# indie Semiconductor, Inc. (INDI) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from indie Semiconductor, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1841925/000162828025009207/indi-20241231.htm
Accession: 0001628280-25-009207
Filing date: 2025-03-03
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/INDI/
All MD&A years: /company/INDI/mda/
Previous year: /company/INDI/mda/fy2023/ (FY 2023)
Next year: /company/INDI/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF INDIE

Throughout this section, unless otherwise noted, “indie” refers to indie Semiconductor, Inc. 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 audited consolidated financial statements and notes thereto included elsewhere in this Form 10-K. Certain amounts may not foot due to rounding. This discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Form 10-K. 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 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; Detroit, Michigan; San Jose, California; Cordoba, Argentina; Budapest, Hungary; Dresden, Frankfurt an der Oder, Munich and Nuremberg, Germany; Edinburgh, Scotland; Schlieren, Switzerland; Rabat, Morocco; Haifa, Israel; Quebec City and Toronto, 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, Canada, 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 years ended December 31,

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2024, 2023 and 2022 approximately 66%, 63% and 54%, 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 ATM 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 December 31, 2024, we had raised gross proceeds of $90.2 million and issued 11,138,984 shares of Class A common stock at an average per-share sales price of $8.10 through this program. For the years ended December 31, 2024, 2023 and 2022, we incurred total issuance costs of $0.4 million, $1.1 million and $0.4 million, respectively, in connection with the ATM Agreement.

Recent Acquisition

Kinetic Technologies

On January 25, 2024 (the “Deal Closing Date”), indie and ADK LLC completed its acquisition of Kinetic Technologies, LLC (“Kinetic”). The acquisition was consummated pursuant to an Asset Purchase Agreement (the “APA”), carving out certain assets, including R&D personnel and intellectual properties (“IP”) from Kinetic Technologies (“Kinetic”), in support of a custom product development for a North American electric vehicle OEM. The closing consideration consisted of (i) $3.2 million in cash as the initial cash consideration, net of an adjustment holdback amount of $0.5 million and an indemnity holdback amount of $0.8 million, payable after the 18-month anniversary of the Deal Closing Date in shares of Class A common stock, par value $0.0001 (the “Class A common stock”), (ii) $2.3 million of contingent consideration, payable in cash or Class A common stock, subject to achievement of certain production based milestones 24 months after the Deal Closing Date, and (iii) $2.3 million of contingent consideration, payable in cash or Class A common stock, subject to achievement of a revenue based milestone 12 months after the Deal Closing Date. The purchase price is subject to working capital and other adjustments as provided in the APA.

Impact of Macroeconomic Conditions

Current and continued inflationary conditions have led, and may continue to lead to, rising prices or rising interest rates, which has had a dampening effect on overall economic activity and consumer demand for automotive products. There continues to be uncertainty regarding overall macroeconomic conditions, including increased geopolitical tensions, risk of recessions, and the effects of potential trade policies including tariffs. For example, on February 1, 2025, the U.S. government announced a 10% tariff on imports from China and a 25% tariff on imports from Mexico and Canada, with immediate effect and a 10% tariff on steel and aluminum imports effective March 2025. Although the tariffs on Mexico and Canada have been temporarily delayed pending further negotiations between these countries, there is no assurance that the governments will be able to reach long-term agreements. The U.S. government has also threatened tariffs against Taiwan that could specifically target imports of semiconductor products, which, if imposed, could seriously and negatively affect our business and the U.S. economy overall

The tariff actions could lead to further potential retaliatory tariffs on U.S. goods and escalate trade disputes in China and in other countries in which we do business. For example, China has responded with tariffs on certain U.S. goods. While we are still evaluating the potential impacts of these proposed tariffs, as well as our ability to mitigate their related impacts, these tariffs may adversely impact our revenue and cost of goods sold in the United States. The institution of trade tariffs both globally and between the United States and China specifically carries the risk of negatively affecting China’s overall economic condition, which could have a negative impact on us as we have significant operations in China. Furthermore, the imposition of tariffs could cause a decrease in the sales of products to customers located in China, other customers selling to Chinese end users, or other global customers which could materially and adversely affect our business, financial condition and results of operations. The ultimate impact of any tariffs will depend on various factors, including if any tariffs are ultimately implemented, the timing of implementation, and the amount, scope and nature of the tariffs. For additional information, see “Item 1A. Risk Factors”, including the risk factor titled “If significant tariffs or other trade restrictions are placed on our products or third-party suppliers, our revenue and results of operations may be materially harmed.”

