indie Semiconductor (INDI) Q3 2025 earnings call transcript

Thank you, Operator. Good afternoon. Welcome to Indy's third quarter 2025 earnings call. Joining me today are Don McClein, Indy's CEO and co-founder, Mark Tindall, EVP of Corporate Development and Investor Relations, and Naishi Wu, Indy's new CFO, whose appointment was announced earlier today. Don will provide opening remarks and discuss business highlights. Mark will then provide a review of Indy's Q3 results and Q4 outlook. Please note that we've been 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 of 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 10-K for the fiscal year ended December 31, 2024, as supplemented by our quarterly reports on Form 10-Q, as well as other public reports 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 Q3 earnings press release, which was issued in advance of this call, can be found on our website at www. indy. inc. I'll now turn the call over to Donald.

Thanks, Ashish, and welcome, everybody. Firstly, I'm very pleased to announce that Naishi Wu has been appointed Chief Financial Officer for Indie effective immediately. Naishi has been with Indie for the past four and a half years and has demonstrated exceptional leadership, integrity, and execution skills within our finance organization, especially during the past months in a period where we successfully executed on multiple complex transactions.

Beginning our career in PwC's assurance practice, Naishi has built an exemplary track record in finance, holding various senior leadership roles in financial and SEC reporting at CalAmp, Westfield, and RealD. Indy's finance team consistently demonstrates seamless collaboration and strong performance, combining expertise and focus to achieve desired business results and goals. Naishi's elevation to Chief Financial Officer is a natural progression in her leadership journey at Indy. Working alongside our capable and dedicated finance team, Indy's financial foundation will continue to strengthen. During the next months, you will have the opportunity to meet Naishi at row shows and investor events.

Let me now review our financial performance within the context of the overall automotive market before discussing Indy's key business achievements.

Starting with market dynamics, we see an automotive market trending slightly better than feared across almost all regions, with China representing Indy's strongest performance during the quarter. However, automotive market analysts are also maintaining a positive outlook for growth trends, with 2026 production now expected to increase by 0.46% from 2025 levels to approximately 91 million vehicles. This is further underpinned by the continued increase of semiconductor devices and sensor content per vehicle to support the upsurge in ADAS and automated driver safety and feature adoption, which we increasingly see across our customer base. For indie, we achieved third quarter total revenue of $53.7 million in line with our outlook, but representing solid quarter over quarter performance with growth above the market.

We have also just completed an annual review of our strategic backlog, which remains a very important and strong indicator for the future potential of our business looking out over the next 10 years. Recall last year's backlog was $7.1 billion. This year, we have expanded into several adjacent markets, including quantum compute and quantum communications, and also into humanoid robotics, where several of our products are relevant, particularly and initially our vision processors.

We now have content at leading robotics providers, Figure. ai and Unitree, who seamlessly use our automotive products for their application. During the last 12 months, due entirely to industry turbulence, we suffered some program cancellations. Particularly, and although we are still heavily engaged at the customer, we made the decision to remove Focosa business from the calculation, as upheaval at the OVM end customer has made the timing of revenue realization less clear.

However, these cancellations were more than offset by new business wins that we achieved in the same period. The strategic backlog is now at 7.4 billion compared to 7.1 billion as of a year ago. However, if we exclude Wuxi, which represented $1.3 billion, the resultant strategic backlog will be 6.1 billion. The composition of our backlog is strengthened materially due to the higher gross margin product mix following the divestment of Wuxi. ADAS and optical products will drive significantly higher gross margin profile going forward.

Let me now turn to our recent business progress and key achievements. Beginning with Radar, in late October, our Tier 1 Radar partner, a leader in the market, for whom we developed our 77 gigahertz chipset, publicly launched the next generation Gen 8 Radar solution to power the future of ADAS for their global OEM customers. The Gen 8 Radar is their primary offering on a go-forward basis. This represents a momentous milestone in the program. Our differentiated chipset enables the Tier 1 to deliver industry-leading performance across multiple dimensions, long-range detection beyond 300 meters with ultra-fine 4D angular resolution, enhanced capability in close-range scenarios for applications such as automated parking, frontal automatic emergency braking, and significantly expanded field of view, enabling new driving scenarios like autopilot in complex urban environments.

