Granite Point Mortgage Trust Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 11, 2023

There are 9 speakers on the call.

Operator

Good afternoon, and welcome to Indy Semiconductors First Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I will now turn the call over to Ashish Gupta, Investor Relations.

Operator

Mr. Gupta, please go ahead.

Speaker 1

Thank you, operator. Good afternoon, and welcome to Indy Semiconductor's Q1 2023 earnings call. Joining me today are Dal McClement, Indi's Co Founder and CEO and Raja Ball, Indi's Chief Accounting Officer Tom Schiller, Andy's CFO and EVP of Strategy is out of the office with the passing of his mother just days ago. Donald will provide opening remarks and discuss business highlights, followed by Roger's review of Endy's Q1 results and second quarter outlook.

Speaker 2

Please note that we are

Speaker 1

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 about 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 a discussion of strategic backlog formulation methodology, please refer to our Safe Harbor statement on our B3 2022 earnings press release. 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 ks for the fiscal year ended December 31, 2022, as well as other public reports filed with the SEC. Finally, the results and guidance discussed today are based on certain non GAAP financial measures.

Speaker 1

For a complete reconciliation to GAAP, please see our Q1 earnings press release, which was issued in advance of this call and can be found on our website atwww.indysemic.com. I'll now turn the call over to Donald.

Speaker 2

Thank you, Ashish, and welcome everybody. I'm pleased to report that Indi delivered yet another above plan record performance in the Q1, reflecting robust demand for our highly innovative Autotech solutions and our unwavering commitment to achieving operational excellence. Once again, we substantially outpaced our industry peers, driven by Indi's diverse and differentiated product set underpinned by over 400 global patents and applications. We're off to a strong start in 2023. Specifically, during the quarter, we grew revenue 84% year over year and 22% sequentially to $40,500,000 and achieved a gross margin of just over 52%.

Speaker 2

Our deep R and D investments and targeted acquisitions are beginning to yield results, allowing Indi to sharply outpace our peer group and insulate us from isolated geographic customer and market weakness. As we'll review, We're gaining design win momentum across ADAS, user experience and electrification applications, setting the stage for sustained outsized growth for years to come as these wins translate into program ramps and ultimately revenue and free cash flow generation. 1st, within the ADAS product area, We're enabling automotive OEMs and Tier 1 suppliers to meet the growing demand for advanced safety systems in next generation vehicles. Importantly, we continue to follow a technology agnostic approach, supporting multiple sensor modalities such as radar, lidar, computer vision and ultrasonic solutions, from which we will ultimately fuse the data created to provide a comprehensive and accurate perception of the vehicle surroundings. We believe that a TensorFusion product roadmap augmented and accelerated by our acquisition As truly differentiated Indy from the pack, including competitors who tend to cling to one modality, often with an extremely narrow customer base.

Speaker 2

Quite simply, we believe that no single sensing modality will dominate the application landscape, particularly given the diversity of ADAS use cases ranging from backup safety systems to lane assist to fully autonomous driving and everything in between. And to be clear, 2 to what I like to call level 2 plus plus plus. In other words, we haven't even begun to address the opportunity presented by levels 45, the definition of the complete driverless vehicle, but we certainly will when those markets begin to mature. In the meantime, upon this particular program, suffice it to say, it's a material development for Indy and will initially encompass many of GM's forthcoming models, including its EV portfolio. We look forward to providing additional information upon the global rollouts next year.

Speaker 2

During the quarter, we also strengthened our position as a technology leader in automotive radar with this acquisition of Silicon Radar, a company specializing in advanced highly integrated high frequency systems on chip. SiliconRadar had developed the industry's first Volume production ready, highly integrated 120 gigahertz radar front end transceiver, including on chip integrated antennas. Silicon Radar had previously been a design partner to our own Munich, Germany based radar group. As vehicle safety standard initiatives The European New Car Assessment Program continue to expand globally. There is an increasing need for driver and occupant monitoring systems, making in cabin sensing solutions as an essential component for ensuring overall safety.

