Whether you drive a gas-guzzling motor vehicle or a cutting-edge electric vehicle (EV), all modern automobiles require semiconductors to operate. This was noticeably apparent during the post-pandemic reopening when automobile prices surged through the roof as the supply of vehicles shrank due to the global chip shortage. Fabless automotive chip maker indie Semiconductor Inc. NASDAQ: INDI designs and develops high-performance mixed-signal integrated circuits (ICs) for the automotive industry.
Its customers included major automakers, including Ford Motor Co. NYSE: F, General Motors Co. NYSE: GM, Stellantis NV NASDAQ: STLA, Volkswagen AG OTCMKTS: VWAGY, Hyundai, Nissan, BMW and Porsche. Tier 1 supplier customers include Magna International Inc. NYSE: MGA, Denso and Continental. indie Semiconductor benefits from vehicle megatrends, including electrification, autonomous driving, ADAS and enhancing user experience.
Advanced Driver Assistance Systems
Technologies that help improve the safety and efficiency of automobiles for drivers are referred to as advanced driver assistance systems (ADAS). ADAS systems utilize various tools and components like cameras, sensors, radar and lidar to detect, assess and analyze the surrounding environment. This data is provided to the driver to react better or used automatically to control vehicles to avoid accidents and operate more efficiently.
Some examples of ADAS systems include adaptive cruise control (ACC), blind spot monitoring (BSM), automatic emergency braking (AEB), ultrasonic parking assistance and lane departure warning (LDW). ADAS systems continue to get more advanced with new models. Over 200 million indie chips have been shipped. Its semiconductor devices power ADAS and in-vehicle infotainment (IVI) systems in more than 12 countries.
EXALOS AG Acquisition
indie Semiconductor acquired privately held Swiss photonics company EXALOS AG. The company specializes in designing high-performance semiconductors. EXALOS The acquisition costs about $45 million and comprises 6.6 million indie Class A common shares. Its high-performance light sources are based on superluminescent light-emitting diodes (SLEDs) and semiconductor optical amplifiers (SOA) backed by 59 global patents.
Its products are used in lidar, industrial sensors, fiber optic gyroscopes and optical coherence tomography. The acquisition complements Indie's portfolio of laser and silicon photonics products. The deal is financially neutral in 2023 but will be accretive starting in 2024.
Growth At a Cost
Indie Semiconductor delivered $52.1 million in Q2 2023 revenues, up 102% YoY and 29% sequentially. Non-GAAP gross margins rose 363 basis points to 52.2%. GAAP operating loss was $40.7 million, up from $30 million in the year-ago period. Non-GAAP operating loss was $16.3 million, a slight improvement over $17 million in the year-ago period.
Deeper R&D and SG&A investments were the drivers. The company captured a large program win with Bosch for an occupant monitoring program supporting Toyota and Lexus. indie launched an automotive wireless power charging system on a chip, bolstering its highly integrated smartphone vehicle access and driving authorization solutions with Marquardt.
Indie Semiconductor CEO Donald McClymont commented, “Our steep growth trajectory reflects design win momentum across ADAS, user experience and electric vehicle applications. indie is increasingly well positioned to capitalize on these triple megatrends and the resulting $48 billion Autotech market opportunity…”
The annualized run rate is expected to scale into $240 million, up 100% YoY. It expects further non-GAAP gross margin improvement and a narrower operating loss. The company targets non-GAAP operating income in Q4 2023, driven by sales growth and margin expansion.
Reraising Q3 2023 Guidance
On Oct. 16, 2023, indie Semiconductor raised its revenue guidance above $60 million versus $60.02 million analyst estimates. Its revenue guidance is expected to be “slightly higher” than previous guidance. It announced its Q3 earnings release and conference call date of Nov. 9, 2023.
indie Semiconductor analyst ratings and price targets are at MarketBeat. indie Semiconductor peers and competitor stocks can be found with the MarketBeat stock screener.
Daily Bearish Pennant Breakdown
The daily candlestick chart for INDI illustrates the aftermath of a bearish pennant pattern breakdown. INDI formed the ascending trendline after bottoming at $6.19 on Aug. 25, 2023, bouncing to a $7.12 peak on Sept. 5, 2023. The descending trendline made lower highs, while the ascending trendline made higher lows until INDI broke down on Sept. 26, 2023.
Shares collapsed to a low of $4.82 on Oct. 13, 2023, and formed a daily market structure low (MSL) trigger at $5.94. The daily relative strength index (RSI) attempts to bounce off the 40-band. Pullback supports are at $4.82, $4.51, $4.15 and $3.93.
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