Luminar Technologies Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

There are 10 speakers on the call.

Operator

Welcome everyone to Luminar's Third Quarter of 2023 Business Update Call. My name is Aileen Smith, and I am Luminar's Head of Relations. With me today are Austin Russell, Founder and Chief Executive Officer and Tom Fenimore, Chief Financial Officer. As a quick reminder, this call is being recorded, and you can find the press release and shareholder letter that accompany this call at investors. Luminartech.com.

Operator

We ran into some hiccups with Business Wire and getting our press release out on time, but hopefully most of you both were able to have a chance to review our inaugural letter to shareholders and our press release that were issued via an 8 ks as well as uploaded to our IR website. As we've communicated, we are piloting a new format for our call of FIST earnings. The Shareholder Letter was meant to replace our historical earnings deck and prepared remarks so that we can dedicate more time to addressing questions from our investor Community, including retail investor questions posted to the SAVE platform, institutional investor questions emailed to our investors' inbox and live questions from our analyst community. We will be checking each of these platforms intermittently throughout the duration of our call to address any that come in real time. Before we begin the Q and A, let me remind everyone that During the call, we may refer to GAAP and non GAAP financial measures.

Operator

Today's discussion also contains forward looking statements based on the environment as we currently see it and as such does include risks and uncertainties. Please refer to our press release and business update shareholder letter for more information on the specific risk factors that could cause actual results to differ materially. We plan to alternate questions asked on our SAVE platform or via e mail with questions asked from our live research analyst community. With that said, let's jump right into Q and A and start with some of the top questions from our SAVE platform. Austin.

Operator

The first question is for you. Recently the

Speaker 1

Is your ERS okay?

Operator

Yes. Everything is good.

Speaker 1

Great. Thanks.

Operator

So recently, the successful run at rate test with Volvo was a major milestone accomplishment for Luminar.

Speaker 2

What else is left to

Operator

do with Celestica of and Volvo before the green light is given to start production and when do we expect series production quarters?

Speaker 1

Yes. So it's been great collaborating with Volvo and leading up to this huge culmination and milestone that we have for us to release to run it right. So this was sort of the Investor Relations. And the key fundamental milestone when it comes to testing the capacity and quality for product leading up to start of production. So that's something that obviously we're proud to have passed and an incredible effort and thank you to the team And as well as Volvo's team in helping push that across the line with the Mexico battery with Celestica.

Speaker 1

So Investor. That's been great. There's obviously still work to do from a finalization of industrialization standpoint in conjunction With Volvo, leading up to the start of production next year and getting everything queued up for what they have launched. But that was really the Big major push in terms of demonstrating the capacity. So that really starts and shows that you can scale well into the tens of thousands and Investment.

Speaker 1

And then setting the stage up for 100 of 1000 thereafter. And I think we said that the Mexico facility would support up to 250,000 Centers or corresponding vehicles per year. So that's it's been a great start with that. And then we'll have ultimately a similar test of Investor Relations. With EBK and Mercedes and everything down the line as that all plays out accordingly.

Speaker 1

So Yes, we're excited for the future and it's really all systems go with Volvo. It's going to be a huge game changer as they launch and scale with EX90 next year.

Operator

Investor Relations. Great. Our second question from the retail shareholders. Can you add some color to your relationships with Mobileye and NVIDIA? How does Luminar benefit from the relationship?

Operator

What kind of future revenues do you expect from them as they launch various products with your LiDAR, in particular Mobileye's Chauffeur Program and Full Star.

Speaker 1

Yes, absolutely. So when it comes to NVIDIA and Mobileye, they're incredible Technology Partners that we have that we've been collaborating with, well, I guess each now for years. So they really selected us as their Investor Relations. Our respective partner when it comes to LiDAR systems and associated technologies and even give us some components of Software as well that we've been collaborating with them with OEMs. So that's something that we really see as a clear Integrated partnership and SpringBoard as well to be able to address the respective OEM opportunities that are out there.

Speaker 1

We know Mobileye has been an Credible leader when it comes to assisted driving systems and that's continuing to extend into further advanced capabilities. And NVIDIA has really been establishing themselves in the industry as well. Investment. And like I said, just incredible success that we've seen. So to be a part of that and be selected to be their partners with respect to these next generation automotive Technologies as automakers really strive to be able to adopt this is very, very meaningful to us.