Speaker 2

In fact, S&P Global Mobility predicts That the market for driver and occupant monitoring semiconductors will grow to over $500,000,000 by 2029 at a 34% compound annual growth rate. With Siliconradar's world class design team, we plan to lead the way. On the LiDAR front, during the quarter, we continued to make progress with our Surya SoC program, demonstrating our solution at multiple European Automotive Tier 1s. Indi Surya LiDAR SoC is a game changing product, enabling customers to implement a highly integrated and high performance software defined data acquisition and signal processing system. It is the world's 1st merchant market coherent lidar solution that integrates multichannel high speed analog to digital converters, Hardware and software based digital signal processing together with the system control interfaces needed for an efficient and cost effective FMCW LiDAR system.

Speaker 2

Specifically, we are targeting a $200 BOM, 80% less than current architectures. As a result, we believe Indi can uniquely drive this key three-dimensional imaging technology, which is now beginning to gain traction as a mainstream sensor. And finally, computer vision systems are a crucial component of both ADAS and autonomous driving, serving as the primary sensing function with next generation vehicles requiring up to 20 cameras for sensing functionality. Computer vision systems are diverse, enabling a wide range of applications, including backup cameras, surround view systems, object and lane detection, night vision and driver and occupant monitoring. These functions collectively enable use cases such as lane change assist, highway pilot, traffic jam pilot, occupant safety and automated parking amongst others.

Speaker 2

During the quarter, we continued to expand our design win pipeline, securing initial vision sockets at Panasonic in support of Honda. Next, turning to user experience. By background, OEMs have been increasingly prioritizing a best in class in cabin experience as a point of differentiation, prioritizing communication, entertainment and information sharing. With modern cars becoming more like temporary homes or workplaces, Providing the ultimate user experience throughout the entire cabin is becoming the new standard. OEMs have increasingly highlighted the importance of interior lighting as it can drive an emotional connection with the driver and as a strong generator of brand recognition.

Speaker 2

With advanced dynamic lighting, it is possible to improve visibility and make it easier for drivers to see and be seen, which can help reduce the risk of accidents. Innovative lighting can also improve the comfort of the driver and occupants, creating an atmosphere suited to the context of the journey, Style preference of the vehicle owner and indeed the general mood. In these solutions such as the recently announced LED matrix controller are designed to address this growing demand for innovative and power efficient LED lighting. Based on our power efficiency leadership, During the quarter, we captured additional advanced lighting wins at several leading EV OEMs, both North American and China based, including BYD, NIO and Li Auto. Similarly, mobile device integration and wireless charging are also top This technology allows drivers to seamlessly link their mobile device into the vehicle's infotainment system, To date, Apple and Android have provided compelling consumer experiences and have gained significant market share.

Speaker 2

In that process, India has played no small part in enabling this functionality. That said, our chipset is agnostic to whatever software layer is implemented, be it Apple CarPlay, Android Auto or even in house solutions. While some OEMs have recently announced plans to transition to internally developed architectures, Indi is in no way impacted by this development, particularly as we continue to sell data transport and power to connect the phone to the infotainment system within any configuration. At the same time, our strong relationships with Tier 1s, global carmakers and rapidly emerging EV OEMs have allowed us to expand our offerings into adjacent areas of user experience such as wireless charging, USB PD controller and other in cabin solutions. And speaking of electric vehicles, we're seeing a market acceleration as EV sales continue to gain momentum.

Speaker 2

According to Kelley Blue Book, EV sales were up 45% versus the prior year in the U. S. And the EV share of the total market increased to over 7%. Additionally, as EV technology continues to improve, charging infrastructure expands and battery costs decrease, The potential for growth in the EV market is phenomenal. We expect global EV OEMs will seek more efficient and integrated semiconductor solutions and believe Indi is in a strong position to benefit from the growth, particularly given our strong relationships with an increasing number of leading EV OEMs around the globe.

