forecasting that average US vehicle prices will increase by over 9% in 2025. 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 ADAS sensing and user experience applications. Despite the challenging market backdrop, we continue to secure new design wins across a global consumer base leveraging our highly differentiated and innovative technologies. Notably, vision and radar design wins are on track to ramp production in the second half of 2025 and continue through 2026. Now let me turn to our notable business progress and key achievements during the first quarter. ADAS is the major long-term focus for Indy and a core driver of our future growth. Our engineering expertise and innovation across analog and mixed signal design and world-leading in-house algorithmic expertise sets us apart from our peer group, enabling an unrivaled product portfolio across all ADAS sensing modalities, including radar and vision. First, our flagship 77 GHz radar solution is progressing well, with excellent feedback from our lead tier 1 customer, with on-road testing results demonstrating compliance to all key performance specifications. 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. Equally important during the first quarter, momentum remains strong for our vision portfolio, featuring our class-leading proprietary image signal processing. Firstly, we secured a new design win for our flagship IND880 processor with Valeo, a leading European tier 1, for in-cabin monitoring, including thermal sensing capability, for a North American OEM targeting production deployment in 2028. In addition, we were awarded an eMirror design win for IND880 with a Korean OEM targeting trucks and buses, with first -the-road deployments commencing at the end of this year. Last quarter, I mentioned our growing success in China for vision applications such as eMirror and in-cabin monitoring. I'm pleased to report our traction continues with further wins for our GW5 vision processor, including at Mercedes China with YFTech, the largest eMirror supplier in China, and an in-cabin monitoring win for BYD targeting production starting in the fourth quarter of this year. And finally, our global partnership with Bosch continues. We were recently selected for an additional high-volume in-cabin monitoring deployment with Toyota. To emphasize the importance of the product lines, we anticipate that each of the radar and vision portfolios will generate well in excess of $100 million incremental annual revenue. Finally, 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. I'm pleased to share that our photonics 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. 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. And in this regard, I am pleased to share that Indy has now shipped greater than 500 million ships cumulatively since our inception. This is a fantastic testament to the incredible value our solutions bring to Tier 1s and OEMs alike and to our global operations and customer support expertise. While we expect sentiment to remain volatile, 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 unrelenting consumer demand for the best in-cabin user experiences. Indy's positioning as a supplier of compelling differentiated solutions to address the transformative automotive megatrends remains robust. I will now turn the call over to Mark for a review of our Q1 results and Q2 outlook.

Thank you, Donald, and good afternoon, everyone. Indy's first quarter revenue of $54.1 million increased .3% from a year ago, which was marginally below the midpoint of our revenue outlook, while non-GAAP gross margin of .5% was within expectations. 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. As a result, our first quarter non-GAAP operating loss was $15.1 million. With net interest expense of $1.6 million, our net loss was $16.7 million, and loss per share was $0.08 on a base of 211.5 million shares. 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 net reduction of $37.6 million during the quarter. Cash 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. 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 -$53 million, or $51.5 million at the midpoint. Based on the anticipated product mix, we expect second quarter gross margins to be in the range of 48-50%. We expect op-ex of $39.8 million, with approximately $29 million of R&D expense and $10.8 million of SG&A expense. Below the line, we expect net interest expense of approximately $1.8 million, with no cash tax expense. Assuming the midpoint of the revenue ranges, and with a base of 215.2 million shares, we 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. As Donald described earlier, the fundamental automotive semiconductor market trends are strong and persist despite the macro situation. We will continue to focus on ramping up customers with innovative value-add solutions, in particular 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 positioned to maximise on the market's tremendous inherent opportunity. We mentioned on our last earnings call that we were in the review of our operating expenditure, with the objective to reduce and accelerate our path to profitability. Given the current uncertain automotive market environment, this mandate has increased in strategic importance. 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. We expect to see initial benefits from lower OPEX in the second quarter, meaningful 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 $8-10 million per quarter or approximately $32-40 million on an annualised basis. This reduced level of OPEX will allow us to reach breakeven of a revenue base of approximately $65 million per quarter. However, I do want to stress, none of our strategic ADAS programmes will be impacted by these restructuring actions. We will continue to invest across hardware design, software and marketing resources, ensuring both our key radar and vision programmes will ramp on schedule at our global OEM customers through 2025 and 2026. We believe prudent expense management, a healthy cash position and ramping programmes position in the incredibly well to navigate current conditions and execute on the vast majority of our pipeline. 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.

The global trade dynamics have become unpredictable, and we have seen this manifest as a -and-see conservatism across our broad customer base. However, despite current challenges, the fundamental trend of increasing semiconductor content in continues unabated. Indy's 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. No other semiconductor company as a product portfolio was brought as Indy's to meet the diverse needs of the automotive megatrends, and this empowers Indy to capitalise on the enduring market opportunity. That concludes our prepared remarks. Operator, please open the line for questions.

Thank you. We will now conduct a question and answer session. 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star 1 at this time. One moment while we pull for our first question. The first question comes from Craig Ellis with B Riley Securities. Please proceed.

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 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 some quantitative color. Give us a sense for how significant that ramp in the back half of the year would be. Thank you.

Thanks Craig.

So,

I mean, we have many wins as we've spoken about over several quarters with many applications ranging from in-cabin applications, provider monitoring, multi-band monitoring, e-meters in the vision space. And now with our radar products, we're able to address forward-facing and corner radars in that application. Each of these product lines that I mentioned with prepared remarks have the strong potential to be significantly greater than $100 million per year for us in each case. We've talked a lot about our strategic relationships with several OEMs. We've called out Vallejo and Bosch in prepared remarks today. And we are a little cautious as we look out into the second half of the year because there has been turbulence in the market, particularly the US and European vendors have struggled with market share with the increased competition coming from their Chinese peers. But that being said, we remain confident in the peak of the ramp. Timing and steepness of the ramp is always a little hard to gauge,

but other than that, we feel really good with where we are with all of these programs.

