# indie Semiconductor, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [indie Semiconductor, Inc.](/companies/indi.md) (CIK 1841925)
- Form: 10-Q
- Filed: 2023-11-13
- Accepted by EDGAR: Nov 9, 2023, 20:08 ET
- Period: 2023-09-30
- Accession: 0001628280-23-038372
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1841925/000162828023038372/indi-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1841925/000162828023038372/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $60.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $153.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $35.2m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $91.4m | us-gaap:CostOfGoodsAndServicesSold |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $41.6m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $120.2m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $19.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $55.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$36.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$113.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $2.2m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $6.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $650.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | −$2.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$17.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$103.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.12 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.73 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.12 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.73 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 146,962,717 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 140,198,899 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$88.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $8.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $160.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $269.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $819.5m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $149.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $406.7m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $156.5m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $4.9m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2023-09-30 | $413.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 43,141 characters.

*Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us, or “our” refer to the business of indie and its subsidiaries prior to the consummation of the Transaction. Throughout this section, unless otherwise noted, “indie” refers to indie Semiconductor and its consolidated subsidiaries.*

*The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read this discussion and analysis in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. Certain amounts may not foot due to rounding. This discussion and analysis contains forward-looking statements. See “Forward Looking Statements.” We urge you to consider the risks and uncertainties discussed in this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2022, under the heading “Risk Factors” and in the other documents we have filed with the SEC in evaluating our forward-looking statements. We assume no obligation to update any of these forward-looking statements except as required by law. Actual results may differ materially from those contained in any forward-looking statements.*

### OUR COMPANY

indie Semiconductor offers highly innovative automotive semiconductors and software solutions for Advanced Driver Assistance Systems (“ADAS”), autonomous vehicle, connected car, user experience and electrification applications. We focus on edge sensors across multiple modalities spanning LiDAR, radar, ultrasound and computer vision. These functions represent the core underpinnings of both electric and autonomous vehicles, while the advanced user interfaces are transforming the in-cabin experience to mirror and seamlessly connect to the mobile platforms we rely on every day. We are an approved vendor to Tier 1 automotive suppliers and our platforms can be found in marquee automotive manufacturers around the world. Headquartered in Aliso Viejo, California, indie has design centers and sales offices in Austin, Texas; Boston, Massachusetts; Detroit, Michigan; San Francisco and San Jose, California; Cordoba, Argentina; Budapest, Hungary; Dresden, Frankfurt der Oder, Munich and Nuremberg, Germany; Cambridge, England; Edinburgh, Scotland; Schlieren, Switzerland; Rabat, Morocco; Haifa, Israel; Quebec City, Canada; Seoul, South Korea; Tokyo, Japan and several locations throughout China.

We maintain design centers for our semiconductor engineers and designers in the United States, Argentina, Hungary, Germany, Scotland, Morocco, Israel, Switzerland and China. We engage subcontractors to manufacture our products. These subcontractors, as well as the majority of our customers’ locations, are primarily in Asia. For the nine months ended September 30, 2023 and 2022, approximately 63% and 53%, respectively, of our product revenues were recognized for shipments to customer locations in Asia.

### Execution of At-The-Market Agreement

On August 26, 2022, we entered into an At Market Issuance Agreement (“ATM Agreement”) with B. Riley Securities, Inc., Craig-Hallum Capital Group LLC and Roth Capital Partners, LLC (collectively as “Sales Agents”) relating to shares of our Class A common stock, par value $0.0001 per share (the “Class A common stock”). In accordance with the terms of the Sales Agreement, we may offer and sell shares of our Class A common stock having an aggregate offering price of up to $150.0 million from time to time through the Sales Agents, acting as our agent or principal. We implemented this program for the flexibility that it provides to the capital markets and to best time our equity capital needs. As of September 30, 2023, we had raised gross proceeds of $70.3 million and issued 7,351,259 shares of Class A common stock at an average per-share sales price of $9.57 through this program.

### Recent Acquisitions

#### Exalos AG

On September 18, 2023, Ay Dee Kay Ltd. completed its acquisition of all Exalos AG, a Swiss corporation (“Exalos”), pursuant to the Share Sale and Purchase Agreement by and among Ay Dee Kay Ltd., indie and all of the stockholders of Exalos, whereby indie UK acquired all of the outstanding common shares of Exalos. The closing consideration consisted of (i) the issuance by indie of 6,613,786 shares of Class A common stock, with a fair value of $42.8 million; (ii) a contingent consideration with fair value of $13.2 million at closing, payable in cash, subject to Exalos’ achievement of certain revenue-based milestones through September 30, 2025; and (iii) a holdback of $2.5 million subject to final release 12 months from the acquisition date payable in shares of Class A common stock. The purchase price is subject to working capital and other adjustments as provided in the merger agreement.