The solution demonstrates superior object detection and classification across a broad range of parking and driving scenarios, with the Tier 1 noting a 30% performance improvement over their prior generation. Final validation in real-world environments is concluding as we prepare for production shipments. Computer vision capabilities within the automotive market continue to be a differentiator for ADAS and automated safety, and a key driver for Indie. We are seeing additional penetration of our vision solutions among key customers with our industry-leading IND880 advanced camera processor.

During the quarter, we secured a design win for image signal processing for multi-camera operation in a leading self-driving robo-taxi OEM in North America for deployment in 2026. Additionally, we have captured multiple new design wins with leading electric vehicle manufacturers in China, spanning multiple applications. According to S&P Global Mobility, China's automotive market continues to lead the global market in terms of growth contribution and regional dominance.

China now represents more than one-third of the worldwide motor vehicle production, where Indy's advanced ADAS solutions are rapidly gaining adoption. From our power group, our 10-watt Qi 2.0 wireless charging platform continues to gain broader market adoption. Highlights include start of production scheduled at Ford for Q1 2026 on the first platform, with multiple subsequent vehicles expected to follow.

We secured design wins at India largest car manufacturer initially for three vehicle models with additional awards also expected to be forthcoming In addition we saw production start at an Indian joint venture of one of Europe top OEMs Looking further out and rounding out the portfolio we are now actively promoting our Qi 2 15 and 25 watt solutions which are gaining very positive market traction We have also provided the first custom samples of a connectivity IC to a leading electric vehicle manufacturer in North America, where production is expected to start in the first half of 2026.

Our momentum with Photonics continues with several highlights, including a design win which will include an NRE payment for our LiDAR application, and a design win in the drone segment for our SLED product. The operational alignment establishing the new Photonic Business Unit has resulted in meaningful impact on our sales funnel.

For applications outside of automotive, while the revenue is not reflected in our short-term results, we are expecting strong growth with minimal additional impact on operating expenses.

Last quarter, Indy announced two additional new distributed feedback, or DFB, laser products, complementing our LXMU laser launched earlier this year. The market response has been compelling with exceptional stability for quantum key distribution and quantum computing applications. This technology leadership in photonics generated through automotive LiDAR development is exposing Indy to exciting new customers across quantum and industrial sensing markets.

I'll now turn the call over to Mark for a review of our Q3 results and Q4 outlook.

Thank you, Donald, and good afternoon, everyone. Indy's third quarter revenue was $53.7 million, with non-GAAP gross margin of 49.6% in line with our outlook. Non-GAAP operating expenses totaled $37.9 million, consistent with our outlook. As a result, our third quarter non-GAAP operating loss was $11.3 million, compared to $14.5 million last quarter and $16.8 million a year ago, demonstrating our continued progress towards achieving profitability. With net interest expense of $2 million, our net loss was $13.3 million and loss per share was $0.07 on a base of 217.4 million shares.

Turning to the balance sheet, we exited the quarter with total cash, including restricted cash of $171.2 million, down $31.7 million from $202.9 million in the second quarter. The reduction in cash includes $17.7 million paid in connection with a recent M&A transaction.

Turning to the M&A transaction, on September 26, 2025, ahead of the original schedule, Indy closed the acquisition of Emotion 3D, a company based in Vienna, Austria, specializing in advanced AI perception software algorithms for automotive in-cabin sensing and ADAS. Their expertise in software combines perfectly with our Vision Processor SOC portfolio, adding a software royalty to the offering. Together, we are already engaging with major Tier 1 and OEM customers, where we expect we can secure and announce the first awards in the coming months.