Speaker 2

Now turn the call over to Raja for a discussion of our Q1 results and Q2 outlook. For those who haven't had the opportunity to meet Raja, he has been a valuable member of the Indy team for over 3 years and currently serves as our Chief Accounting Officer. Raja, over to you.

Speaker 3

Thanks, Donald. Indi delivered a strong Q1, once again exceeding our top line guidance and expectations. In fact, this represents our 8th consecutive quarter of beating or at least meeting our revenue and gross margin targets post Indy's IPO. Specifically, revenue for the period was up 84% year over year and up 22% sequentially to $40,500,000 including a stub portion of revenue from our acquisition of GEO Semiconductor in March. On a non GAAP basis, gross profit was $21,100,000 translating into 52.2 percent gross margin, up 4 84 basis points year over year and slightly ahead of our 52% guidance.

Speaker 3

Total operating expenses for the quarter were $37,900,000 including $29,300,000 in R and D and $8,600,000 in SG and A, reflecting our continued investment in accelerated product development and expansion of our sales and marketing reach. In turn, our Q1 operating loss was $16,800,000 Below the line, net interest income was $500,000 As a result, Our net loss was $16,300,000 and we posted a $0.10 loss per share on a base of 155,100,000 shares in line with guidance. Turning to the balance sheet. We had significant one time cash disbursements during the quarter, including $90,000,000 related to the acquisition of Geo Semiconductor, $8,400,000 related to the acquisition of Silicon Radar and a $10,000,000 repayment of the Analog Devices promissory note related to the acquisition of SMAO. We also invested $16,700,000 in working capital, primarily to secure inventory in support of our back half growth plans.

Speaker 3

$3,200,000 in capital expenditures for expanded internal testing capabilities and $3,900,000 in other financing activities. Also during the quarter, we raised $34,200,000 from the ATM and issued 3,300,000 shares. These sources and uses of cash combined with our non GAAP operating loss of $16,800,000 resulted in $207,400,000 of cash on hand exiting the quarter. Looking forward, based on our order visibility and the depth of Indy's new product pipeline, we plan to demonstrably outperform the AutoTech market over the forecast For the Q2, we plan to scale to a $205,000,000 to $210,000,000 annualized revenue run rate. Assuming the midpoint of this range at $51,900,000 we expect non GAAP gross margin again in the 52% particularly as we work through lower margin pre synergized GEO inventory.

Speaker 3

We are also planning $33,000,000 in R and D and $9,000,000 and SG and A, which includes the full quarterly impacts of both our recent acquisitions versus just 1 month in Q1. As a result, we plan to narrow our operating loss to approximately $15,000,000 Below the line, we anticipate $200,000 of net Interest expense and no taxes. Assuming 164,300,000 shares outstanding, we expect a $0.09 loss per share. Finally, and to reiterate, we believe the combination of Indi's accelerating growth trajectory, gross margin expansion, post acquisition synergies and planned operating expense leverage will enable us to reach profitability in the back half of this year. With that, I'll turn the call back to Donald for his closing comments.

Speaker 2

Thanks, Raja. In summary, Q1 was another solid quarter operationally, but we also remain in the early innings of what's possible at Indy, given the strength of our customer engagements, supplier partnerships, product portfolio, roadmaps and our world class design team. In the short term, our performance and outlook represent yet more proof points that we're effectively executing to our plan. In fact, we are now on pace to more than double our top line again this year, our 3rd year in a row of doing so. Since we're in the middle of the NBA playoff season, That's Indy's version of a triple double, representing another step towards realizing our vision of capitalizing on the $42,000,000,000 automotive semiconductor market opportunity and in the process creating an Autotech powerhouse.

Speaker 2

That concludes our prepared remarks. Operator, let's open the call for questions.

Operator

Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from Suji Desilva with ROTH Capital. Please proceed with your question.

