indie Semiconductor(INDI) - 2023 Q1 - Quarterly Report

Part I. Financial Information Item 1. Condensed Consolidated Financial Statements Presents indie Semiconductor's unaudited Q1 2023 financial statements, detailing 84% revenue growth, a $72.7 million net loss, and impacts from recent acquisitions Condensed Consolidated Balance Sheets - Total assets increased to $793.6 million as of March 31, 2023, from $603.4 million at the end of 2022, primarily driven by a $142.5 million increase in Goodwill and a $126.4 million increase in Intangible Assets resulting from recent acquisitions[14] - Total liabilities rose to $435.4 million from $289.0 million, largely due to a $47.3 million increase in warrant liability and a $57.5 million increase in accrued expenses and other current liabilities, which includes contingent considerations for acquisitions[14] Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $793,577 | $603,351 | | Cash and cash equivalents | $207,398 | $321,629 | | Goodwill | $278,949 | $136,463 | | Intangible assets, net | $189,476 | $63,117 | | Total Liabilities | $435,440 | $289,019 | | Warrant liability | $92,730 | $45,398 | | Long-term debt, net | $155,959 | $155,699 | | Total Stockholders' Equity | $358,137 | $314,332 | Condensed Consolidated Statements of Operations - The company reported a net loss attributable to indie of $72.7 million in Q1 2023, a significant shift from a net income of $10.8 million in Q1 2022, primarily driven by a $47.3 million non-cash loss from the change in fair value of warrants, compared to a $47.4 million gain in the prior-year period[16] Q1 2023 vs. Q1 2022 Operating Results (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total Revenue | $40,452 | $21,999 | | Loss from Operations | $(36,981) | $(34,334) | | Net Income (Loss) attributable to indie | $(72,746) | $10,833 | | Net Income (Loss) per share — diluted | $(0.55) | $0.07 | Condensed Consolidated Statements of Cash Flows - Net cash used in operating activities increased to $32.9 million in Q1 2023 from $15.7 million in Q1 2022[24] - Net cash used in investing activities was $101.6 million, dominated by $98.4 million used for business combinations (net of cash acquired)[24] - Net cash provided by financing activities was $21.1 million, primarily from $34.2 million in proceeds from an At-the-Market (ATM) stock offering, partially offset by debt and finance software payments[24] Notes to Unaudited Condensed Consolidated Financial Statements - The company completed two significant acquisitions in Q1 2023: GEO Semiconductor Inc. for total consideration of $253.1 million and Silicon Radar GmbH for $29.1 million, which significantly increased goodwill and intangible assets[29][30][41] - As of March 31, 2023, total debt stood at $160.6 million, primarily composed of $160.0 million in 4.50% Convertible Senior Notes due 2027[68][69] - The fair value of warrant liability increased from $45.4 million at year-end 2022 to $92.7 million as of March 31, 2023, resulting in a $47.3 million non-cash loss recognized in the statement of operations[90][91] - For Q1 2023, two customers accounted for 15.8% and 11.9% of total revenue, respectively, indicating significant customer concentration[121] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2023 financial performance, highlighting 84% revenue growth, increased operating expenses, a net loss from warrant adjustments, and the company's liquidity position Operating Results Revenue Breakdown Q1 2023 vs Q1 2022 (in thousands) | Revenue Type | Q1 2023 | Q1 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product revenue | $33,653 | $18,086 | $15,567 | 86% | | Contract revenue | $6,799 | $3,913 | $2,886 | 74% | | Total revenue | $40,452 | $21,999 | $18,453 | 84% | - Cost of goods sold increased by 70% to $24.1 million, primarily due to higher product shipments, a change in product mix, and a $2.5 million amortization charge for inventory step-up value related to recent acquisitions[151] - R&D expenses grew 24% to $36.6 million, reflecting increased investment in product development and higher personnel costs[152] - SG&A expenses rose 33% to $16.8 million, driven by $3.0 million in transaction costs for the GEO and Silicon Radar acquisitions, along with increased personnel costs and share-based compensation[153][53] - A non-cash unrealized loss of $47.3 million from the change in fair value of warrants was recognized, primarily due to the increase in