Additionally, on October 28, we announced that Indy entered into an asset purchase agreement with United Faith Auto Engineering, A publicly listed company in China to sell our entire outstanding equity interest in Bushi Indy Micro for gross proceeds of approximately $135 million, payable in cash, net of applicable local taxes of roughly 10% upon closing. However, I do want to set realistic expectations regarding the closing timeline. The transaction is subject to customary closing conditions for a transaction of this type, including shareholder approval from United States and receipt of all required regulatory approvals in China, including both Shenzhen Stock Exchange and CSRC.

Based on precedent transactions and discussions with our advisors, we expect closing in late 2026, so the exact timing will be determined by the regulatory approval process. Between now and closing, once it is determined that a transaction meets their requisite criteria under applicable accounting guidance, the WUSHI operation will be reported as discontinued operations within our consolidated financial statements.

Further, the sale of WUSHI will improve our margin profile and lower our quarterly break-even threshold while simultaneously strengthening our balance sheet. While we exit our equity position in Wuxi, China remains an important market for indie, supported by our strong, independent, and well-established sales channel, including local-regional support.

Moving to the outlook for the fourth quarter of 2025. With ever-increasing demand in the semiconductor market, driven by AI, we are beginning to see some short-term disruptions to the back end of our manufacturing flow. Specifically, there are shortages in the supply of packaged substrates, which will impact our ability to deliver the full demand for Q4. In spite of that, we expect to continue to grow and deliver revenue within the range of $54 to $60 million, or $57 million at the midpoint, with an estimated shortfall of about $5 million due to the substrate shortage.

We expect this supply issue to be resolved during Q1 2026. Based on the anticipated product mix, we expect our non-GAAP gross margin to be in the range of 47%, driven by unfavorable product mix and margin pressure on the WISHI business. We continue the execution of certain targeted initiatives aimed at reducing operating expenses and accelerating our path to profitability.

I'm pleased to report that we remain on track. Progress in Q3 has been encouraging and is consistent with our communicated targets. We continue to expect to achieve our stated objectives within the anticipated timeframe. This reflects strong execution across the organization and continued commitment to operational discipline and long-term value creation. However, as we now move closer to the production ramp of radar and some of our large Envision design wins, our customers are demanding an enhanced second sourcing strategy with requirements for production localization. This is requiring additional OPEX investment in the next quarters to qualify these products in fabs and test houses outside of Taiwan and China.

Taking these into account, for Q4, we now expect our non-GAAP OPEX to be $36.5 million, down $1.5 million from Q3. Below the line, we expect net interest expense of approximately $2.2 million with no tax expenses. Assuming the midpoint of the revenue ranges, and with a base of 220 million shares, we expect a 7 cents net loss per share. From a financial perspective, with our strong focus on operating expenses, further optimization of our capital structure, and our solid balance sheet, including anticipated proceeds from the sale of WUSHI, Indy is well positioned to continue developing differentiated products for the automotive, ADAS, and adjacent industrial markets. This balanced approach would support our return to strong and profitable growth as design wins ramp as we enter 2026.

With that, I turn the call back to Donald for closing remarks.

Thanks, Mark. Our core business is solid and growing, as evidenced by our third quarter results and positive outlook. Radar and vision programs remain on track, as evidenced by our Tier 1 partners' recent release of their Advanced Gen 8 radar product, and the fundamental trend of increasing semiconductor content in vehicles continues unabated. With the addition of new high-growth markets, such as 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 advanced as Indy's to meet the diverse needs of these markets. That concludes our prepared remarks. Operator, please open the line for questions.

I mean, going in reverse order, for sure, we get the revenue back. It's just an inconvenience at the moment because of the short-term shortage. It's something that came fairly suddenly to the market. It wasn't something that we were able to anticipate. It was kind of a shock to the market. There are several other companies out there who have been placed in the same situation. If you look at the reports of some of the other companies, Intel in particular, called this out a few weeks ago. So, you know, it's something that we expect will resolve in Q1, and it's just basically a short-term thing that we've got to work through.