Speaker 4

And congrats on the progress here. First question, In this exposure, I just wanted to think about a framework to think about this. I guess I think about traditional versus new auto car companies. And I'm wondering, Is the exposure roughly half half or is there any kind of one that's stronger than the other? And I guess China EV, the question has been there around the demand you said would remain So just curious your thoughts on the relative demand across traditional versus new auto companies.

Speaker 2

Thanks, Ujji. I mean, from our subjective viewpoint, all of our products have Extremely strong demand as you can see from the results. So as far as we're concerned, the market remains particularly strong. We are very diversified across our products, geographies, customers and technologies, Including the difference between e vehicle and internal combustion engine. So we're not really beholden to any one of those factors.

Speaker 2

We're very diversified across all of those factors. There has been of course some noise in the market, I would say, with regard to weakness in China e vehicles, where we do have representation, of course, as part of the broader portfolio. But from our perspective, they're scheduled to do 8,000,000 e vehicles in China this year and That's a pretty strong performance. It's a huge percentage of the world's market for e vehicle and they've come from a Very low base to basically a leadership position in a very short time. So our view on that generally is we only see strength in that particular market at this point also.

Speaker 4

Okay, great. And in the prepared remarks, you guys mentioned the Apple CarPlay in China. Can you just elaborate on The content opportunity there and what's happening in that market if it's diversifying from Apple CarPlay and how the opportunities scaled out for you?

Speaker 2

Well, I mean, from our perspective, our hardware supports any software skin or user interface that's used on top of it. So whether it be Apple CarPlay, Android Auto or some proprietary system which belongs to an OEM. And it makes really no difference to us as regards to what they do. So as far as our perspective goes, As long as there is continued growth and integration of the user's mobile device into the vehicle user experience, then There's potential for growth for us in those product areas. So it's still one of the strong parts of our business and it continues to grow.

Speaker 4

Okay. If I can sneak in one last quick question. For the in cabin opportunity, what do you think of the 2 or 3 biggest revenue opportunities? It seems like a lot of different content there across safety and infotainment and all that. Maybe that you could point out towards me that are really high growth opportunities in the next 1 to 2 years?

Speaker 2

I mean, it's spread across our whole portfolio as we mentioned in the remarks. The ones that we called out in the remarks are really the ones That are the most immediate. But generally speaking, I mean, the cabin is becoming a place where people spend more time and There are many more creature comforts, which are desired and can be offered by the car manufacturer to increase brand So it's generally still a very, very strong growth area. I mean much has talked about autonomous driving and e vehicle and so on and so forth. But it's still going to be a great driver of semiconductor content as the future unfolds.

Speaker 4

Okay. Thanks, Donald.

Operator

Thank you. Our next question comes from Anthony Stoss with Craig Hallum. Please proceed with your question.

Speaker 5

Thanks. Hi, guys. Don, I wanted to focus in on your GM ADAS win. I know you're not on liberty to probably divulge too much, but I'm just curious, did I hear you correctly Something may start next year or any sense on when the revenues would start for you? And then I have

Speaker 2

a couple of follow ups. Yes. I mean, in that time frame, it's a very positive announcement for us, and we are indeed Pleased about it. GM has been a sell through customer of ours for many years, but this represents kind of A new product area for us that's launching.

Speaker 5

Is there any share or any number of models that you think you'll get That you care to share?

Speaker 2

We're not at the point where we're at liberty to disclose Exact numbers and volumes and car models, but it's going to be significant for us to say the least.

Speaker 5

Got it. And then following up on one of the earlier questions on China and your lighting was that you disclosed. What percentage of revenue is China right now for you and where do you see that in the next couple of years?

Speaker 3

Sure. I'll take that, Donald. So China has been roughly historically roughly half of our revenues and That's pretty consistent with the current quarter and where we expect to be going forward.

Speaker 2

But to clarify that, China for us It's kind of misleading in terms of the filings because many of the or much of the volume that's Credited as being manufactured over there is generated through European and U. S. Design wins.

Speaker 5

Okay. Yes, that makes more sense. And then last question related to GEO. I'm curious if you're now having conversations post the close on other automakers that We're maybe a little shy in using GEO because they're a private company and they're small. And when do you expect kind of new customer design wins now under the flag of Indy?

