indie Semiconductor, Inc.

Ladies and Chairman, greetings and welcome to Indie Semiconductor second quarter 2025 earnings conference call. At this time, all participants are in listen only mode. A brief question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please signal the operator by pressing star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Ashish Gupta from ICR. Please go ahead.

Thank you, operator. Good afternoon and welcome to Indie Semiconductor's second quarter 2025 earnings call. Joining me today are Donald McClymph, Indie CEO and Mark Tindal, Head of Corporate Development and Investor Relations. In addition, given the strong investor interest in our foray into photonics and quantum opportunities, I'm pleased to have Matthew Drolet, Executive Vice President of our photonics business unit, joining us today as a special guest to address any questions you may have on this exciting sector. Donald will provide opening remarks and discuss business highlights. Mark will then provide a review of Indie's Q2 results and Q3 outlook. Please note that we're 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 the 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 and our annual report on Form 10K for the fiscal year ended December 31st, 2024, as well as other public reports filed with the SEC. 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 Q2 earnings press release, which was issued in advance of this call and can be found on our website at .indie.inc. I'll now turn the call over to Donald.

Thanks, Ashish, and welcome, everybody. I'll begin by reviewing our financial performance within the context of the overall automotive market before discussing Indie's key business achievements in the quarter. During the second quarter, Indie achieved total revenue of $51.6 million above the midpoint of our outlook, representing a solid performance given the challenging automotive market conditions we are experiencing. Starting with market dynamics, automotive market analysts have become tendentially more optimistic, including S&P Global Mobility, who recently raised forecasts for global light vehicle sales across all regions, including the U.S., China, and Europe, now expecting modestly positive growth for 2025 compared to 2024. Underlying demand has strengthened despite continued macroeconomic uncertainties. Regarding trade policy impacts, U.S. trade policies to date have had minimal direct impact on our business. Our globally diversified supply chain of foundry and packaging partners provides significant resilience against policy shifts as our manufacturing is primarily based in regions strategically aligned to our customers' locations. Despite the ongoing uncertainty from policy volatility, which continues to create hesitation in the OEM decision-making, our key projects remain on track. 2025 is proving to be a transitional year for Indie as we introduce new products, customers ramp our solutions across multiple ADAS sensing and user experience applications, while we expand into adjacent industrial markets. Despite the challenging automotive backdrop, we continue to secure new design wins across a global customer base, leveraging our highly differentiated and innovative technologies. Notably, radar and several key vision design wins previously communicated are poised to begin production in late 2025 and through 26. Let me now turn to our business progress and key achievements during the second quarter. I want to stress that momentum in ADAS is strong and is the major long-term focus for Indie, especially after our recent restructuring. It will be the core driver of our future growth. Today, our R&D investment is primarily focused on our key radar and vision programs. Our differentiated engineering expertise in analog and mixed signal design, combined with world-leading in-house algorithmic capabilities, uniquely separates us from our peers, enabling a class product portfolio that spans all ADAS sensing mobility, including both radar and vision. First, our flagship 77 gigahertz radar chipset continues to achieve more milestones and is receiving excellent feedback from our lead tier one customer as we near production ramp. Our full custom solution will be adopted by multiple OEMs across several key geographic regions. Results from actual road testing are demonstrating not only compliance with key performance specifications, but additionally are providing paradigm-changing application capabilities together with economic benefit as compared to the performance of current competitor products on the market today. During the second quarter, we continue to build momentum for our vision portfolio, featuring our -in-class proprietary image signal processing and our latest IND880 processor. Notably, in less than one year from sampling, the processor will enter production at a leading Chinese OEM for a camera monitoring system, this exemplifies the rapid design into production cycles achievable in the Chinese market. We also secured an additional design win for an occupancy monitoring system at a different leading Chinese OEM, with both customers considered prominent players in China's electric vehicle market. Beyond automotive, as I mentioned previously, we're also targeting adjacent industrial markets around mobility that have high development synergies with our automotive products. For vision, I'm pleased to report our first success with the IND880 powered cameras, now shipping in humanoid robots. IND880 is an ideal choice for image signal processing and such systems, requiring multiple cameras, an extremely low latency, and again an exciting new opportunity in an emerging market to drive growth. The momentum continues for our in-cabin user experience products. During the quarter, we secured several notable design wins in wireless charging. In Japan, we were awarded a design win at a major OEM through our tier one partner, OZDEN. Additionally, in India, Mahindra continues to adopt her wireless charging technology for new model upgrades across multiple platforms in addition to VW Skoda, starting production during the last quarter. As I've highlighted recently, we see growing applications for our existing products in automotive adjacent segments, particularly in the industrial sector. I already mentioned robotics, a second area is quantum. I'm excited to report that our newly formed Photonics group has already secured notable design wins with emerging players for a high-performance LXMU laser, particularly in the area of quantum communications. Commercial quantum e-distribution, or QKD, systems are being launched right now and their deployment is accelerating. A key ingredient of QKD performance is the quality of the optical system. Lower noise translates into longer range, breaking through an important barrier to the wider adoption of quantum-secured communication systems. We deliver a 10x noise improvement versus our competitors in this space. It is strategically important to be adopted by players at the forefront of development in an emerging market, as we position Indy to be the default supplier once high volume is reached. The ASPs and gross margins are proving to be highly attractive in this segment, and we expect the market size for Photonics in quantum communications to exceed $2.5 billion by 2030. As a reminder, the Photonics business unit also develops Photonics solutions for applications including automotive lidar and heads-up displays. While we expect automotive sentiment to remain volatile, when you look past the near-term noise, we continue to forecast that vehicle semiconductor content will grow beyond today's average $1,000 per vehicle, and ADAS remains central to this growth, propelled by global safety regulation and self-driving demands, uniquely positioning Indy as a leading and focused supplier of compelling, differentiated solutions to address these transformative automotive megatrends. I'll now turn the call over to Mark for a view of our Q2 and Q3 outlook.