And can you talk about your gross margin declines into Q4? You mentioned Woozy. What's happening there sequentially? It's just a mix, really. The products that we sell that use this particular kind of package are a very high margin, and so because we have a small shortfall in the market that we can't deliver to, that's the biggest impact on the margin mix. And then because of that, WUSHI is a larger percentage of the roll-up and causes the margin percentage decay.

Excellent. And then lastly, on the radar side, can you just talk about what's happened in the last 90 days, and what's your visibility, and what does this ramp look like as we push into next year? Yeah, I mean, it's been a whirlwind for us. We've had so much activity in the last 90 days. It caused us to accelerate our plans to bring up the second sourcing procedures for what we're bringing into play here. It costs a little bit of short-term OPEX in the short run, but it's a great problem to have. We're having to prepare to deploy into multiple geographical regions with multiple different supply chain requirements, basically China for China and not China for not China, and the sort of level of support and effort that we're having to put into this now is enormous.

The fact that the customer also announced the product is a ringing endorsement of where we are in the process. These things don't go public unless there's a high degree of certainty that stuff's going to happen. So it's been a crazy 90 days, I will say, Cody, as we've gone through the process of launching now.

Any thoughts on next year's contribution? I mean, you know, I think we're not really going to make any change to our outlook on LIFE for 26. We still feel that there could be a very aggressive ramp in 26. That together, coupled with our vision processors, we're preparing, again, as I said, because of the supply chain issues that we're having to address, we're preparing to prepare for a big ramp. We're already in the manufacturing process. So we feel that we've got a lot of good stuff coming for 26.

That's great. Thanks, you guys.

Thank you.

Late Q2, really, it's accelerating very rapidly, and I think if you look at the reports of the public quantum guys, you're seeing them raising their numbers. So it's a new market for us. We're learning as we go, but it does seem very exciting, very dynamic. It's quite a fragmented market, so we have to cover quite a lot of bases and customers and so forth, but certainly the deployments can go very quickly to ship parts off the shelf, basically, off the rack.

Okay. Great. And then the backlog growth you saw year over year, can you talk about what programs are driving the increases in backlog? Is it more radar vision opportunity or expansion of scope of programs or any thoughts? Yeah, I mean expansion of scope of the radar program for sure, and then some heavier vision programs, which we added to the portfolio.

Okay. And lastly, on the vision programs, can you talk about the timing of when those? I think the radar one is coming on very quickly, but comments on the vision would be helpful. I mean, vision is also ramping now, and we have some fairly significant volume in it already. We've added a bunch of new wins in China, which ramp very quickly, and there are certain sort of dynamics in the market that, in many cases, the programs that are new to us should ramp actually pretty quickly through 26. So, again, it's been a whirlwind quarter.

Okay, great. Thanks.

Yeah, so primarily it is centered around our ADAS products, both radar and vision. And we had some bigger discrete wins at vision, which we'll talk about in the fullness of time once we're able to. There is, we have added a little bit for the quantum-related optics products, still small, but now that we have running revenue, of course, we're kind of compelled to anyway.

We're still quite conservative on the market growth and the amount of money that we have in there, or assumed in there. It's very small compared to what we're committing to on the ADAS products. But we are excited about the market. It's moving extremely quickly. And that, coupled with the fact that we're now seeing a lot of interest from the humanoid robotics market for our product base, means that there are some dynamic market growth factors there which we hadn't anticipated in our unexpected positives, I would say. Thanks for that And then coming back to Radar and just going a little bit deeper on where Suji was it nice to hear that your primary customer has identified that the product will ramp Can you help us understand beyond just color on multi ramp potential what type of customers they may be engaged with that could give us a sense of the type of volume we would be talking about when this starts going out in volume I mean, you know, they're one of the largest vendors on the planet in this space, and so their product portfolio addresses everything from the highest volume passenger cars through commercial vehicles through high-end vehicles and heavy industry.