Speaker 2

Yes. I mean, it's I mean, we announced a couple of wins in there that went across the line, perhaps, I would say because of the girth of the combined companies now already, I mean, which are really just on the 1 yard line, we give a final pushover. But yes, I mean, we've been super happy with the way that the sales teams have integrated. We're working great together even after a very short timeframe. And the amount of traction that we're seeing for their products through our sales channel and vice versa indeed for our products through their sales channel is enormous.

Speaker 2

So I do expect over the course of the next file, we will make some announcements in that space.

Speaker 5

Thanks, Donald. Appreciate it.

Operator

Thank you. Our next question comes from Ross Seymore with Deutsche Bank. Please

Speaker 6

I guess the first one, Donald, outside of China to a certain extent because you've already answered that one, but Lot of investor concern just about supply demand dynamics in the automotive space. Any sort of changes In that from your perspective, obviously, your numbers don't seem to show any big change one way or the other, but just wanted to get your thoughts.

Speaker 2

I mean, the situation has greatly alleviated itself from the situation of, let's say, the last 18 months or so. Much of the supply chain is back to normal. There are some isolated pockets that you can see, which demand Enhanced management to make sure that there's no slip Twix cup and lip. But other than that, it's becoming More alleviated. That being said, what we see is that there I mean the car volume Per year is still below where it was at its peak in 2018.

Speaker 2

Still many cars didn't get manufactured during the course of that period. And we still see some pent up demand to get the cars volume back to really where it was before. But generally speaking, we would see that the demand situation has improved, but still some work to do.

Speaker 6

Got it. Thanks for that. And then a couple of geo questions quickly. Was the ADAS design win at General Motors in partnership with Sharp Japan, I noticed the word Japan in there. Was that something to do with the geo side of things or was that from kind of core indie?

Speaker 2

Yes. We're actually not detailing that at the moment, but we'll announce on that as time progresses and we can talk a little bit more about the application.

Speaker 7

Got you. And then

Speaker 6

the last question would just be, now that you've had GEO in the fold for a bit of time, I think you said a couple of $1,000,000 was the stub in the prior quarter when you guided and you expect a full quarter and then $40,000,000 for the year roughly if I remember Correctly. Any changes to those numbers or are those all still applicable?

Speaker 2

No, we're still tracking to plan. Great. Thank you. Thanks, Louis.

Operator

Thank you. Our next question comes from Cody Courie with Benchmark. Please proceed with your question.

Speaker 8

Yes. Thanks for taking my questions, guys. And please pass my sympathies along to Tom on passing his mother.

Speaker 2

Yes. We'll do it, Tony.

Speaker 8

Thank you very much. Don, can you just talk about your revenue mix By application, can you just give us some kind of color on how that breaks down for this quarter or this past quarter and in your guidance? And then I have another follow-up.

Speaker 2

Well, I mean, we don't really segment our revenue by application Geography or anything at all really for that matter. Really, we're tracking to the plan that we put in place. I would say That by and large everything even in the sub segments and the product areas that we pursue is are individually tracking to plan as well. So we're pretty happy with The outlook that we have for the next few quarters and the next few years.

Speaker 8

And I guess Then if you look at your revenue another way, what is can you talk about the sensitivity of your revenue to New wins versus what might be just volume sensitivity to the market. I guess what I'm saying is, how much of your business is initial ramping of new products and new sockets And how much is dependent on the market's volume of vehicles?

Speaker 2

Well, the primary factor that affects our revenue profile is our own share gain. As you've seen from the results that we've posted over the last eight quarters, we've massively outgrown the market. And that's the primary factor that's going to influence us before anything else. Of course, That was generated by new business starts and new product deployments over the course of that period and will continue to do so. In terms of I wouldn't really characterize them as new wins any longer because these are wins that we made, I mean largely in terms of the revenue profile that we've produced Today, the wins were made largely when we were a private company.