#### GEO Semiconductor Inc.

On February 9, 2023, we entered into an Agreement and Plan of Merger, pursuant to which Gonzaga Merger Sub Inc., a Delaware corporation and indie’s wholly-owned subsidiary, will merge with and into GEO Semiconductor Inc., a Delaware corporation (“GEO”), with GEO surviving as a wholly-owned subsidiary of indie (the “Merger”). The aggregate consideration for this transaction consisted of (i) $93.4 million in cash (including accrued cash consideration at closing and net of cash acquired); (ii) the issuance by indie of 6,868,768 shares of Class A common stock at closing, with a fair value of $75.6 million; (iii) 1,907,180 shares of Class A common stock at closing, with a fair value of $21.0 million payable in the next 24 months; and (iv) an earn-out with fair value of $63.1 million at closing payable in cash or in Class A common stock, subject to achieving certain GEO-related revenue targets through September 30, 2024. The purchase price is subject to working capital and other adjustments as provided in the merger agreement. The transaction was completed on March 3, 2023.

#### Silicon Radar

On February 21, 2023, Symeo GmbH (“Symeo”), one of our wholly-owned subsidiaries, completed its acquisition of all of the outstanding capital stock of Silicon Radar GmbH (“Silicon Radar”). The acquisition was consummated pursuant to a Share Purchase Agreement by and among Symeo, indie and the holders of the outstanding capital stock of Silicon Radar. The closing consideration consisted of (i) $9.2 million in cash (including debt payable at closing and net of cash acquired), (ii) the issuance by indie of 982,445 shares of Class A common stock at closing, with a fair value of $9.8 million; and (iii) a contingent consideration with fair value of $10.0 million at closing, payable in cash or in Class A common stock subject to Silicon Radar’s achievement of certain revenue-based and design-win milestones through February 21, 2025. The purchase price is subject to working capital and other adjustments as provided in the Share Sale and Purchase Agreement.

See Note 2 — *Business Combinations* for additional descriptions of these acquisitions.

### Impact of Macroeconomic Conditions

The recent conflict in the Middle East and the implications of these events has created global political and economic uncertainty. We are closely monitoring developments, including potential impact to our business, customers, suppliers, our employees and operations in Israel, the Middle East and elsewhere. At this time, the impact to indie is subject to change given the volatile nature of the situation.

Refer to Part I, Item 1A of our 2022 Annual Report on Form 10-K for the fiscal year ended December 31, 2022 under the heading “*Risk Factors”* for more information on our risks and uncertainties.

### OPERATING RESULTS

### Comparison of the Three Months Ended September 30, 2023 and 2022

### Revenue

*(in thousands)*

| Revenue: | Three Months Ended September 30, 2023 $% of Revenue |  | 2022 $% of Revenue |  | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Product revenue | $53,363 | 88% | $24,425 | 81% | $28,938 | 118% |
| Contract revenue | 7,113 | 12% | 5,591 | 19% | 1,522 | 27% |
| Total revenue | $60,476 | 100% | $30,016 | 100% | $30,460 | 101% |

Revenue for the three months ended September 30, 2023 was $60.5 million, compared to $30.0 million for the three months ended September 30, 2022, an increase of $30.5 million or 101%, which was primarily driven by a $28.9 million increase in product revenue as well as an increase in contract revenue. The increase in product revenue was due primarily to change in product mix as well as higher product volume (units sold) given the continued growth in demand from our customers globally as well as the recent acquisitions. Increases in average selling price (“ASP”) also contributed to the increase in product revenue year-over-year. The increase in contract revenue of $1.5 million or 27% was primarily due to a higher percentage of completion in the current period as we continue to make progress in the large multi-year non-recurring engineering project that commenced in early 2022.

### Operating Expenses

*(in thousands)*

| Operating expenses: | Three Months Ended September 30, 2023 $% of Revenue |  | 2022 $% of Revenue |  | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of goods sold | $35,187 | 58% | $14,970 | 50% | $20,217 | 135% |
| Research and development | 41,594 | 69% | 30,229 | 101% | 11,365 | 38% |
| Selling, general, and administrative | 19,841 | 33% | 10,676 | 36% | 9,165 | 86% |
| Total operating expenses | $96,622 | 160% | $55,875 | 186% | $40,747 | 73% |

Cost of goods sold for the three months ended September 30, 2023 was $35.2 million, compared to $15.0 million for the three months ended September 30, 2022. The increase of $20.2 million or 135% was primarily due to a $7.5 million increase due to change in product mix, a $5.9 million increase in product shipments in connection with the increase in products sold, as described above, and a $4.0 million increase in product cost. Cost of goods sold for the three months ended September 30, 2023 also included additional $2.6 million in amortization related to acquired intangible assets as a result of the recent business combinations.