Got it. Thank you. And then I'll ask the follow-up to Mark. Mark, I didn't catch in your commentary what you expected the fourth quarter OPEX level to be after 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, how do we look at that base level of OPEX versus what would go forward from 4Q? Thank you.

For Q4, approximately $33 million. And then flat through through the second half. Sorry, to the 2026, not the second half. The next question comes from Ross Seymour with

Delta Bank. Please proceed.

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 uncertainties.

Yeah, I mean, I

think

it's exactly, as you said, it's close to the greatness and the gradient of the ramp that is harder to judge, given the market uncertainties right now. We're seeing the start points staying relatively fixed and the models that are currently in target that are staying in place. But really, the wild card is how quickly it's going to ramp and how many deployments are going to subsequently happen after the first round of the curve. Again, we feel confident about the peak of the ramp and really

assist at this point managing the gradient as we go forward.

Then maybe for Mark or you, Donald, as well, on the restructuring side of things, 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 roughly $27 million a few quarters ago, what sort of impact are these actions going to have on that number?

I mean, very minimal. These are our programs which

basically we have been spending roadmap dollars on developing further and the volumes have been somewhat disappointing, mostly based in obviously not in the ADA space but in the other spaces that we address in user experience. In the short term, there will be some NREs which disappear which are small, probably less than $1 million and then some smaller impacts to the short term revenue, again, some of the region of $2 to $3 million in the second half. But for the long term, we still expect to be able

to execute on the vast, vast majority of our strategic platform.

Got it. Thank you. Thank you.

The next question comes from Anthony Stoss with Craig Hallam. Please proceed.

Hey Donald, I just wanted to clarify one thing in the past. You were saying your goal is to be even the break even in Q4. Now with, I guess, your break even being dropped to $65 million and NREs, do you still expect to be even the break even in Q4? Yes. Okay.

Yes,

absolutely. And then your $7 billion in strategic backlog, I know you don't update that until November, but I'm just curious if there's been anything that's been taken out or if you can maybe just kind of quantitatively suggest that that backlog is still growing.

I mean, there's been some,

a few puts and takes in terms of timing and we have also called out some new wins in the prepared remarks. So, I mean, we'll update in the fourth quarter, but directionally we're still going

in the right direction and adding to it as we progress.

Okay, and then lastly, you know, I heard you talked about the radar being on track. Is FECOSTA still on track for kind of Q4 timeframe?

The radar is still largely on track. FECOSTA have some challenges with their end customers so there's likely to be some delay but still in the...

All right, thank you. The next question comes from Kody Accrete with the Benchmark

Company. Please proceed. Yeah, guys, thanks for taking my questions and maybe Don, if we can start in China, you mentioned some increased competition there. Can you just talk specifically about what you're seeing in China directionally around the tariff increase environment and maybe more specifically expand on your comments on competition?

I mean, the comments on competition were directed at the OEM level, given that there's been a huge emergence of strong

in China's OEMs which have been taking share from US and European manufacturers, particularly locally in China and the export market has increased. From our perspective, we still see our products as being strongly differentiated so we haven't seen enhanced competition from local Chinese or from

other countries.

Any comments specifically around the direction of business happening in China though? Sorry, I

didn't quite catch that.

Just the velocity of business in China, what's been happening recently around the tariff situation?

I mean, we haven't in China has really seen

direct impact. I mean, our supply chain is China for China. We deploy directly into that market and, you know, with the exception of some ups and downs I think a lot of the ideas of the car company who is growing like weeds right now and our customer virus which is the nice. So in that respect, in spite of the challenges that the general Chinese economy has had, the car market is strong there because of

their ability to gain share locally

primarily.

All right, Mike, can you just talk

about your channel inventory situation both domestically and internationally, how you're seeing any changes impact your level of visibility?

There haven't been material changes in the last quarter or so that differ from comments that we made in the past as regards to inventory.

All right, thank you guys. The next question comes from John Talenting with

CJS Securities. Please proceed.

Hi, thank you for taking my questions. I was wondering if you could update us on your M&A plans. You have some cash on the balance sheet. Has that opportunity set changed with the current uncertainty and volatility that's out there or are you still planning to do your marked up acquisitions?

I mean, at this point,

we want to be very conservative with our balance sheet. So any initial opportunities that we've been looking at

are pretty much firmly on the export line.

Understood, thank you. And then just with the CFO situation, I was wondering if you could tell us what the plans and timeline there are before you fill that.

Yeah, so I mean, we're in the throes of

a search right now. We're very engaged in that. We have a few candidates that we're talking to and that we're excited about and

no firm updates on timeline right now, but what's the space?

Okay, great. And one last one from me. I think you mentioned well over 100 million in incremental annualized revenue. I think from the design window you announced in the quarter, is that what you said and was there a timeframe to that?

So what I talked about was

the individual product lines and the sort

of

annualized run rate minimum that we expect from those.

We didn't specifically update

the timeline. Okay, thank you. Thank you. At this time, I would like to turn the call back to management

for closing comments.

Thanks everybody for your time and see you at the investor conference as well of course.

Thank you. This does conclude today's teleconference. You may disconnect your lines this time. Thank you for your participation and have a great day.