Thank you, Donald, and good afternoon, everyone. Indy's the midpoint of our outlook. Non-GAAP operating expenses totaled $39.9 million, consistent with our outlook. As a result, our second quarter non-GAAP operating loss was $14.5 million compared to $17.2 million from a year ago, demonstrating our continued progress towards achieving profitability. With net interest expense of $1.6 million, our net loss was $16.2 million, and loss per share was $8.0 on a base of 215.3 million shares. Turning to the balance sheets, we exited the quarter with total cash, including restricted cash of $202.9 million, down from $246.9 million in the first quarter. $26.8 million of this cash usage was used to repurchase 30 million principal of our 2027 convertible notes at an attractive discount, while an additional $1.3 million of cash was used for the restructuring measures executed during the quarter. Excluding these two events, actual cash usage, including capex and semiannual interest payment for the outstanding notes, declined from the prior quarter to $16 million, demonstrating improved operating efficiency and benefits from working capital optimization, two areas where we strongly focus today. Additionally, as the May 19th 8K filing, we entered into a non-binding agreement with United Fate Auto Engineering, or UFA, for the sale of our 34% stake in our partially owned Chinese subsidiary. We have continued discussions with UFA and other interested parties, and any cash proceeds will be used to further optimize our cash structure. However, with the recent regulatory changes around new public offerings for technology companies in China, we may also explore the possibility of an IPO of our joint venture, which could potentially yield an even higher return for our holdings. Moving to our outlook, for the third quarter of 2025, we expect to grow and deliver revenue within the range of $52 million to $56 million, or $54 million at the midpoint, and attractive growth over the prior quarter. Based on the anticipated product mix, we expect our non-GAAP gross margin to be in the range of 49% to 50% for the third quarter of 2025, with our reduced OPEX of approximately $38 million. Below the line, we expect net interest expense of approximately $1.9 million, with no tax expenses. Assuming the midpoint of the revenue ranges, and with a base of $219.1 million shares, we expect a $0.06 net loss per share, an improvement of $0.02 million sequentially. As mentioned in our last earnings call, we began execution of certain targeted initiatives aimed at reducing operating expenses and accelerating our path to profitability. I am pleased to report that we remain on track. Progress in Q2 has been encouraging and is consistent with our communicated targets. We continue to expect to achieve our stated objectives of $8 million to $10 million in quarterly savings within the anticipated time frame. This reflects strong execution across the organization and continued commitment to operational discipline and long-term value creation. Finally, today we are very excited to announce the signing of the strategic acquisition of Emotion3D. This represents our first acquisition in nearly 18 months. The company is located in Vienna, Austria, and a leader in perception software, targeting automotive vision applications such as OMS and DMS within the cabin and external applications including forward vision sensing. Their technology is already in the early stage of adoption with Tier 1 customers and perfectly complements our family of vision processors. This will allow us to realize software royalties in addition to our chip sales, which will have a meaningful positive gross margin impact across our ADAS product range. This actually aligns exactly with our strategy and is supported by the desire of key Tier 1 partners to collaborate with Indy on the semiconductor side and Emotion3D for software. The consideration paid at closing will be $20 million in cash with a potential earn out of $10 million in cash or stock at our discretion over approximately an 18-month period. Finally, from a financial perspective, with our strong focus on operating expenses, further optimization of our capital structure, and our solid balance sheet, Indy is well positioned to continue developing differentiated products for the automotive, ADAS, and adjacent industrial markets. This balanced approach will support our return to strong and profitable growth as design wins ramp through 2025 and beyond. With that, I'll turn the call back to Donald for closing remarks.