Research and development expense for the three months ended September 30, 2023 was $41.6 million, compared to $30.2 million for the three months ended September 30, 2022. The increase of $11.4 million or 38% was primarily due to a $5.4 million increase in personnel costs and a $4.7 increase million increase in product development costs, both to support our continuous growth in research and development needs. Research and development expense for the three months ended September 30, 2023 also included $0.9 million in share-based compensation expense, which was due to increase in headcounts and new awards granted since prior year. We expect research and development expense to continue to increase as we continue to grow our headcount organically to support expanded product development activities.

Selling, general and administrative expense for the three months ended September 30, 2023 was $19.8 million, compared to $10.7 million for the three months ended September 30, 2022. The increase of $9.2 million or 86% was primarily due to a $2.5 increase in personnel costs due to increase in headcount, a $2.2 million increase in share-based compensation expense, and a $1.1 million increase in outside professional fees. Selling, general and administrative expense for the three months ended September 30, 2023 also included $3.6 million in amortization related to acquired intangible assets as a result of the recent business combinations. We expect selling, general, and administrative expense to continue to increase as we grow our headcount to support our global expansion and to fulfill our obligations as a publicly traded company.

### Other income (expense), net

*(in thousands)*

| Other income (expense), net: | Three Months Ended September 30, 2023 $$ | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $1,858 | $612 | $1,246 | 204% |
| Interest expense | (2,242) | (166) | (2,076) | 1251% |
| Gain (loss) from change in fair value of warrants | 15,660 | (19,059) | 34,719 | (182)% |
| Gain (loss) from change in fair value of contingent considerations and acquisition-related holdbacks | 3,535 | (121) | 3,656 | (3021)% |
| Other income (expense) | (692) | 24 | (716) | (2983)% |
| Total other income (expense), net | $18,119 | $(18,710) | $36,829 | (197)% |

Interest income for the three months ended September 30, 2023 was $1.9 million, compared to $612 thousand for the three months ended September 30, 2022. Interest income increased in the current period primarily as a result of higher cash balances in the 2023 period resulting from proceeds received from the 4.50% convertible notes with principal balance of $160.0 million issued in November 2022 (the “2027 Notes”) and increases in interest rates associated with the money market funds and marketable securities.

Interest expense for the three months ended September 30, 2023 was $2.2 million, compared to $166 thousand for the three months ended September 30, 2022. Interest expense relates to the routine cash and non-cash interest expenses on outstanding debt obligations. The increase was primarily driven by the issuance of the 2027 Notes.

For the three months ended September 30, 2023 and 2022, we recognized gains (losses) from change in fair value for warrants, contingent considerations and acquisition-related holdbacks. The gains (losses) recorded for the three months ended September 30, 2023 and 2022 represent the following:

i) Warrants: During the three months ended September 30, 2023, we recognized an unrealized gain from change in fair value of our warrants of $15.7 million, which reflected the decrease in fair value of our warrant liability. The decrease in fair value of our warrant liability of $15.7 million was primarily a result of the decrease of the closing price of our Class A common stock listed on the Nasdaq to $6.30 per share on September 30, 2023 from $9.40 per share on June 30, 2023. In the same period in the prior year, the increase in fair value was a result of the increase of the closing price of our Class A common stock listed on the Nasdaq to $7.32 per share on September 30, 2022 from $5.70 per share on June 30, 2022.

ii) Contingent considerations and acquisition-related holdbacks: During the three months ended September 30, 2023, we recognized a net unrealized gain from change in fair value of our contingent considerations and acquisition-related holdbacks of $3.5 million which is primarily contributed by an unrealized gain of $2.9 million and $0.8 million for the contingent considerations and acquisition-related holdbacks related to the GEO and Symeo acquisitions, respectively. During the three months ended September 30, 2022, we recognized an net unrealized loss from change in fair value of our contingent considerations of $0.1 million.

### Income Taxes

We utilize the asset and liability method in accounting for income taxes. Deferred tax assets and liabilities reflect the estimated future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax asset and liability. Valuation allowances are established when necessary to reduce deferred tax assets where it is more likely than not that the deferred tax assets will not be realized. We make estimates, assumptions, and judgments to determine our provision for our income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. We also assess the likelihood that our deferred tax assets, if any, will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we establish a valuation allowance.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits which, as of the date of this report, have not been material, are recognized within provision for income taxes.

Income tax expense for the three months ended September 30, 2023 and 2022 is primarily related to our operations in Canada and Europe.

Refer to Note 16, *Income Tax*, in our accompanying unaudited condensed consolidated financial statements for additional detail.