the company's stock price from $5.83 to $10.55 during the quarter[157] Liquidity and Capital Resources - As of March 31, 2023, the company had $207.4 million in cash and cash equivalents[167] - The company utilized its At-The-Market (ATM) program, raising gross proceeds of $52.1 million as of March 31, 2023, with approximately $97.9 million remaining available for future issuance[168] - Significant cash was used for acquisitions in Q1 2023, including approximately $93.4 million for GEO Semiconductor and $9.2 million for Silicon Radar[173][174] Future Material Cash Obligations (in thousands) | Contractual Obligations | Less than 1 year | 1 - 3 years | 3-5 years | >5 years | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Debt obligations | $5,659 | $— | $160,000 | $— | $165,659 | | Operating leases | $1,993 | $4,325 | $3,590 | $4,132 | $14,040 | | Interest on debt obligations | $7,320 | $14,600 | $11,880 | $— | $33,800 | | Total | $14,972 | $18,925 | $175,470 | $4,132 | $213,499 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company identifies foreign currency and interest rate risks as primary market exposures, with foreign currency risk stemming from international operations and interest rate risk deemed minimal due to investment strategy - The company is exposed to foreign currency risk from its international operations, with primary exposures in the Canadian dollar, Chinese yuan, and Israeli New Shekel; as of March 31, 2023, a cumulative foreign currency translation loss of $13.5 million is included in 'Accumulated other comprehensive loss'[187] - Investment and interest rate risk is related to the company's $207.4 million portfolio of cash and cash equivalents, and the risk is considered not material as investments are short-term and focused on liquidity and capital preservation[189][191] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2023, due to persistent material weaknesses in internal control over financial reporting, particularly regarding non-routine transactions and IT general controls - Management concluded that disclosure controls and procedures were not effective as of March 31, 2023[192] - The ineffectiveness is due to persistent material weaknesses related to risk assessment of non-routine transactions (e.g., mergers and acquisitions) and inadequate information control processes, including IT general controls (ITGCs)[195] - Remediation efforts are ongoing, but management cannot guarantee when the material weaknesses will be fully resolved[197] - The acquisitions of GEO and Silicon Radar in Q1 2023 represented material changes to the company's internal control over financial reporting[199] Part II. Other Information Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not party to any material legal proceedings, though it may be involved in ordinary course of business claims from time to time[201] Item 1A. Risk Factors The company confirms no material changes to risk factors previously disclosed in its Form 10-K for the fiscal year ended December 31, 2022 - There have been no material changes to the Company's risk factors as disclosed in the Form 10-K for the year ended December 31, 2022[202] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the quarter, the company issued over 2.6 million shares of Class A common stock in unregistered transactions, primarily for an acquisition and unit exchanges, exempt under Section 4(a)(2) of the Securities Act - The company issued 1,626,348 shares of Class A common stock to three ADK Minority Holders in exchange for an equal number of ADK LLC units[203] - In February 2023, the company issued 982,445 shares of Class A common stock as partial consideration in an acquisition[203] - All unregistered sales were conducted in reliance on the exemption under Section 4(a)(2) of the Securities Act of 1933[203] Other Items (Items 3, 4, 5, 6) This section confirms no defaults on senior securities, non-applicability of mine safety disclosures, and lists exhibits filed with the report - Item 3: No defaults upon senior securities[204] - Item 4: Mine safety disclosures are not applicable[205] - Item 6: A list of exhibits filed with the 10-Q is provided, including merger agreements and officer certifications[207][208] Signatures The report was signed on May 12, 2023, by Kanwardev Raja Singh, Chief Accounting Officer of indie Semiconductor, Inc - The report was signed on May 12, 2023, by Kanwardev Raja Singh, Chief Accounting Officer[213]