Additionally, the ongoing 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.

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Results of Operations

A discussion of our results of operations for the year ended December 31, 2022, including a comparison to our results of operations for the year ended December 31, 2023, is included under “Results of Operations” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 29, 2024.

Revenue

We design, develop and manufacture primarily analog, digital and mixed-signal integrated circuits (“ICs”) together with software running on the embedded processors in the majority of the ICs. Our revenue represents both (i) non-recurring engineering (“NRE”) fees for the development of ICs and prototypes and (ii) product sales, the sale of semiconductors under separate commercial supply arrangements.

Our revenues fluctuate in response to a combination of factors, including the following:

•our overall product mix and sales volumes;

•gains and losses in market share and design win traction;

•semiconductor content per vehicle;

•pace at which technology is adopted in our end markets;

•fluctuations in currency exchange rates that affect our prices;

•the stage of our products in their respective life cycles;

•the effects of competition and competitive pricing strategies;

•governmental regulations influencing our markets; and

•the global and regional economic cycles.

Product Revenue. Our product revenue is recognized when the customer obtains control of the product and is based on the contractual shipping terms of a contract. We provide an assurance-type warranty which is not sold separately and does not represent a separate performance obligation. Therefore, the estimated costs of warranty claims are generally accrued as cost of goods sold in the period the related revenue is recorded. Under limited circumstances, we may offer an extended limited warranty to customers for certain products. We accrue for known warranty and indemnification issues if a loss is probable and can be reasonably estimated. The majority of our product revenue originates from sales shipped to customer locations in Asia, and the United States.

Contract Revenue. Contract revenue is revenue earned from NRE services. Generally, our NRE contracts with our customers initially contain a single distinct performance obligation, which is to provide NRE design services for products based on the customer’s specifications. Generally, our contracts also include the optional purchase of products that may be exercised at stated prices subsequent to completion of NRE design services. We have determined that the option to purchase products is not a material right and have not allocated transaction price to this provision.

For NRE arrangements, we recognize revenue over time as services are provided based on the terms of the contract on an input basis, using costs incurred as the measure of progress. The costs incurred represent the most reliable measure of transfer of control to the customer. Revenue is deferred for amounts billed or received prior to delivery of the services.

Cost of Goods Sold

Cost of goods sold consists primarily of the cost of semiconductors purchased from subcontractors, including wafer fabrication, assembly, testing and packaging, board and device costs, manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, inventory and warranty provisions, memory and component costs, and shipping costs. Cost of goods sold also includes compensation related to personnel associated with manufacturing and amortization of certain intangible assets acquired through the business combinations. Cost of goods sold generally does not include

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development costs incurred related to servicing our NRE services contracts, which are recorded to research and development and expensed as incurred.

Research and Development Expense

Costs related to research, design, and development of our products are expensed as incurred. Research and development expense consists primarily of pre-production costs related to the design and development of our products and technologies, including costs related to developing products subsidized by NRE services contracts. This includes costs with customers such as employee compensation, benefits and related costs of sustaining our engineering teams, project material costs, third-party fees paid to consultants, prototype development expenses, costs related to IP licenses, occupancy costs and related overhead based on headcount, other costs incurred in the product design and development process and amortization expenses for certain intangible assets acquired from the business combinations.

Selling, General, and Administrative Expense

Selling, general, and administrative costs include employee compensation, including compensation and benefits for executive, finance, accounting, legal, business operations and other administrative personnel. In addition, it includes marketing and advertising, outside legal, tax and accounting services, insurance, occupancy costs and related overhead based on headcount and amortization expenses for certain intangible assets acquired from the business combinations. Selling, general, and administrative costs are expensed as incurred.