### Comparison of the Nine Months Ended September 30, 2023 and 2022

### Revenue

*(in thousands)*

| Revenue: | Nine Months Ended September 30, 2023 $% of Revenue |  | 2022 $% of Revenue |  | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Product revenue | $132,471 | 87% | $62,963 | 81% | $69,508 | 110% |
| Contract revenue | 20,565 | 13% | 14,807 | 19% | 5,758 | 39% |
| Total revenue | $153,036 | 100% | $77,770 | 100% | $75,266 | 97% |

Revenue for the nine months ended September 30, 2023 was $153.0 million, compared to $77.8 million for the nine months ended September 30, 2022, an increase of $75.3 million or 97%, which was primarily driven by a $69.5 million increase in product revenue as well as an increase in contract revenue. The increase in product revenue was due primarily to change in product mix as well as higher product volume (units sold) given the continued growth in demand from our customers globally as well as the recent acquisitions. Increases in ASP also contributed to the increase in product revenue year-over-year. The increase in contract revenue of $5.8 million or 39% was primarily due to commencement of a large multi-year non-recurring engineering project with a top customer in the prior year.

### Operating expenses

*(in thousands)*

| Operating expenses: | Nine Months Ended September 30, 2023 $% of Revenue |  | 2022 $% of Revenue |  | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of goods sold | $91,370 | 60% | $44,340 | 57% | $47,030 | 106% |
| Research and development | 120,226 | 79% | 88,195 | 113% | 32,031 | 36% |
| Selling, general, and administrative | 55,292 | 36% | 35,403 | 46% | 19,889 | 56% |
| Total operating expenses | $266,888 | 174% | $167,938 | 216% | $98,950 | 59% |

Cost of goods sold for the nine months ended September 30, 2023 was $91.4 million, compared to $44.3 million for the nine months ended September 30, 2022. The increase of $47.0 million or 106% was primarily due to a $15.9 million increase due to change in product mix, a $15.4 million increase in product shipments in connection with the increase in products sold as described above, and a $6.7 million increase in product cost. Total cost of goods sold for the nine months ended September 30, 2023 also included an additional $5.4 million in amortization related to acquired intangible assets and a $4.2 million increase due to amortization for inventory step-up value both in connection with the recent acquisitions.

Research and development (“R&D”) expense for the nine months ended September 30, 2023 was $120.2 million, compared to $88.2 million for the nine months ended September 30, 2022. This increase of $32.0 million or 36% was primarily due to a $14.8 million increase in product development costs and a $13.3 million increase in personnel, both to support our continuous growth in research and development needs. Research and development expense for the nine months ended September 30, 2023 also included a $1.4 million increase in amortization expense related to R&D project licenses and acquired intangible assets from business combinations and a $0.4 million increase in share-based compensation expense. We expect research and development expense to continue to increase as we continue to grow our headcount organically to support expanded product development activities.

Selling, general and administrative expense for the nine months ended September 30, 2023 was $55.3 million, compared to $35.4 million for the nine months ended September 30, 2022. The increase of $19.9 million or 56% was primarily due to a $7.1 million increase in personnel costs due to increase in headcounts, a $5.2 million increase in share-based compensation expense, and a $1.8 million increase in outside professional fees. Both the increase in personnel costs and share-based compensation expense are driven by increase in headcounts. Total selling, general and administrative expense for the nine months ended September 30, 2023 also included a $5.2 million increase in intangible asset amortization from business combinations in comparison to prior year. We expect selling, general, and administrative expense to continue to increase as we grow our headcount to support our global expansion and to fulfill our obligations as a publicly traded company.

*(in thousands)*

| Other income (expense), net: | Nine Months Ended September 30, 2023 $$ | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $6,147 | $820 | $5,327 | 650% |
| Interest expense | (6,534) | (491) | (6,043) | 1231% |
| Gain (loss) from change in fair value of warrants | (6,626) | 48,595 | (55,221) | (114)% |
| Gain from change in fair value of contingent considerations and acquisition-related holdbacks | 4,208 | 3,546 | 662 | 19% |
| Other income (expense) | (263) | 3 | (266) | (8867)% |
| Total other income (expense), net | $(3,068) | $52,473 | $(55,541) | (106)% |

Interest income for the nine months ended September 30, 2023 was $6.1 million, increased by $5.3 million or 650% from the nine months ended September 30, 2022. Interest income increased in the current period primarily as a result of higher cash balances in the 2023 period resulting from proceeds received from the 2027 Notes and increases in interest rates associated with the money market funds and marketable securities.

Interest expense for the nine months ended September 30, 2023 was $6.5 million, compared to $0.5 million for the nine months ended September 30, 2022. Interest expense relates to the routine cash and non-cash interest expenses on outstanding debt obligations. The increase was primarily driven by the issuance of the 2027 Notes.