Speaker 1

And like I said, we couldn't ask for Better Partnerships in the Industry to be able to help successfully realize that. So we're all in, they're all in. And we're, I think really now starting to see the fruits of the labor of the collaboration that we've had for years. So that's at, I think probably yet another inflection point We're at where you can start seeing that transition from development work that we've been doing with these guys Investment. Into the automotive industry, into production vehicles.

Speaker 1

And you take a look at like the Mercedes program, for example, and the collaboration that we have with them on that Investment. With NVIDIA, that's something that's obviously been public. And again, it goes to show What you can do when you combine the respective leading technology companies together to create an incredible solution.

Operator

All right. Our next question is going to be for Tom and that is, is Luminar in danger of bankruptcy?

Speaker 3

Investor. Aileen, the short answer is no. Yes, I understand why some shareholders would ask that question given the recent stock price performance. When you actually look at our most recent results for Q3, we cut our non GAAP gross loss Investor Day. Almost in half, which puts us on trajectory to get it to positive by the end of the year as those launch related costs continue to wind down as we Investor Relations.

Speaker 3

We cut our free cash spend by nearly $20,000,000 during the quarter, which puts us on track to kind of get it That $35,000,000 to $40,000,000 range for Q4. We had over $320,000,000 of cash and liquidity As of quarter end, we're on track to have over $300,000,000 of cash and liquidity at the end of the year. So when you kind of look at where we our targets for ending the year, we're going to have over 2 years of runway. We believe that that's going to be enough To get us to profitability, we have the book to business in place that will drive strong revenue growth once we reach that high volume SOP next year, so that gives us a credible way to start growing our revenues and profits to help our reduce Investment. Our cash spend even more.

Speaker 3

And so once again, I understand the source of the question, but that's clearly not the case. We have the most cash on Investor Relations. And God forbid, if we find ourselves in a scenario where we need more, I have plan A, B, C, D, E, F Investor Relations. And many more ways ready to go. Always have contingency plans still to put those in place way before you need them.

Speaker 3

And we're doing that if, Investor. God forbid, we end up need to do something on that end.

Operator

Great. All right. We are going to transition to some questions from Retail sorry, Research Analyst. Because we are trying to offer more time for Q and A, we would ask that our research analyst asked one question and we will allow for another 2, 3 follow ups. Our first question is going to come from Josh Pokalter at TD Cowen.

Speaker 4

Hey, Thanks for taking my question and thanks for letting me go after the bankruptcy question. It's a nice way to warm up the room. I want to follow-up on the Mobileye comments from earlier. It's been our we've observed that Luminar has been the lighter of choice on Mobilye's platform while they work on their internally developed product. There have been some recently announced design wins for Chauffeur.

Speaker 4

I mean, Can you guess is it safe to assume that Luminar has a very decent shot on goal? Can you maybe expand on that relationship and what chauffeur wins mean for your business?

Speaker 3

And you want me to

Speaker 5

take that or you want to take it?

Speaker 1

Yes. No, I mean, I think it's fair to say. It's hard to comment specifically Investor. Further at this time as it relates to the ongoing work and collaboration. But I could say it's been as successful as we could have hoped Investment.

Speaker 1

And again, everything that we set out when we originally announced the partnership with Mobileye that we wanted to ultimately achieve, we've been Pushing that full speed ahead and that's been absolutely fantastic since what in it was nearly, I think it was like 3 years ago. Yes, I think probably to the month, 3 years ago when we were out there with it. And at the same time, Same with NVIDIA in terms of what we can hope to achieve. So I think we wish All of the best possible success to these respective companies. And I think in any scenario, a key component of it, we don't make the compute systems Investment.

Speaker 1

So that's something that I think will be an important part of that collaboration. Now obviously, Investor. The internal effort I think was unique to Mobileye rather than NVIDIA specifically, but there obviously hasn't been any change as it relates to Investment Realizing and using us when it comes to that from a platform standpoint. So building LiDARs and Creating new breakthrough technologies is really, really hard. And as we know, it takes a lot of time, effort, a decade and a lot of capital along the way to be able to make that happen assuming you have the right technology path and roadmap in the first place.

Speaker 1

But that's why we spend all these years building up from the chip level up to have these level of capabilities, performance, economies of scale and at the same time doing what's needed to be able to achieve these automaker requirements and Investor. So that's been good. And I think they are ultimately will also help drive the long term aspects of Investor Relations. Of our order book and contracts as well respectively with automakers there. And we said by the end of the decade, Investment.