Restructuring Costs

In August 2024, we initiated a plan intended to improve our operating performance (the “Plan”). The Plan consisted of actions including but not limited to, workforce and facilities reductions. Due to the size, nature and frequency of this Plan, it is fundamentally different from our ongoing productivity actions. As a result, all pre-tax charges related to such initiatives are separately reflected in Note 4 - Restructuring costs in our accompanying financial statements for more information.

Amortization for Intangible Assets Acquired from Business Combinations

As a result of the most recent business combinations, we acquired various intangible assets. The corresponding amortization expenses are included within Cost of goods sold, Research and development expenses, and Selling, general and administrative expenses based on their respective nature. Our acquired intangible assets with definite lives are amortized from the date of acquisition over periods ranging from two to twelve years.

Interest Income

Interest income represents cash or income earned on our cash balances and investments with certain banking institutions.

Interest Expense

Interest expense primarily consists of cash and non-cash interest under our term loan facilities, convertible notes and line of credit.

Other Income (Expense)

Other income (expense) primarily comprises the change in the fair value of the warrants and earn-out liabilities issued as a result of the Transaction and contingent considerations and holdbacks issued as a result of the recent business combinations.

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Income Taxes Benefits

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 year ended December 31, 2024 are primarily related to our foreign operations. Income tax benefits for the year ended December 31, 2023 are primarily related to the tax effects of our acquisition structure of GEO and release of our valuation allowance in China.

Refer to Note 18 — Income Tax, in our accompanying financial statements for additional detail.

Comparison of the Years Ended December 31, 2024 and 2023

Revenue

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Revenue for the year ended December 31, 2024 was $216.7 million, compared to $223.2 million for the year ended December 31, 2023, a decrease of $6.5 million or 3%, which was primarily driven by a $13.6 million decrease in contract revenue and offset by a $7.1 million increase in product revenue. The increase in product revenue was due primarily to change in product mix as well as the recent acquisitions, offset by a decrease in average selling price. The decrease in contract revenue of $13.6 million or 49% was primarily due to a large multi-year non-recurring engineering project that commenced in early 2022 that is winding down in the current year towards its completion stage.

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Operating Expenses

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[[/GREPCENT_TABLE]]

Cost of goods sold for the year ended December 31, 2024 was $126.4 million, compared to $133.6 million for the year ended December 31, 2023. The decrease of $7.2 million or 5% was primarily due to a $9.3 million decrease in product cost, offset by $2.6 million increase due to change in product shipments in connection with the increase in products sold as well as $4.5 million increase due to change in product mix. Total cost of goods sold for the year ended December 31, 2024 also included a decrease of $5.7 million in amortization related to acquired intangible assets and inventory step-up value both in connection with finalizing the opening net assets acquired from the recent acquisitions.

Research and development (“R&D”) expense for the year ended December 31, 2024 was $175.1 million, compared to $154.5 million for the year ended December 31, 2023. This increase of $20.6 million or 13% was primarily due to a $17.7 million increase in share-based compensation expense due to both increase in headcount and additional equity awards granted since the same period in prior year. Research and development expense for the year ended December 31, 2024 also included a $4.9 million increase in personnel costs due to increase in headcount to support our continued growth in research and development needs. We expect research and development expense to stabilize over time.

Selling, general and administrative expense for the year ended December 31, 2024 was $80.9 million, compared to $70.5 million for the year ended December 31, 2023. The increase of $10.5 million or 15% was primarily due to a $1.8 million increase in personnel costs due to increase in headcount, a $2.0 million increase in various office and business related expenses and a $4.8 million increase in share-based compensation expense. The increase in share-based compensation expense is due to both increase in headcount and additional equity awards granted since the same period in prior year. Total selling, general and administrative expense also included an increase of $2.1 million in amortization related to acquired intangible assets from the recent acquisitions. We expect selling, general, and administrative expense to stabilize over time.

Restructuring costs for the year ended December 31, 2024 was $4.3 million due to the restructuring plan initiated in August 2024. The restructuring plan was substantively completed as of December 31, 2024.

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Other income (expense), net

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[[/GREPCENT_TABLE]]

Interest income for the year ended December 31, 2024 was $4.6 million, compared to $7.8 million for the year ended December 31, 2023. The decrease of $3.2 million from the year ended December 31, 2023 was primarily as a result of lower cash balances due to multiple acquisitions in 2023 and the first quarter of 2024.