For the nine months ended September 30, 2023 and 2022, we recognized gains (losses) from change from change in fair value for warrants, contingent considerations and acquisition-related holdbacks. The gains (losses) recorded for the both the nine months ended September 30, 2023 and 2022 represent the following:

i) Warrants: During the nine months ended September 30, 2023, we recognized an unrealized loss from change in fair value of our warrants of $6.6 million, which reflected the increase in fair value of our warrant liability. The increase in fair value of our warrant liability of $6.6 million was primarily a result of the increase of the closing price of our Class A common stock listed on the Nasdaq to $6.30 per share on September 30, 2023 from $5.83 per share on December 31, 2022. In the same period in the prior year, the decrease in fair value was a result of the decrease in the closing price our Class A common stock listed on the Nasdaq to $7.32 per share on September 30, 2022 from $11.99 per share on December 31, 2021.

ii) Contingent considerations and acquisition-related holdbacks: During the nine months ended September 30, 2023, we recognized an unrealized gain from change in fair value of our contingent considerations and acquisition-related holdbacks of $4.2 million which is primarily contributed by an unrealized gain of $5.0 million for the contingent considerations and acquisition-related holdback related to GEO, offset by $0.3 million and $0.4 million unrealized loss for the contingent considerations related to the Symeo and Silicon Radar acquisitions, respectively. During the nine months ended September 30, 2022, we recognized an unrealized net gain from change in fair value of our contingent considerations of $3.5 million. During the nine months ended September 30, 2022, management determined that the product design specified in the contingent consideration arrangement would be replaced with a new product design that is better aligned with customer requirements and which will not be eligible for either of the contingent considerations. Accordingly, the fair value for both the Tapeout and Design Win were reduced to zero, resulting in a gain of $3.9 million.

### Income Taxes

We utilize the asset and liability method in accounting for income taxes. Deferred tax assets and liabilities reflect the estimated future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax asset and liability. Valuation allowances are established when necessary to reduce deferred tax assets where it is more likely than not that the deferred tax assets will not be realized. We make estimates, assumptions, and judgments to determine our provision for our income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. We also assess the likelihood that our deferred tax assets, if any, will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we establish a valuation allowance.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits which, as of the date of this report, have not been material, are recognized within provision for income taxes.

Income tax benefits for the nine months ended September 30, 2023 are primarily related to the tax effects of our acquisition of GEO and subsequent tax reorganizations. Income tax benefits for the nine months ended September 30, 2022 is primarily related to our operations in Canada and Europe.

Refer to Note 16, *Income Tax*, in our accompanying unaudited condensed consolidated financial statements for additional detail.

### JOBS Act

The JOBS Act permits an emerging growth company (“EGC”) such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use the extended transition period under the JOBS Act until the earlier of the date we (1) are no longer an emerging growth company or (2)

affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

The market value of our common stock that is held by non-affiliates exceeded $700 million as of June 30, 2023, and therefore, we will no longer qualify for emerging growth company status commencing December 31, 2023. As a result, we will be subject to certain disclosure requirements that have not been applicable to us as an emerging growth company, including the ability to take advantage of such extended transition period.

We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for public companies.

### Liquidity and Capital Resources

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, working capital requirements related to inventory, accounts payable and general and administrative expenditures. In addition, from time to time, we use cash to fund our mergers and acquisitions, purchases of various capital and software assets and scheduled repayments for outstanding debt obligations. Our immediate sources of liquidity are cash, cash equivalents and funds anticipated to be generated from our operations and available borrowings under our revolving credit facility. We believe these sources of liquidity will be sufficient to meet our working capital needs for at least the next 12 months. Our future capital requirements may vary from those currently planned and will depend on many factors, including our rate of sales growth, the timing and extent of spending on various business initiatives, including potential merger and acquisition activities, our international expansion, the timing of new product introductions, market acceptance of our solutions, and overall economic conditions including the potential impact of global supply imbalances, rising interest rates, inflationary pressures, the impact of the ongoing conflicts in Ukraine and the Middle East, and volatility in the global financial markets. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. We have cash deposits with large financial institutions that have stable outlooks and credit ratings as of November 9, 2023. These cash deposits may exceed the insurance provided on such deposits. As part of our cash management strategy going forward, we concentrate cash deposits with large financial institutions that are subject to regulation and maintain deposits across diverse retail banks.

Historically, we derive liquidity primarily from debt and equity financing activities as we have historically had negative cash flows from operations. As of September 30, 2023, our balance of cash and cash equivalents was $160.6 million.

On August 26, 2022, we entered into the ATM Agreement with the Sales Agents relating to shares of our Class A common stock. In accordance with the terms of the Sales Agreement, we may offer and sell shares of our Class A common stock having an aggregate offering price of up to $150.0 million from time to time through the Sales Agents, acting as our agent or principal. We implemented this program for the flexibility that it provides to the capital markets and to best time its equity capital needs. During the nine months ended September 30, 2023, indie has raised gross proceeds of $53.1 million and issued 5,219,500 shares of Class A common stock at an averaged per-share sales price of $10.18 through this program. For the nine months ended September 30, 2023, indie incurred total issuances costs of $1.1 million. As of September 30, 2023, we have raised gross proceeds of $70.3 million and issued 7,351,259 shares of Class A common stock at an average per-share sales price of $9.57 through this program and had approximately $79.7 million available for future issuances under the ATM Agreement.