Speaker 1

The target would be to get towards $60,000,000,000 contracts for the order book, which is in terms of Investor. The respective opportunity that we have ahead of ourselves by capturing what that was like 3% or 4% markup penetration. So that's something that Investment. Those companies are going to be very helpful to us to be able to hopefully achieve beyond that.

Speaker 4

Thanks for that Austin. And for my follow-up, In the shareholder letter, I think you mentioned you're on track to achieve $1,000,000,000 of order book growth this year, but some of the contracts might slip into next year. Maybe you could elaborate on how much has already 1, I guess how much of that is new versus existing customers and what's driving $1,000,000,000 was roughly I believe what you added last year, which is Investment. What's driving, I guess, the bit of a slowdown in the amount of business that you're signing this year versus last year? Thank you.

Speaker 3

Yes, Josh, look, as we said in the letter, we're still on track to add $1,000,000,000 We do the formal tally at the end of the year. We kind of don't do it along the way, but we already have Investment. A few wins in there, some from existing customers, some from new customers. We'll talk about stuff once our customers are ready to talk about them. So we remain confident that we're going to get to that $1,000,000,000 We're sitting here on November 8.

Speaker 3

So we have a lot of things already in the year. There's a few things that we're hoping to wrap up here in the few weeks left in the year. Whenever you get to that, there's always a risk that some things of Investor Relations. Into Q1, but there's also a little bit of a cushion in there. So we remain confident in it.

Speaker 3

Look, these things that the longer term opportunity continues to remain and exist. I would say almost every major automaker is now having serious conversations of Investor Relations. About implementing LiDAR technology on their vehicles, it's a question of when, not if. And the timing of them kind of making these formal awards Can be a little lumpy. And so I wouldn't read anything in particular to kind of I would say an overall industry slowdown, But I would say we still remain satisfied with the pace of our commercial activity and discussions both with new and existing customers.

Speaker 4

Investor. Okay. Thank you. I'll hop back in the queue. Sorry, Austin, please.

Speaker 1

Yes. I was just going to say, one other thing, just as a and I'm sure, as you know, Investor Relations. Josh, but just as a general reminder, the way that we calculate our order book is also generally a Substantially more conservative standard than some of what we've seen out there in the broader industry. It's probably like a would be a multiple of this, Investor. It was a significant multiple of this if we did that, but we want to do it right and we want to show Investment.

Speaker 1

Really what's actually there in the bag and what we can have that clear one to one conversion with in revenue over the Investor relative near term here in terms of opportunity that we have that we'll obviously start seeing starting to realize with these new mobile vehicle launches here soon. Investor.

Speaker 5

Got it.

Speaker 4

Thank you, Austin, Tom and Aileen. I appreciate

Speaker 1

it. Thank you.

Operator

Next up in our queue from the analyst will be Winnie Dong at Deutsche Bank.

Speaker 2

Thank you so much. I was wondering if you can provide a current update on the TPK facility around in China, where that might stand and then can you just remind us on the target volume and timeline?

Speaker 3

Investment. So I was actually over in China last week spending some time with the TPK team As well as some other customers over there. I would say that things are proceeding very well so far with Investor. We're starting right now for Iris Plus. We're making those B samples internally at our Orlando manufacturing facility.

Speaker 3

Investor Relations. And sometime next year, we'll actually transfer production of the C samples to them. And so we're starting to ramp that up, Investor Relations. Buying the necessary equipment, putting in place the necessary clean rooms and the TPK team is doing a very good job on that. We've been pleased so far with the TPK relationship and I wouldn't be surprised if that's something that continues to expand over time.

Speaker 3

With regards to timeline, they're planning to, as I said, start C sample production for us in the first of Investor Relations. And then the plan is to have that facility ready for start of production by the end of 2025. The initial capacity that we're planning that out for is about 600,000 units or LiDARs. And we also have the ability to grow that as we continue to win more business over there.

Speaker 2

Thank you for the very detailed response. And then I was wondering if you can elaborate a little

Speaker 4

bit more

Speaker 2

on the gross margin improvement headwind that was stated in the shareholder letter, Obviously, still targeting gross margin positive in Q4, but I was wondering if you can just elaborate a little bit Investor Relations.

Speaker 3

And as a reminder, we're kind of Investor. Launching 2 major products at 1. 1 is Iris where our lead customer is Volvo. That's what we're building out our new facility down in Mexico to produce. That's what we're preparing for high volume SOP next year.

Speaker 3

Investment. And I would say we're kind of in the tail end of those initial industrialization of Investor. And so as we kind of reach that SOP, there's going to be a fair amount of launch and other related costs that start to come out of the system, we're doing that. For Iris Plus, we're in that B sample phase, right. So we're making those LiDARs at our advanced manufacturing facility down in Orlando.

