Indie Semiconductor, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Amounts below are in U.S. dollars; financial figures are rounded to millions unless otherwise noted. This is an annual report, not a standalone 2023 fourth-quarter filing.
Business context
Indie develops automotive semiconductors and embedded software for ADAS and automated driving, in-cabin user experience, connectivity, and vehicle electrification. It operates primarily under a fabless model, relying on third parties for manufacturing, assembly, and testing. Its growth strategy includes product development, customer design wins, and acquisitions.
Financial results and liquidity
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $223.2m | $110.8m | +101% |
| Product revenue | $195.6m | $89.5m | +119% |
| Contract revenue | $27.5m | $21.3m | +29% |
| Gross profit / gross margin | $89.6m / 40.1% | $50.3m / 45.4% | Margin down 5.3 percentage points |
| Operating loss | $(135.4)m | $(119.1)m | Loss widened |
| Net loss attributable to indie | $(117.6)m | $(43.4)m | Loss widened |
| Net loss per share, diluted | $(0.81) | $(0.37) | Loss per share increased |
| Net cash used in operating activities | $(104.4)m | $(76.7)m | Cash use increased |
- Management attributed revenue growth to higher product volumes, product mix, average selling prices, and acquisitions. Acquired businesses contributed $59.7m of 2023 revenue from their respective acquisition dates; the filing does not isolate organic growth.
- Cost of goods sold rose 121% to $133.6m, faster than revenue. It included $9.8m of inventory step-up amortization and $6.9m of acquired-intangible amortization. R&D was $154.5m, or 69% of revenue; SG&A was $70.5m.
- Cash and cash equivalents were $151.7m at year-end, down from $321.6m. Current assets were $271.8m and current liabilities $138.9m. Management said available liquidity was expected to cover working-capital needs for at least 12 months.
- Debt carrying value was $160.8m, including $160.0m principal of 4.50% convertible notes due November 2027. The notes may be settled in cash, shares, or a combination at the company’s election; conversion or repurchase obligations could affect liquidity and dilute shareholders.
- Contractual obligations totaled $209.1m, including debt principal, interest, and operating leases. Current contingent-consideration liabilities were $83.9m at year-end, largely related to acquisitions.
Material changes and notable items
- Revenue more than doubled, but gross margin declined and operating cash use increased. The company continued to report losses and negative operating cash flow.
- Acquisitions completed in 2023 included GEO Semiconductor, Silicon Radar, and Exalos. The acquisitions increased goodwill and intangible assets; goodwill reached $295.1m and intangible assets $208.1m at year-end. The GEO purchase included substantial contingent consideration.
- In October and November 2023, indie exchanged all outstanding warrants for approximately 7.7m Class A shares. This eliminated the warrant liability but increased the share count.
- The company raised $53.1m gross through its at-the-market equity program in 2023, issuing 5.2m shares. Approximately $79.7m remained available under the program at year-end.
- Aptiv accounted for 14.8% of 2023 revenue, down from 36.9% in 2022. Greater China was the largest shipping destination, representing $101.3m, about 45% of revenue.
Outlook, risks, contingencies, and controls
- Management expects continued operating losses and negative operating cash flows, with R&D, SG&A, and capital expenditures expected to increase as the business expands. No specific revenue or earnings guidance is provided.
- Key risks include automotive and semiconductor cyclicality, pricing pressure, dependence on outsourced manufacturing and supply chains, customer design-win uncertainty, and significant revenue exposure to China and a major Tier 1 customer.
- Management cited inflation, interest-rate and market volatility, and geopolitical uncertainty, including conflicts in Ukraine and the Middle East. The potential business impact was described as uncertain.
- A November 2023 demand letter sought $7.5m in contingent consideration and alleged covenant breaches. Indie denied liability, intends to defend the claim, and said a potential loss could not be reasonably estimated.
- Management identified material weaknesses in internal control over financial reporting, including deficiencies in staffing, risk assessment, information and communication, IT and process-level controls, and monitoring. Management concluded controls were ineffective at December 31, 2023; KPMG issued an adverse opinion on internal control. KPMG separately gave an unqualified opinion on the consolidated financial statements. Remediation is ongoing and may extend beyond 2024.
- In January 2024, indie acquired selected Kinetic Technologies assets for initial cash consideration of $4.5m plus potential holdbacks and milestone payments. This occurred after the reporting period.
Important facts for investors to verify
- Whether revenue growth translates into improving gross margins and a lower operating cash burn, particularly after acquisition-related costs and amortization.
- Cash needs and potential dilution from the 2027 convertible notes, ATM issuance, equity awards, and acquisition earn-outs.
- Achievement and settlement terms for acquisition milestones, and the outcome of the $7.5m demand-letter dispute.
- Customer and geographic concentration, including Aptiv’s continuing contribution and the scale of China-related sales and operations.
- Progress in remediating internal-control weaknesses and whether the company can demonstrate sustained effectiveness.
- Whether management’s stated liquidity runway remains adequate as operating losses, investment, and acquisition-related obligations continue.