On November 21, 2022, we issued $160.0 million in aggregate principal of our 2027 Notes. The 2027 Notes will be convertible into cash, shares of Class A common stock or a combination of cash and common stock at our election. We used the net proceeds from the 2027 Notes to fund the acquisitions of GEO and Silicon Radar as well as a stock repurchase program authorized by our Board of Directors in November 2022. The acquisitions of Silicon Radar completed in February 2023 and GEO completed in March 2023, which resulted in us funding a purchase price of approximately $9.2 million and $93.4 million, respectively. The stock repurchase program resulted in us repurchasing 1.1 million shares of our outstanding Class A common stock in November 2022 at an average cost of $6.65 per share, which amounts for a total cash outflow of $7.4 million as of December 31, 2022.

On November 29, 2022, Wuxi executed a Capital Increase Agreement to raise CNY300.0 million (approximately $42.0 million) of capital by issuing 371,160 shares of its common stock, which represents 16% of Wuxi’s equity at the time of issuance. As a result, indie’s ownership in Wuxi has reduced from 45% to 38%. Among other provisions, this agreement includes certain liquidation preferences for the investors of this Capital Increase Agreement as well as an ability to exchange their Wuxi shares for up to 6 million shares of indie’s Class A common stock in the event Wuxi does not successfully complete a local initial public offering by December 31, 2027. The funds raised are intended to promote Wuxi’s business development and strengthen its capabilities.

#### Acquisitions

Since the closing of the Transaction, we have completed multiple acquisitions. We continually assess and plan to selectively pursue inorganic growth opportunities that are complementary to our existing technologies and portfolio of products and/or accelerate our growth initiatives.

In connection with our acquisitions, we may from time to time be required to make future payments or issue additional shares of our common stock to satisfy our obligations under the acquisition agreements, including to satisfy certain earn-out requirements. In January 2022 we completed the acquisition of Symeo GmbH, for which we made an initial cash payment of approximately $10.0 million and an additional $10.0 million was paid in January 2023. We are still subject to an equity based earn out based on Symeo’s future revenue growth.

In February 2023, we entered into an agreement to acquire GEO Semiconductor, Inc. and completed the transaction on March 3, 2023. The acquisition requested for (i) $93.4 million in cash (including accrued cash considerations at closing and net of cash acquired); (ii) the issuance by indie of 6,868,768 shares of Class A common stock at closing, with a fair value of $75.6 million; (iii) 1,907,180 shares of Class A common stock at closing, with a fair value of $21.0 million payable in the next 24 months; and (iv) an earn-out with fair value of $63.1 million at closing payable in cash or in Class A common stock, subject to achieving certain GEO-related revenue targets through September 30, 2024.

Additionally, in February, 2023, we acquired Silicon Radar GmbH, for approximately (i) $9.2 million in cash (including debt payable at closing and net of cash acquired), (ii) the issuance by indie of 982,445 shares of Class A common stock at closing, with a fair value of $9.8 million; and (iii) a contingent consideration with fair value of $10.0 million at closing, payable in cash or in Class A common stock subject to Silicon Radar’s achievement of certain revenue-based and design-win milestones through February 21, 2025.

In September 2023, we acquired Exalos. The closing consideration consisted of (i) the issuance by indie of 6,613,786 shares of Class A common stock at closing, with a fair value of $42,791; (ii) a contingent consideration with fair value of $13,225 at closing, payable in cash, subject to Exalos’ achievement of certain revenue-based milestones through September 30, 2025; and (iii) a holdback of $2,500 subject to final release 12 months from the acquisition date payable in shares of Class A common stock.

We expect to continue to incur net operating losses and negative cash flows from operations. We also expect our research and development expenses, general and administrative expenses and capital expenditures will increase over time as we continue to expand our operations, product offerings and customer base.

The following table summarizes our condensed consolidated cash flows for the nine months ended September 30, 2023 and 2022:

|  | Nine Months Ended September 30, 2023 | 2022 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Net cash used in operating activities | $(87,977) | $(58,815) | $(29,162) | 50% |
| Net cash used in investing activities | (103,569) | (13,213) | (90,356) | 684% |
| Net cash provided by financing activities | 34,195 | 2,531 | 31,664 | 1251% |

### Operating Activities

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, working capital requirements related to inventory, accounts payable and general and administrative expenditures.