Interest expense for the year ended December 31, 2024 was $9.3 million, compared to $8.7 million for the year ended December 31, 2023. The increase of $0.6 million was primarily as a result of the addition of the 2029 Notes in December 2024.

For the years ended December 31, 2024 and 2023, we recognized gains (losses) from change from change in fair value for warrants, contingent considerations and acquisition-related holdbacks. The gains (losses) recorded represent the following:

i) Warrants: During the year ended December 31, 2023, we recognized a net gain from change in fair value of our warrants of $7.1 million, which reflected the net increase in fair value of our warrant liability since December 31, 2022 until immediately prior to the completion of our warrant exchange to Class A common stock on November 9, 2023. The net increase in fair value was primarily a result of the decrease of the closing price of our Class A common stock listed on the Nasdaq to $4.94 per share on November 9, 2023 from $5.83 per share on December 31, 2022. The total liability as of November 9, 2023 was reclassified to Additional Paid in Capital in our consolidated balance sheet. As of December 31, 2023, there was no liability remaining on the balance sheet.

ii) Contingent considerations and acquisition-related holdbacks: During the year ended December 31, 2024, we recognized a net gain from change in fair value of our contingent considerations and acquisition-related holdbacks of $29.0 million, which is primarily contributed by an net gain of $31.9 million for the contingent considerations and acquisition-related holdback related to the GEO acquisition, partially offset by a loss of $3.0 million for the contingent considerations related to Exalos. During the year ended December 31, 2023, we recognized a net unrealized loss from change in fair value of our contingent considerations of $3.0 million, which is primarily contributed by unrealized gains (losses) for the contingent considerations and acquisition related holdbacks of $3.2 million, $(5.7) million and $(0.4) million for Silicon Radar, GEO and Exalos, respectively.

Other expense for the year ended December 31, 2024 was $0.4 million, compared to $1.2 million for the year ended December 31, 2023. Other expense relates primarily to the realized and unrealized foreign currency gains and losses during the year.

Income Taxes

Income tax benefits for the year ended December 31, 2024 are primarily related to our foreign operations. Income tax benefits for the year ended December 31, 2023 are primarily related to the tax effects of our acquisition of GEO and subsequent tax reorganizations.

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,

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from time to time, we use cash to fund our mergers and acquisitions, purchases of various capital, intellectual property 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 and the issuance of Class A common stock under the ATM Agreement. We believe these sources of liquidity will be sufficient to meet our liquidity 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, 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 February 28, 2025. 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. 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 ATM 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 flexible access it provides to the capital markets. During the year ended December 31, 2024, we raised gross proceeds of $19.8 million and issued $3,787,725 shares of Class A common stock at an averaged per-share sales price of $5.24 through this program. For the year ended December 31, 2024, we incurred total issuance costs of $0.4 million. As of December 31, 2024, and since the inception of the program we have raised gross proceeds of $90.2 million and issued 11,138,984 shares of Class A common stock at an average per-share sales price of $8.10 and had approximately $59.8 million available for future issuances under the ATM Agreement. As of December 31, 2024, we have incurred total issuance costs of $1.9 million since inception.

In December 2023, employees in Wuxi exercised options granted to them through the Wuxi Employee Equity Incentive Plan (the “Wuxi EIP”) and contributed total capital of CNY88.0 million (or approximately $12.3 million) from option proceeds in preparation for a potential IPO in China. The funds will be used by Wuxi for general corporate purposes. Wuxi does not have an obligation to repay the collected capital to its employees in the case of an unsuccessful IPO.

On March 29, 2024, we entered into a revolving line of credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”) with a credit limit of $10.0 million, bearing interest at the Secured Overnight Financing Rate (“SOFR”) plus 1.75%. The outstanding principal balance is due and payable in full on March 28, 2025. Interest is payable monthly beginning on May 1, 2024 through the maturity date. This line of credit required us to collateralize a cash balance equal to the total outstanding balance in a cash security account with Wells Fargo.

On September 27, 2024, Wuxi entered into a short-term loan agreement with the Bank of Ningbo Co., Ltd. with an aggregate principal balance of CNY40.0 million (or approximately $5.7 million) bearing interest of 3.50% per annum and maturing on December 27, 2024. This short-term loan was fully repaid on December 27, 2024.