Speaker 3

And what you're doing during the B phase is you're kind of building those LIDARs and then you do a fair amount of testing on them and then you kind of have to modify the design As you do that testing and identify issues, that's very typical during the B and C sample files. The issues you of Investor. It's difficult to predict until you actually get them in there. And so they were a little higher than we were expecting. I think the good news is that the team has done a good job of Investment.

Speaker 3

Identifying the necessary modifications we need to make to fix them. And so I think we've kind of made those. But the cost for that was a little bit higher Investor. That flows through our COGS line. And so while the IRIS industrialization costs are starting to come down, The IRIS Plus industrial allocation costs continue to remain high and we'll do so until we reach the SOP for that Investor Relations.

Speaker 3

A little bit behind the Irish for the initial Irish launch. And so as you're kind of industrializing a product, of Investor Relations. The issues you encounter is in the cost to kind of fix those are a little bit unpredictable and that's what we found on Iris Plus. Once again, nothing significant there. The team has identified Investor Relations.

Speaker 3

We need to go through the necessary testing and validation to prove it out, but that's What kind of happened on the Iris Plus side during Q3?

Speaker 1

So basically, what you see is that because you have sort of a cost variance thereof, call Investment. It's very hard to predict the exact like what it is to be exact like so it will be like plus or minus 10% when it comes to that. But because The way that this happens with the contracts that we have with the automakers and like the revenue recognition preproduction is percentage of Investor Relations as a release of relative costs. So that when things go up or down by 5% here or there, probably 5% there, adjust the timing of the revenue recognition. And then of Investor.

Speaker 1

That's kind of as we go through. Obviously, we've had the same kind of questions. It's like, why does this input affect this or whatever it may be. But Investor. From a business management standpoint, we're on track to our key milestones and what we've laid out, including to the important part for Investor Production and that lines up with both Iris and ultimately Iris Plus as well that comes Investor Relations thereafter for the respective additional programs for SOP.

Speaker 2

Thank you both. Thanks.

Operator

It's going to come from John Babcock from Bank of America.

Speaker 6

Hey, good evening, Dash, good afternoon. I guess just my question, the performance that you've seen this quarter and then what you're expecting through the rest of the year, Is there anything we should take from that and how that impacts your longer term outlook? I know you guys reiterated it, but just wanted to see if this poses any risk or if there are any other factors that we should keep in mind as we're thinking about that?

Speaker 3

The answer to that question is, John, we don't see anything. Investment. While these are bumps on the road and the revenue came in a little bit lighter than expected and we talked about some of the gross margin headwinds, As you kind of industrialize your product and kind of go from the B2C sample phase, you freeze the design and actually reach serious production, a lot of those launch related costs Wind down. And so as you successfully industrialize those kind of bumps on the road costs that were higher costs that we're seeing in COGS, Those should dissipate. We're seeing it on Iris where we're a year plus or minus ahead in terms of development line there.

Speaker 3

Iris Plus is just a little bit Behind that and as you're going through that industrialization process, the cost can be a little bit unpredictable. On the revenue side, once again, so plus

Speaker 1

or minus, like 5% or 10% like we're not talking. I mean, because then basically, that again feeds into the respective revenue line that's, okay, plus or minus 5% or 10% or Investment. Okay, plus or minus 5% or 10% or whatever it is. So if anything, that then gets offset, respectively, to like it's not like a loss. It's just Based on the economy that it gets offset to respectively the next year.

Speaker 1

So it doesn't actually affect the long term outlook of what we got.

Speaker 3

So John, it doesn't change the size of the order book. Investment. We're still on track for the SOP target dates that our customers want to be on. And so you just need to make it to there and then start converting Investor. The order book into real annual revenue.

Speaker 3

And so these bumps on the roads that we're hitting there don't impact that. Of Investor Relations. And some of the revenue lightness we experienced in Q3 is related to, I would say, a couple of things, particularly with these issues. 1, We had to move some of our LSI engineers off revenue for external projects to help implement some of these design changes. And so that's revenue where didn't come in during this quarter when those engineers free up and work on it, you'll get that in the future.

Speaker 3

And then the way that we account for the revenue we receive for the development work, it's based upon percentage completion. And so We're still going to recognize the same amount of revenue, you just because of percentage completion methods have to recognize less in this specific quarter. Of Investment. As your cost goes up, your percentage of completion goes down.