For the nine months ended September 30, 2023, net cash used in operating activities was $88.0 million, which included net loss of $114.2 million and reflected adjustments for certain non-cash items and changes in operating assets and liabilities. Non-cash increases primarily consisted of $2.7 million of net losses resulting from a change in fair value for warrants and contingent considerations, $36.6 million in share-based compensation expense and $26.5 million in depreciation and amortization.

Changes in operating assets and liabilities from operations used $39.3 million of cash, primarily driven by an increase in accounts receivable, inventory and prepaid and other current assets.

Cash used in operating activities during the nine months ended September 30, 2022 was $58.8 million, which included net income of $37.0 million and was adjusted for certain non-cash items and changes in operating assets and liabilities. Non-cash charges primarily consisted of $52.4 million of net gains resulting from a change in the fair value of warrants and contingent considerations. These non-cash decreases were partially offset by $30.8 million in share-based compensation expense and $11.2 million in depreciation and amortization. Changes in operating assets and liabilities from operations used $16.1 million of cash, primarily driven by an increase in accounts receivable, prepaid and other current assets, and inventory, partially offset by an increase in accounts payable.

### Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2023 and 2022 was $103.6 million and $13.2 million, respectively. During the period ended September 30, 2023, the decrease in cash was primarily due to the acquisitions of Exalos, GEO and Silicon Radar for $95.0 million, net of cash acquired, as well as an increase in cash used of $8.6 million for the purchase of capital expenditures. During the period ended September 30, 2022, the decrease in cash was primarily due to the acquisition of Symeo for $8.7 million, net of cash acquired, as well as an increase in cash used of $4.5 million for the purchase of capital expenditures. We expect that we will make additional capital expenditures in the future, including licenses to various intangible assets, in order to support the future growth of our business.

### Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2023 was $34.2 million, which was primarily attributed to $52.0 million of net proceeds from the issuance of common stocks through the ATM, partially offset by $12.5 million payments on debt obligations and $7.0 million of payments on financed software.

Net cash provided by financing activities for the nine months ended September 30, 2022 was $2.5 million, which was primarily attributed to $12.3 million of net proceeds from the issuance of common stocks through the ATM, partially offset by $5.0 million paid to OnSemi as part of the deferred payments in relation to the acquisition of ON Design Israel Ltd, $3.2 million of payments on financed software, and a $1.0 million payment of City Semi Deferred compensation.

### Future Material Cash Obligations

Following is a summary of our material cash requirements from known contractual and other obligations, including commitments for capital expenditures, as of September 30, 2023:

| Contractual Obligations | Future Estimated Cash Payments Due by Period Less than 1 year | 1 - 3 years | 3-5 years | \>5 years | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Debt obligations | $5,934 | $— | $160,000 | $— | $165,934 |
| Operating leases | 823 | 4,651 | 3,630 | 4,609 | 13,713 |
| Interest on debt obligations | 7,320 | 14,600 | 8,220 | — | 30,140 |
| Total contractual obligations | $14,077 | $19,251 | $171,850 | $4,609 | $209,787 |

### Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments in applying our most critical accounting policies that can have a significant impact on the results we report in our financial statements. The SEC has defined critical accounting estimates as those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on a registrant’s financial condition or results of operations. Based on this definition, our most critical accounting estimates include revenue recognition, which impacts the recording of net revenue; inventory valuation, which impacts the cost of goods sold and gross margin; business combinations, which impacts the fair value of acquired assets and assumed liabilities; goodwill and long-lived assets, which impacts the fair value of goodwill and intangible assets; warrants and earn-out liabilities valuations, which impacts the fair value of these financial instruments; and income taxes, which impacts the income tax provision. These policies and significant judgments involved are discussed further below. We have other significant accounting policies that do not generally require subjective estimates or judgments or would not have a material impact on our results of operations. Our critical accounting policies and estimates are disclosed under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K filed for the year ended December 31, 2022.

### Recently Issued and Adopted Accounting Pronouncements

We describe the recently issued and adopted accounting pronouncements that apply to us in *Note 1 — Nature of Business and Basis of Presentation* to our condensed consolidated financial statements presented herein.

## Market risk

As filed, 3,232 characters.

### Foreign Currency Risk

We have international operations, giving rise to exposure to market risks from changes in currency exchange rates. Our primary foreign currency exposures are the Canadian dollar, Chinese yuan/renminbi and Israeli New Shekel. We have intercompany loans with certain of our foreign subsidiaries that are long-term in nature. Repayments of such principal amounts are neither planned nor anticipated in the foreseeable future and are therefore treated analogous to equity for accounting purposes. As a result, the foreign exchange gains and losses on these borrowings are excluded from the determination of *Net income (loss)* and recorded as a component of *Accumulated other comprehensive income (loss)* in the condensed consolidated balance sheets. A cumulative foreign currency translation loss of $20.3 million and $12.0 million related to our foreign subsidiaries is included in “*Accumulated other comprehensive loss”* within the Stockholders' Equity section of the condensed consolidated balance sheet as of September 30, 2023 and December 31, 2022, respectively. The aggregate foreign currency translation exchange rate loss included in determining loss before income taxes was $0.7 million and $0.3 million for the three and nine months ended September 30, 2023, respectively. The aggregate foreign currency translation exchange rate loss included in determining loss before income taxes for both the three and nine months ended September 30, 2022 was de minimis. The year-over-year change was driven by the cumulative foreign currency translation loss recorded in relation to permanently invested intercompany loans as of September 30, 2023 as the U.S. dollar strengthened against foreign currencies.