Thank you, Mark. Our core business is solid and growing.

Radar and vision programs remain on track and the fundamental trend of increasing semiconductor content in vehicles continues unabated. With the addition of new high-growth markets like quantum and robotics, Indy's technology leadership and expanding product portfolio ensure we are well positioned to drive continued growth. No other semiconductor company has a product portfolio as comprehensive as Indy's to meet the diverse needs of these markets.

That concludes our prepared remarks. Operator, please open the line for questions.

Thank you. Ladies and Chairman, we will now begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you'd 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. Ladies and Chairman, we will wait for a moment while the question queue assembles. The first question comes from the line of Sujit Desilva from Roth Capital Partners. Please go ahead.

Hi, Donald. Hi, Mark. Congrats on the progress here. The emotion acquisition, curious on that. Is this the first instance of software licensing revenue for Indy or have there been instances of that in the past? Just understanding if this is now an element of the model that's coming in incrementally in terms of revenue margins.

Yeah, this is really the first major ingression into generating a meaningful licensing stream from the software that runs on our processors. We have made money from software deployments in the past, but it's been mostly in the form of license fees and support fees. This really does change the model in terms of building up or taking a share of the incremental software license fees that run on top of the processors that we make today. Excellent.

That's great to hear. Also, I guess you can ask about the photonics here. What are the type of customers your division is engaged with? There are quantum computing companies out there and maybe emerging quantum comms companies, but curious what kind of customers have already started to talk to you about your products?

Yeah, it's all of the above. We've seen the quantum key distribution and we have many active engagements going in that space also, which have already generated some revenue. The same goes for quantum compute applications with five of the six techniques that can be used to make quantum computers relying heavily on optical components, all of which we're able to supply.

Okay, great. Thanks. I'll pass it along.

Thank you. The next question comes from the line of Ross Seymour from Deutsche Bank. Please go ahead.

Hi guys. Thanks for the next question. Don, I want to start with you with any further update you could have on the radar and the vision design. When you talked about some of the stuff ramping late this year, I know it's going to be more so next year as far as the dollars go, but especially on the radar side of things, any sort of more details on the magnitude of that ramp and if it's being impacted in any way by the tariffs and macro uncertainty?