Speaker 6

Okay. Thanks for that. And then just one quick follow-up here. As it of pertains to next generation LiDAR, how much of that investment has already been made versus how much is still have to be done? And then also how where have you made OEMs of this Product and Capabilities, etcetera.

Speaker 6

And has this flowed through into your order book at this point?

Speaker 1

Yes. So I think we're really just starting to successfully get that off the ground of where we've spent years Investor. We're going to work on the back end from a technology development standpoint, creating the fundamentals of what's there. So I would say the I mean, the majority of the time of Investment for what's required to create the fundamentals of the technology for the NexGen LiDAR is already done. The real question at this point is Being able to progress throughout this coming year to get to a stage of where we can really set this up to be LiDAR system that can fundamentally be on every vehicle produced.

Speaker 1

And that's really the goal is that we talk about standardizing and democratizing safety in And I think we recognize that as fantastic as the products are today, that It's meant for millions of sensor scale, not tens of millions of sensors in terms of respective Scale that we can be able to get out there with. And this is exactly what this is designed for, so we can really capture the larger automotive industry and also not just The initial vehicle launches that some of these automakers have, but also when you start going towards even very mainstream Vehicle Models as well. This will be particularly helpful. So that's really what we're seeing. And then when it comes to Investment.

Speaker 1

That investment standpoint, I mean, you take a look at like most of the investment is actually goes into the infrastructure that's required for both development As well as the, call it, the manufacturing infrastructure and getting those set up getting that set up right to be able to successfully produce this. And that's really what we've been doing in partnership, of course, with Celestica and TTK, respectively. So setting that groundwork is very, very helpful. The level of like efficiency, I'd say, just from a development cost perspective is dramatically higher for each iterative Product thereafter. And that's something that's also particularly helpful when we have the economies of scale and the supply to be able to support it.

Speaker 1

If you didn't have that, with like 1,000,000,000 of dollars of business and shipping, being able to have a Investment Unit Supply Chain along the way, then that's a very different scenario and outcome than if we did. And that's what we're able to leverage successfully. So With that said, there's more work to do obviously on this, but we're very excited to have an opportunity to unveil Investor details, respectively, next year about the next generation product.

Speaker 3

And then, John, while we haven't been talking a lot publicly about The details of our next generation product, we have been talking about it with some of our customers. And with your question about order book, There was nothing for our next generation product in the order book at the end of last year. I'm pretty confident Investment. Some of the positive growth you'll see in the order book this year will include some portion of it from our next generation product. And as Austin said, we'll talk about that in the future and hopefully near future here.

Speaker 1

Okay. Thank you. Appreciate it.

Operator

Our next question is going to come from Natalia Winkler at Jefferies.

Speaker 7

Hi, thank you for taking my question. So The one I just wanted to clarify, Tom, on those two contracts that you highlighted in the letter that have been pushed up, could you explain a little bit more How do these work? And also maybe part of that, like how should we think about that sequential growth that you guys are seeing in the revenues in the Q4?

Speaker 3

Yes. So There were 2 contracts in particular that were supposed to get done in Q3. They one of them is actually done Investment. It got done in October instead of September. The other one is going to be get done here, I would say, in the coming days.

Speaker 3

Investor. And so once again, that's just revenue that we'll start to recognize in Q4 as opposed to Q3. When you kind of look at where we ended up in Q3 from a revenue perspective and then you look at kind of what the implied Q4 revenue is, it's about $10,000,000 of additional revenue. Of Investor. Of that $10,000,000 of additional revenue, about 70% of that is, I would say, coming from contracts that we've already executed.

Speaker 3

And so we feel pretty good about that strong sequential growth from Q3 to Q4 and most of that revenue we kind of already have

Speaker 1

That would be like what, I mean, over 50% Growth from Q3 to Q4.

Speaker 3

Yes, I would say 10 over 17, I think it's somewhere around 60%, but don't have my calculator.

Speaker 7

That's very helpful. And then the second question I had was kind of a little bit longer term strategic. Just wondering if you guys could provide some more color on the China market, Investor. Like what kind of competition are you seeing there? And how do you think how do you consider those dynamics of Chinese OEMs maybe getting incrementally more successful in Southeast Asia and Europe.

Speaker 7

Does that basically kind of change your view on the opportunity going forward?