As our international operations grow, our risks associated with fluctuation in foreign currency rates will become greater, and we will continue to reassess our approach to managing this risk. In addition, currency fluctuations or a weakening U.S. dollar could increase the costs of our international expansion and operation. To mitigate the risk, we plan to enter into additional foreign currency forward contracts in the foreseeable future.

### Investment and Interest Rate Risk

Our exposure to interest rate and general market risks relates principally to our investment portfolio, which consists of cash and cash equivalents (money market funds and marketable securities purchased with less than ninety days until maturity) that totals approximately $160.6 million as of September 30, 2023.

The main objectives of our investment activities are liquidity and preservation of capital. Our cash equivalent investments have short-term maturity periods that dampen the impact of market or interest rate risk. Credit risk associated with our investments is not material because our investments are diversified across securities with high credit ratings.

Given the objectives of our investment activities, and the relatively low interest income generated from our cash, cash equivalents, and other investments, we do not believe that investment or interest rate risks currently pose material exposures to our business or results of operations even in the current environment of rising interest rates.

## Controls and procedures

As filed, 4,799 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2023 and based on this evaluation, have concluded that, as a result of the material weaknesses in internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of September 30, 2023.

Per Rule 13a-15(e), the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

### Previously Reported Material Weaknesses

A material weakness is a deficiency or combination of deficiencies in our internal control over financial reporting that creates a reasonable risk that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected in a timely manner.

As disclosed in in Part II—Item 9A of the Form 10-K for the year ended December 31, 2022 filed with SEC on March 28, 2023, management determined that the Company did not have effective risk assessment to identify and analyze risks related to non-routine transactions, such as mergers and acquisitions, at a sufficient level of detail to identify all relevant risks of material misstatement across the Company or within each acquired entity. Additionally, the Company did not have effective information control processes, including those related to information technology general controls (“ITGCs”), user access controls and the use of manual spreadsheets, to ensure the reliability of information used in certain computations related to financial reporting. As a consequence of the aforementioned deficiencies, the Company did not have effective control activities related to the design and operation of process-level controls across certain key financial reporting processes.

Management has determined that these material weaknesses persisted as of September 30, 2023.

### Remediation Efforts to Address the Material Weaknesses

Management’s remediation efforts are ongoing and the actions outlined in the Form 10-K for the year ended December 31, 2022, will continue to be pursued. As we continue to evaluate and enhance our internal control over financial reporting, we may determine that additional measures to address the material weaknesses or adjustments to the remediation plan may be required. However, we cannot guarantee when we will remediate material weaknesses, nor can we be certain that additional steps will be necessary. Furthermore, it cannot be guaranteed that no further material weaknesses will emerge in the future.

The remediation efforts are subject to continuous management evaluation and audit committee supervision. Until Management has completed its remediation efforts and evaluated their effectiveness, we will not be able to determine whether the steps taken will completely remedy the material deficiencies in the Company’s internal control over financial reporting.

### Changes in Internal Control Over Financial Reporting

Our internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15d, remained unchanged during the quarter ended September 30, 2023, with the exception of the ongoing remediation efforts related to the material weaknesses described above and the acquisitions of Exalos on September 18, 2023, GEO on March 3, 2023, and Silicon Radar on February 21 2023. As a result of the acquisitions, we have implemented internal controls over financial reporting to include consolidation of Exalos, GEO, and Silicon Radar, as well as acquisition-related accounting and disclosures, which represent material changes in internal control over financial reporting since management’s last assessment of the Company’s internal control over financial reporting, which was completed as of December 31, 2022.

## Risk factors

As filed, 956 characters.

The business, financial condition, and operating results of the Company can be affected by many factors, whether currently known or unknown, including but not limited to those described in Part 1, Item 1A in the Company’s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2022 under the heading “*Risk Factors,”* any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past or the anticipated future financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results, and stock price. There have been no material changes to the Company’s risk factors disclosed under the heading “*Risk Factors”* in Part 1, Item 1A in the Company’s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2022 filed on March 28, 2023.

Filed Nov 13, 2023.
Source: SEC EDGAR, the filing index for accession 0001628280-23-038372. Last ingested by Listed: Oct 30, 2026, 12:04 ET. No prices; not investment advice.