Well, we're taking the last one first. The larger share of where we would ship radar components is outside the US. There are some cases where it would cross into that border, but it's relatively limited. In terms of the magnitude of this, remember these products are high ASP and there typically going to be four per car. So we should easily be in the sort of $25 to $30 range of ASP per car that's shipped. So the ramp could go significantly quickly and the lead customer that we have who is facilitating the drop into the market is well positioned in that space and has a large market share. So without being too specific about it, we think it can be extremely large.

I guess as my follow-up, the number of adjacencies you're talking about, is the -to-market sufficiently similar that you don't have to really invest in the sales channel side? Because I'm just trying to balance the attractive use of spreading the technology to adjacent markets on one hand, but then your ability to manage the OPEX, hit break even, all those sorts of things while trying to go to different markets.

Yeah, I mean we don't anticipate a significant increase in the OPEX because of that. In this case, we're pretty much all set with what we have. I mean you're talking about quantum really rather than radar, right? Yes. Yeah, yeah. No, we're all set in that space. I mean it's kind of a rifle shot market at this point. So we can handle it with very limited OPEX

increase. Got it. Thank you. Thank you. The

next question comes from the line Cody Acree from the Benchmark Company. Please go ahead.

Yeah, thanks guys and congrats on the progress. Maybe if we can go back to Ross's question, can you just talk about, just remind us, the number of radar and machine vision programs you expect to ramp in Q4 and then how that looks through 26. And I guess what's giving you the confidence that these programs are finally going to begin here at the end of the year?

Well, there are multiple and I don't believe that we actually a number of programs on that in the past specifically, but we don't depend on all of them. There are multiple programs which can ramp and provide an even greater ramp up profile to what we're committing to in the numbers right now. The confidence is really just linear execution from our stellar team and also from our customers, great teams who are building these things into their products and beginning to put them out into the market. We do see trickle orders of the first products, particularly in the vision space already going out the door. So it's just, we cross every hurdle and every milestone as we come to it. And I would say tendentially versus last quarter, maybe we're even a little bit ahead of where we thought we'd be at this time.

Excellent. Thank you for that. And then on the Emotion 3D acquisition, so am I to understand that this is going to be a separate licensing screen going forward or does this software get integrated on chip and become a feature that you're additionally selling or just giving away into your product or is this a long-term different licensing model?

I mean, we will run them on our chips and we will sell them alongside each other, but we don't intend to give them away. There's a very vibrant market for software right now and it's generating in some cases more licensing fees than the hardware that they're running on. So we absolutely intend to drive it into perhaps not a different business model as such because we call on the same customers and sell the two products to them at the same time. But certainly we'll be driving a pricing model which preserves the value of the company we just bought.

And any help on the amount of revenue you expect in this?

A little too early to tell. They're quite small right now. They have some very good wins. We were nudged in that direction, of course, by our customers because they saw that the technology they were providing was really the best that they could get access to in the market. But if you assume the sort of number of sockets that we were likely to ship in our hardware, then this will generate multiple dollars per instance for every either hardware socket or software standalone that we ship into

the market. All right. Thank you guys. Thank

you. The next question comes from the line of Anthony Stoss from Craig Hallam. Please go ahead.

Thanks, Donald. Two for you. Then I have a follow up for Matthew. Donald, if you wouldn't mind, can you just give us an update on both Bosch and FACOSA timing, etc. And then haven't heard much on the CFO hunt. And then again, I have a follow up for Matthew.

Yeah, I mean, the programs that we're depending on are all on track. Bosch is at the point now where we're beginning to see trickle orders coming in from those guys for those programs. FACOSA remains a little bit delayed as it was in the case when we reported last quarter. CFO search is ongoing. Nothing to report yet. We have excellent finance department who are running without breaking sweat at this point and making sure that all the gears keep running inside the corporation. But we'll keep you posted when we have something to say about that.

Got that. And then as a follow up for Matthew, nice to have you on the call. I understand the initial lasers can do the communication side, but is there a road map or can you do the compute side? And then also, my understanding is you guys are production constrained right now. What can you do to ease that and get scale and get production really wrapped up?