On December 6, 2024, we issued $218.5 million in aggregate principal amount of our 3.50% convertible senior notes which are due in December 2029 (the “2029 Notes”). The 2029 Notes will be convertible into cash, shares of common stock or a combination of cash and common stock at our election. In connection with the 2029 Notes, we entered into privately negotiated capped call transactions with certain of the initial purchasers or their respective affiliates and other financial institutions. The capped call transactions are expected generally to reduce potential dilution to our common stock upon any conversion of 2029 Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of converted 2029 Notes, as the case may be. We used approximately $23.4 million of the net proceeds from issuance of the 2029 Notes to pay the cost of the capped call transactions. We intend to use the remainder of the net proceeds from the issuance of the 2029 Notes for working capital and general corporate purposes, which may include potential acquisitions.

As of December 31, 2024, our balance of cash and cash equivalents, including restricted cash, was $284.5 million.

Acquisitions

We have completed multiple acquisitions in the last couple of years and we plan to selectively pursue and assess inorganic growth opportunities that are complementary to our existing technologies and portfolio of products and/or accelerate our growth initiatives.

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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 February 2023, we entered into an agreement to acquire GEO. and completed the transaction on March 3, 2023. The closing consideration consisted of (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, with a fair value of $21.0 million at closing, payable in the next 24-month period after closing; and (iv) an earn-out with a fair value of $59.3 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, 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 $9.2 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 $42.8 million; (ii) a contingent consideration with fair value of $9.8 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.

On January 25, 2024, we completed the acquisition of certain business properties from Kinetic through an asset purchase agreement. The closing consideration consisted of (i) $3.2 million in cash as the initial cash consideration, net of an adjustment holdback amount of $0.5 million and an indemnity holdback amount of $0.8 million, (ii) $2.3 million of total contingent considerations, payable in cash or Class A common stock, subject to achievement of certain production based milestone for the next 24 months, or through January 25, 2026, and (iii) $2.3 million of contingent considerations, payable in cash or Class A common stock, subject to achievement of certain revenue based milestones 12 months after January 25, 2024. The indemnity holdback amount is payable within five business days after the 18-month anniversary of the closing date of January 25, 2024 and is 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 to stabilize over time.

The following table summarizes our consolidated cash flows for the years ended December 31, 2024 and 2023:

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[[/GREPCENT_TABLE]]

A discussion of our cash flows for the year ended December 31, 2023 is included under “Liquidity and Capital Resources” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 29, 2024.

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 year ended December 31, 2024, net cash used in operating activities was $58.6 million, which included net loss of $144.2 million and reflected adjustments for certain non-cash items and changes in operating assets and liabilities. Non-cash adjustments primarily consisted of (i) $67.2 million in share-based compensation expense and $39.8 million in depreciation and amortization, which are partially offset by (ii) $27.4 million of net gains resulting from a change in fair value for contingent

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considerations and currency forward contracts. Changes in operating assets and liabilities from operations provided $1.1 million of cash, primarily driven by an increase in inventory and a decrease in other liabilities, offset by a decrease in accounts receivable and an increase in accounts payable.

Cash used in operating activities during the year ended December 31, 2023 was $104.4 million, which included net loss of $128.8 million and reflected adjustments for certain non-cash items and changes in operating assets and liabilities. Non-cash adjustments primarily consisted of (i) $43.7 million in share-based compensation expense and $31.8 million in depreciation and amortization, which are partially offset by (ii) $3.2 million of net gains resulting from a change in fair value for warrants, contingent considerations, and currency forward contracts. Changes in operating assets and liabilities from operations used $58.1 million of cash, primarily driven by an increase in accounts receivable, prepaid and other current assets and inventory.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2024 was $19.3 million. During the year ended December 31, 2024, the decrease in cash was primarily due to the acquisition of Kinetic for $3.2 million, net of cash acquired, as well as cash used of $14.3 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.

