Indie Semiconductor, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Amounts below are in U.S. dollars, generally rounded to millions.
Business context
Indie develops automotive semiconductors and software for ADAS, autonomous vehicles, connected cars, in-cabin user experience and electrification. It outsources manufacturing, primarily to subcontractors in Asia. In January 2024, indie acquired certain Kinetic Technologies assets, personnel and intellectual property supporting custom development for a North American EV OEM.
Financial performance and liquidity
- Revenue: $52.4 million, up 29% from $40.5 million. Product revenue rose 44% to $48.6 million; contract revenue fell 44% to $3.8 million.
- Gross profit and margin: Approximately $22.3 million and 42.5%, compared with $16.4 million and 40.5% a year earlier.
- Operating expenses: $102.0 million, up 32%. R&D was $49.6 million and SG&A was $22.3 million. Share-based compensation increased to $25.6 million from $11.4 million.
- Losses: Operating loss was $49.6 million versus $37.0 million. Consolidated net loss was $34.2 million versus $82.0 million; net loss attributable to indie was $31.2 million versus $72.7 million. Basic and diluted loss per share was $0.19 versus $0.55.
- Cash flow: Operating cash use was $9.3 million, improved from $32.9 million used. Investing cash use was $5.5 million, compared with $101.6 million, largely reflecting lower acquisition spending. Financing provided $6.9 million, versus $21.1 million; Q1 2023 included ATM proceeds.
- Cash and liquidity: Cash and cash equivalents were $138.2 million at quarter-end, plus $10.0 million restricted as collateral for a new Wells Fargo line of credit. Management said available liquidity sources should meet working capital needs for at least 12 months.
- Debt: Total carrying value was $170.2 million, including $160.0 million principal of 4.50% convertible notes due 2027 and $10.7 million drawn on revolving credit facilities. The Wells Fargo $10.0 million facility matures March 2025 and bears interest at SOFR plus 1.75%.
- Balance sheet: Total assets were $803.6 million and total stockholders’ equity was $461.5 million. Goodwill was $290.4 million and net intangible assets were $198.6 million.
Changes, outlook and risks
- Management attributed product growth to higher volume, product mix and recent acquisitions. Contract revenue declined as a large multi-year engineering project moved toward completion.
- R&D and SG&A costs rose with hiring, equity compensation and acquired intangible amortization. Management expects both expense categories to continue increasing as product development and global operations expand.
- No specific revenue, earnings or margin guidance was provided. Management expects continuing operating losses and negative operating cash flow, and anticipates higher R&D, G&A and capital expenditures.
- Other income included a $15.4 million net gain from remeasurement of contingent consideration and acquisition-related holdbacks, substantially non-cash. This helped reduce reported net loss; outcomes depend on estimates and milestone expectations. The prior-year comparison included a $47.3 million warrant fair-value loss; the warrants were exchanged in 2023.
- Acquisition earn-outs and holdbacks create potential future cash or share payments. The Kinetic and Exalos purchase-price allocations remained preliminary; fair-value revisions could affect goodwill and deferred taxes.
- Management cited inflation, interest rates, weaker automotive demand, geopolitical uncertainty, supply-chain/manufacturing dependence, competition, and execution and integration risks. About 66% of product revenue was shipped to customer locations in Asia.
- Disclosure controls were deemed ineffective at March 31, 2024 because previously reported material weaknesses persisted, including deficiencies in risk assessment for non-routine transactions and in information controls and financial-reporting processes. Remediation is ongoing; timing and effectiveness are not assured.
- A counterparty demanded $7.5 million in contingent consideration, alleging covenant breaches. Indie denies liability and intends to defend the claim; the company said it cannot reasonably estimate any potential loss.
Most important facts for investors to verify
- Whether revenue growth and improving gross margin persist as product mix, acquisition contributions and the wind-down of engineering contracts change.
- Cash burn, unrestricted liquidity and the company’s ability to fund operations while losses and planned R&D spending continue.
- Potential cash or share dilution from acquisition earn-outs, convertible notes, equity compensation and the Wuxi investment arrangements.
- Progress in remediating material weaknesses and the status of the disputed $7.5 million demand.
- Final purchase accounting for recent acquisitions and the assumptions behind contingent-consideration fair values.