So it's a very, very high-volume market indeed. And, you know, we expect to get a very significant market share of the entire radar market through this program. And, again, that's why we're preparing our supply chain and really had to double down during the last quarter in terms of bringing up second sources earlier than we thought we would.

Got it.

Yes, so the acquisition is off to a very good start, great integration ongoing. We've already engaged with the customers, with the main Tier 1 customers for camera, OMS, DMS, combining our device with their software. So it's probably too early to have a synergy, say, a revenue in Q4, but certainly next year we will see some sales synergy there.

It's already running in the order of approximately $1 million a quarter for 2025, and that should increase going through 2026.

It's our new vision processor. Got it. And then I think in the last quarter of the call, you talked about expanding a relationship with BYD, and I think there's a vision program that was supposed to launch this quarter, Q4. Maybe you can just update us. I know you made some comments about Chinese wins on the call, but I'd love to hear more. Yeah, I mean, we're engaged with all of the name brand Chinese OEMs. We have wins with many of them, and, you know, we're making the prescribed progress that we expected through this quarter. So, I mean, we're generally pretty happy with the way the market is.

And, I mean, the sales channel that remains in China net of Wuxi is doing a phenomenal job of deploying our new products into that space. And so, you know, we do expect significant revenue from that geography as time progresses.

Got it. And then my last question also related to the radar ramp. You talked about bringing up a second supplier earlier than anticipated. Is your partner, are the automakers moving more towards intermodel changes out and putting in Aptos in any solution, or why do you need to bring on a second supplier so quickly? I mean, heavily it's been driven by geographical compatibility.

So we do need, for certain, OEMs to ensure that we have a supply chain that is not including China and Taiwan. And we were well positioned to do that, but we had to accelerate some of our plans and spend some of the manufacturing tooling I'm going to turn the call over to management for the next quarter in order to make that happen. Got it. Thanks, Donald. Appreciate it. No worries.

Thank you.

Well, taking the first part, I mean, we're in the process of bringing up several second sources. As I mentioned before, just as a matter of form, we get to accelerate our procedure, particularly for these organic substrates that are used in the flip chip packages that we use. So the discussions and ongoing engagement with the new vendors has been going well. Well, I would say this is, let's say, a corner of the industry specific where the vendors who are heavily exposed to large language model ICs from NVIDIA and co. are redirecting capacity over there. Even some very large brand names are struggling to get what they want. So it was just kind of a fallout of that.

So you're right, it's an indirect impact. I don't necessarily see that we have a long-term impact from anything that is out there right now. The Nexperia thing aside, with Volkswagen particularly, of course, that was public. But I do expect that that will rectify itself in short order. It doesn't feel like a general industry shortage like we saw post-pandemic.

Okay, great. That's helpful. Well, and then just to dig a little deeper there, is the pricing and ramping more sources for chip substrate going to be an issue, especially if your volumes next year are going to be better than maybe you thought with these, you know, your customers requiring second sources for your production? Yeah, I mean, the second source helps us give price leverage into our supply chain. So, I mean, it was something we would have done in the fullness of time anyway.

Our hand was forced, really, by some unexpected positive news, really, to do it earlier. And, you know, it really should give us leverage as we go forward, as we're able to play wafer foundry suppliers against each other, and likewise with packaging and test houses that make up the back end of the product.

Okay, great. If I could sneak in one more, what does the margin and optics without WUSH look like, and what does the break-even level look like in revenue? I mean, we don't really segment it out. I mean, we did give directionally indication that the WUSHI business was significantly lower margin than the rest.

As we go forward and deploy our ADAS products, you know, we're still committed to getting to the 60% gross margin level of the target model that we set ourselves.

Okay, great. Thank you. Thank you.

Well, thanks, everybody. Thanks for attending the call, and looking forward to seeing the conferences over the coming week, where you'll meet myself and Mark and Naisi.