Speaker 2

And the wins that we talk about when we do our earnings and make press releases and so forth when we announce new products and Customer relationships are largely things that are going to build revenue sometime further out in the future, which is great because it gives us great visibility of where we've come from, where we are right now and where we're going for the long term really through the end of this decade. So, again, we don't really sub segment out by category or by nature of design win. But, just the nature of our business because of The long design cycles, we have a great deal of security and visibility into where the revenue is coming from on a quarterly and yearly and almost decade basis.

Speaker 8

And then lastly, Don, if I can, could you just talk about your gross margin trends beyond the June quarter, just mix versus internal efficiencies, supply efficiencies?

Speaker 2

I mean, it will be driven by a multitude of factors, mix as higher technology products deploy, Operating efficiencies as we increase in scale, maybe in the short term, operating efficiencies as we fully integrate the acquisitions that we recently made. And we remain on track to hit our 60% gross margin model, which we've talked about at length over the course of the last quarters.

Speaker 8

Okay. Thank you, guys.

Operator

Thank you. Our next question comes from Craig Ellis with B. Riley Securities. Please proceed with your question.

Speaker 7

Yes. Thanks for taking the question. Donald, I'll start with one that's more qualitative, but it It relates to a point you made about the way you're scaling up the business, both organically and inorganically. With the business where it is today, it's Significantly increased scale over the last few years. How is that changing the way customers come to Endy to try and engage Both types of customers, size of customers and maybe across different types of products that they may be interested in.

Speaker 2

I mean, that's an interesting question. Our progress has been largely consistent and steady. And so with every, let's say, small milestone that we made, our credibility improves With our customers and they are willing to give us access to larger programs. I would Say that there are days where you feel that there's somehow been a threshold across when some very large customer approaches us and calls out to us and says, hey, We like what you're doing. We're really impressed.

Speaker 2

We are looking for a vendor in this space. It looks like your technology is very differentiated. And that sort of pull from the market is something that is very gratifying to see as we've grown over the course of the last quarters years. And we've begun to get that sort of, let's say, quality of reliability in the market that we can deliver. We can deliver on time to And automotive is quite a conservative market in that sense, so track record matters.

Speaker 2

I mean, I would say generally speaking, it's I mean, it's been a Again, I'll repeat it. It's been a very gratifying experience to see our progress happening really linearly over the course of the last 14 years even.

Speaker 7

That's helpful. And then I'll ask a specific product question. So there's been a lot of inquiry around GEO, so I'll stay away from that one. But on radar, which is one of the bigger opportunities the company has. Can you just talk about how product development is going and customer engagement Going here and your confidence for that flip to revenues and the benefit that you get with the recent acquisition in that area too.

Speaker 2

Yes. I mean, it remains fully on track. I mean, we don't talk about specific milestones in public, But yes, we're very happy with the way it's executing. The resonance from the market who's beginning to get an appreciation that it's coming It is becoming very strong because we do truly have a disruptive technology in that space that's going to make a difference. The addition of silicon radar also helps us in the in cabin arena because of their 120 gigahertz technology.

Speaker 2

It's really the next step on the road map beyond what we have in development now. And they have a leadership position in that. They're really the only 120 gigahertz functioning front Available in the world today. So that's really going to take us to the next level beyond what we're developing right now.

Speaker 7

Got it. And then the last one, and I'll ask it to you, but it may be one for Roger. On the amount raised in the quarter of $34,000,000 I think it was conveyed that that was via ATM. Is there plans to raise similar This quarter, either by type or by amount. Thank you.

Speaker 3

Yes, sure. We did raise the $34,000,000 via the ATM during Q1 and there are no plans Currently to raise additional share place additional shares, particularly at these share prices.

Speaker 7

Got it. Thanks, guys.

Operator

Thank you. There are no further Questions at this time, I would like to turn the floor back over to management for closing comments.

Speaker 2

Thanks everybody for attending and listening to our call. Hope to see you guys at the investor

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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