Yeah, indeed. Right now, the most traction we have is really in the quantum communication with our LXM product. And as Donald mentioned, we are positioned across multiple quantum implementation approaches, including quantum computing. And actually, our LXM can be used for quantum computing for very specific applications where the quantum bit needs to be generated with photons. And one of the advantages of the LXM for the quantum computing is that it is intrinsically low noise. So it means that the chip itself can be easily co-packaged and integrated with other photonic components, which is an advantage for scalability and cost efficiency.

Just on the production expansion, I know you guys are kind of sold out right now, but how quickly can you add production?

Actually, all the proposed products that we have for quantum areas are already existing products, actually, with some existing capacity. So we can ramp up the production as needed, I would say.

Thank

you. Thank you. We take the next question from the line of Craig Ellis. From B. Riley Securities. Please go ahead.

Yeah, thanks for taking the question. And I wanted to start with a follow-up on Emotion 3D, Donald. I think we typically look at anything in automotive having a multi-year gestation cycle before from design until it ramps revenue. But Emotion 3D seems like it could leapfrog that. The question is, where does this new capability once it is in-house intercept with product that is going into a customer ramp, can it go immediately? And would there be any potential for it, since it is software, to download into existing products and pull in revenues for you from ships that are already out there in the field and operating?

Yeah, I mean, absolutely. We certainly believe so. There is not necessarily dependence on any of our hardware being ready in order for them to ship the software. And if our hardware is being deployed with other vendors, then there is a possibility of upgrade. I am not sure about in-field. I will hold back on that one. But certainly, at some point where there could be a very quick switch over in production, that is definitely possible. And so we certainly believe that they will be able to ramp quicker than a hardware solution going into production. They also have wins of their own, actually, which they are bringing to the party, which are yet to ramp or are at the very thin edge of a ramp and generating some royalty stream right now, which will begin to take some effect into 26.

Excellent. And then the second question is for Matthew. Matthew, I was hoping you could help frame Indy's view of what the photonics and quantum opportunities look like, whether it is 2030 or you are proximate to that. How big is the market that Indy could serve and help us understand how you think you are positioned or could be positioned from a market standpoint in that market? Thank you.

Yes. So, yes, said earlier, the quantum technologies are relying heavily on the photonics components. And Indy's photonics BU is well known for its cutting edge optical components. So we have been providing products to researchers and industrial actors for quantum applications for many years. And today, based on several market studies and our own marketing efforts, the total quantum photonics market is expected, obviously, to grow fast and to be between 3 and 5 billion by 2030. So that's our evaluation of the market. As of today, our most promising product is the LXM, as mentioned, due to its noise that is 10 times lower than the competing technology, which enables QQD system with even more range and reliability. So I

think what Matthew is trying to tell you is we think we can take a big share of that 3 to 4 billion number he just mentioned. Yep. Or did you say 3 to 5? 3 to 5. 3 to 5, sorry.

Well, I look forward to following that progress, and guys, and good luck. Thank you. Thank you. Thank you.

We take the next question from the line of John Tan 110 from CJS Securities. Please go ahead.

Hi, this is Wilhelm for John. Just one for me. You bought back Converse and announced the acquisition in the quarter. How should we think about cash burning, cash use from here?

You mean in terms of the acquisition or generally?

Just generally.

Well, we are largely on track with the cash burn from operations that we mentioned in the last quarter of around 25 million. We burned around 10 in this quarter. We have 15 to go over the course of the next two quarters, which should get us over the line. The cash burn for the acquisition is about 20, which is in addition to that. And nothing really has changed relative

to where we were last quarter. Thank you.

Thank

you.

Ladies and gentlemen, as there are no further questions, I will now hand the conference over to Mr. Donald McCliment for closing comments.

Thanks, everybody, for your time, and see you at the conferences in the next few weeks.

Thank you. Ladies and gentlemen, the conference of Indy Semiconductor has now concluded. Thank you for your participation. You may now disconnect your lines.