Indie Semiconductor, Inc. — FY2021 Form 10-K
Business context and reporting period. This is the annual report for the fiscal year ended December 31, 2021, not a standalone fourth-quarter report. Indie develops automotive semiconductors and software for safety/ADAS, connected-car, in-cabin user experience and electrification applications. The June 2021 SPAC transaction was accounted for as a reverse recapitalization; the financial statements continue the legacy Indie business. Acquisitions of TeraXion and ON Design Israel closed in October 2021, so their results are included only after closing. Symeo closed January 4, 2022.
Financial performance and position
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $48.4 million | $22.6 million |
| Gross profit / gross margin | $19.7 million / 40.7% | $9.6 million / 42.3% |
| Operating loss | $74.8 million | $19.2 million |
| Consolidated net loss | $118.6 million | $98.4 million |
| Net loss attributable to Indie; loss per share | $88.0 million; $1.26 | $97.5 million; $3.12 |
| Cash used in operating activities | $55.8 million | $21.2 million |
| Cash used in investing activities | $84.3 million | $0.8 million |
| Cash provided by financing activities | $340.6 million | $33.5 million |
- Revenue increased 114%, largely from greater product volumes, with product revenue up 125% to $43.8 million and contract revenue up 48% to $4.6 million. The filing attributes growth to stronger customer demand, product mix and higher average selling prices.
- Gross margin declined about 1.6 percentage points. Cost of goods sold rose 120% to $28.7 million, reflecting volume, higher material costs and product mix.
- Operating expenses more than doubled to $123.2 million: R&D was $58.1 million (120% of revenue) and SG&A was $36.4 million. Increases included personnel and product development, share-based compensation, acquisition costs and public-company costs.
- Reported losses were affected by fair-value accounting: FY2021 included a $21.6 million gain on SAFEs, a $26.1 million warrant remeasurement loss and a $38.8 million earn-out remeasurement loss. The first earn-out milestone was achieved and the associated liability was reclassified to equity; no earn-out liability remained at year-end.
- At December 31, 2021, cash and cash equivalents were $219.1 million and total debt carrying value was $7.9 million, implying substantial net cash. Total assets were $470.9 million and stockholders’ equity was $291.9 million. Financing cash flow chiefly reflected the SPAC transaction; investing outflows chiefly reflected $80.3 million of acquisitions.
- Contractual cash obligations included $8.9 million of operating-lease payments. The company also disclosed future acquisition payments, including $7.5 million due in 2022 for ON Design Israel, contingent ON Design consideration of up to $7.5 million, and Symeo consideration of $10 million at closing and $10 million in 2023, plus a share-based earn-out.
Material changes versus FY2020
- Revenue more than doubled, but operating loss increased materially as Indie expanded R&D, headcount and public-company operations. Consolidated net loss widened, while net loss attributable to Indie and loss per share decreased; noncontrolling interests and significant fair-value items affect comparability.
- Cash increased to $219.1 million following the June business combination and PIPE financing. The transaction generated approximately $341.3 million of net cash proceeds as described in MD&A; transaction costs and debt repayment partly offset proceeds.
- TeraXion added photonics and LiDAR capabilities; ON Design Israel added engineering capabilities for radar. Acquisitions drove substantial year-over-year increases in goodwill and intangible assets.
- Customer concentration eased but remained significant: Aptiv represented 39% of revenue, compared with 57% in 2020. Greater China accounted for $26.0 million, or about 54%, of total revenue by customer shipping location.
Outlook, risks and unusual items
- The filing provides no quantified revenue, earnings or cash-flow guidance. Management expects continued operating losses and negative operating cash flow, with R&D, SG&A and capital expenditures expected to increase as the company expands.
- Management cites semiconductor shortages and supply constraints, extended lead times, higher production and expedite costs, and risks from reliance on outsourced manufacturing. The company says it placed orders based on anticipated demand to secure capacity.
- Key business risks include automotive-market cyclicality, design-win uncertainty, price erosion, customer concentration, and exposure to China. The filing also identifies geopolitical/trade restrictions, COVID-19, foreign-exchange movements and acquisition-integration risks.
- Management concluded that internal control over financial reporting and disclosure controls were not effective at year-end because of material weaknesses involving staffing and accountability, risk assessment, information processes, monitoring and process-level controls. Remediation was underway, with work expected to continue through 2022 and possibly into the first quarter of 2023. The independent auditor did not opine on internal-control effectiveness.
- No material legal proceedings were reported. The financial-statement audit opinion was unqualified.
Most important facts for investors to verify
- Whether revenue growth converts into improved gross margin and lower operating losses, given the 2021 R&D and SG&A cost base.
- Whether supply constraints ease and Indie can fulfill customer demand without further cost increases or delays.
- How much future revenue depends on Aptiv and China-linked shipments, and whether customer concentration continues to decline.
- Acquisition performance and remaining cash, contingent and equity-based consideration, including Symeo’s post-year-end contribution.
- Progress in remediating the disclosed material weaknesses, and the effect of potential warrant, equity-plan and other share issuance on dilution.