Net cash used in investing activities for the year ended December 31, 2023 was $107.7 million. During the year ended December 31, 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 cash used of $12.8 million for the purchase of capital expenditures.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2024 was $209.3 million, which was primarily attributed to $195.1 million net proceeds from the 2029 Notes, which included $218.5 million gross proceeds, $9.0 million issuance cost and $23.4 million cost of capped call. We also received $19.4 million of net proceeds from the issuance of common stock through the ATM, and $10.0 million of net proceeds from the issuance of the line of credit through Wells Fargo. These cash inflows are partially offset by $8.0 million payments on other debt obligations and $5.5 million of payments on financed software.

Net cash provided by financing activities for the year ended December 31, 2023 was $43.6 million, which was primarily attributed to $52.0 million of net proceeds from the issuance of common stock through the ATM and $12.3 million of proceeds related to the Wuxi EIP capital contribution, partially offset by $12.8 million payments on debt obligations and $9.1 million of payments on financed software.

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 December 31, 2024.

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In connection with our acquisitions (See subheading titled Liquidity and Capital Resources — Acquisitions above, we may be required to make future payments or issue additional shares of our common stock to satisfy certain earn-out requirements under the acquisition agreements.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation

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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; business combinations, which impacts the fair value of acquired assets and assumed liabilities; and contingent considerations, which impact the fair value of assumed liabilities and the recording of other income (expense). 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 significant accounting policies and estimates are described in Note 2 — Summary of Significant Accounting Policies to Item 8 of this Annual Report on Form 10-K.

Revenue Recognition

We enter into contracts with customers that can include various combinations of products and services. As a result, our contracts may contain multiple performance obligations. We determine whether arrangements are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether our commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract.

In particular, we enter into engineering services contracts with customers that generally contain only one distinct performance obligation, which is design services for ICs based on agreed-upon specifications. Engineering services contracts typically also include the purchase, at the customer’s option, of ICs at agreed upon prices subsequent to completion of IC design services. We have determined that the option to purchase ICs is not a material right and has not allocated transaction price to this provision.

For IC development arrangements, revenue is recognized over time as services are provided based on the terms of the contract on an input basis, using costs incurred as the measure of progress and is recorded as contract revenue in the consolidated statement of operations. The costs incurred represent the most reliable measure of transfer of control to the customer.

Business Combinations

We allocate the fair value of the purchase consideration of a business acquisition to the tangible assets, liabilities, and intangible assets acquired, including in-process research and development (“IPR&D”), based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When an IPR&D project is completed, the IPR&D is reclassified as an amortizable purchased intangible asset and amortized over the asset’s estimated useful life. Our valuation of acquired assets and assumed liabilities requires significant estimates, especially with respect to intangible assets. The valuation of intangible assets, in particular, requires that we use valuation techniques such as the market, income and cost approach. These approaches include the use of a discounted cash flow model, which includes discounted cash flow scenarios and requires the following significant estimates: future expected revenue, expenses, capital expenditures and other costs, and discount rates; or weighted average cost of capital, and any cost savings that are expected to be derived in the future from the viewpoint of a market participant. We estimate the fair value based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

Contingent Considerations

Our contingent consideration obligations are arrangements resulting from acquisitions that involve potential future payment of consideration that is contingent upon the achievement of certain financial metrics. Contingent consideration is recognized at its estimated fair value at the date of acquisition based on our expected future payment, discounted using accepted valuation methodologies.

We review and re-assess the estimated fair value of contingent consideration liabilities at each reporting period and the updated fair value could differ materially from the initial estimates. We measure contingent consideration recognized in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified as Level 3 inputs. The fair value is measured based on a Monte Carlo simulation or a scenario-based method, depending on the earnout objective and the timing of the measurement. The fair value measurement includes the following significant inputs: volatility, projected financial information and scenario probability. Significant increases or decreases to any of these inputs in isolation could result in a significantly higher or lower liability. Ultimately, the liability will be equivalent to the amount paid, and the difference between

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the fair value estimate on the acquisition date and each reporting period and the amount paid will be recognized in earnings within Other Income (Expense), net on the consolidated statements of operations.

Recently Issued and Adopted Accounting Standards

For information regarding new accounting pronouncements, and the impact of these pronouncements on our consolidated financial statements, if any, see Note 2 — Summary of Significant Accounting Policies in our accompanying financial statements.