Speaker 3

Yes. Look, we are the China market, I would say, is moving very fast both in terms of The automakers there adopting LiDAR technology, particularly some of these new EV companies, I would say, as well as the pace We've so far been Investor Relations. Really the only Western LiDAR company that's had success in China and we think that that success is going to continue. Investor. But we need to make sure that we operate in China in the right way to make sure that we can appropriately serve the local Chinese customers both in China, but as they start to serve their As they start to expand globally.

Speaker 3

That's why the second manufacturing plant we opened up is in China with PPK and I think you're going to continue to see us of Investor

Speaker 7

Relations. And if I may, just one follow-up on this. How do you guys think about ASTs longer term for China market and outside of China market? And also like how should we think about the ASPs that you guys are considering for the order book, the 1,000,000,000

Speaker 3

Whatever is in the order bookings already have pricing agreed to with our customers. And so that's kind of already contractually put in place. Investor. Look, we're always going to get pressure from our customers and automakers whether they're in China or globally to lower our prices. But the one thing that we continue To impress upon with our customers is you got to look at the value that our LiDAR provides.

Speaker 3

And that's both in terms of unique technology to enable this next generation ADAS system as well as Five Way Economy. We'll continue to be able to bring our costs down with our next generation LiDAR, but really the value we create in the ecosystem Where we like to focus the conversations on, we tend not to compete on business where it's who can provide the cheapest Investor. We like to compete on business where you can provide the best value to the system that our customers are trying to build.

Speaker 1

Investor. I think it's also very important to note that and again, this is we're obviously in the foundation business that's been alive, but we've really been focused on how we continue to monetize Investor Ecosystem around this through our software and AI developments that we've had and seen some success ways through, Investor Relations. For example, these mapping products that you've now been able to be out there with through all the different parts of the entire supply chain, these are all the way down to the semiconductor Investor at the LIDAR and how we've been able to successfully sell those products even just outside of what we do with the core business. I think that's important as part of this. Ultimately, insurance will play a significant role in I think supporting very significant Investor Relations.

Speaker 1

Where the safety improvements will ultimately be king when it comes to the kind of value proposition that you can be able to provide. And this is where we are also and are successfully launching a new test protocol and system. This is actually of Investor. Swiss Re is going through an independent third party test. They're our exclusive insurance partner.

Speaker 1

So to be able to quantify the benefits of Safety Improvements, what the LiDAR can have, to be able to basically correlate that into respective insurance savings and costs. And Investment. I've said, multiple occasions before that the in respect to savings and value that's being provided Investment. From that alone, from a safety savings standpoint, you would expect it to be significantly more than even just the entire cost of the LiDAR Investment. In and of itself.

Speaker 1

So I think this will be certainly on premium vehicles and even mainstream vehicles. So accidents are expensive, Investment. Vehicle collisions are expensive and even if you average over time and probability weighted, it's extremely expensive. So preventing that Makes a huge difference. And that's why I think it's very clear that over the long term, from a value proposition and ASP standpoint, It all comes down to the technology, the product in terms of what can be supported and that's why we're obviously proud to be the leading technology company in Investor Relations.

Speaker 1

And have the performance capabilities for why we're seeing all this leading adoption from the top automakers out there.

Speaker 7

Thank you, Flavia, Tim.

Operator

Thanks, Ittaiya. We're going to transition back to some questions from our investors. The next one is going to be Vethro Austin. Going by 3 year design cycles, 2024 RFQs will be for the 2027 model year. Will these RFQs be pitched with the next gen LiDAR?

Speaker 1

Yes. So I would say that when we're talking about the second half of the decade here, Absolutely, that will incorporate our next generation LiDAR as well. We have Iris and we have Iris Plus That are continuing to scale accordingly with automakers as well, so that's not stopping. But when it comes to the next generation systems and models, Ultimately streamlining into the respective roadmaps of the customers. For both existing customers and new customers, we're also making sure The sensors are, so to say, backwards compatible as it relates to respective automakers as well To make sure that ultimately as they launch new models and whatnot, they can have an easy and straightforward transition with both the hardware and software Investment, respectively, to the new sensor technologies that we have.

Speaker 1

So that's yes, will be great to be able to see that realized. And I would just say as well, there's obviously our few processes and whatever it may be that's there. But I think what's Investor. Our Qs are cheap to be able to send out. What's important is that the automakers that are investing 1,000,000,000 of dollars with us to be able to develop These kinds of new holistic systems and deployments that can go out onto their production vehicles and sort of show what's possible when it comes to implementation of this technology.

Speaker 1

And that's really what we're seeing and going to continue to emphasize on. So it should be a smooth transition, ultimately People Scale and that will unlock, as I was alluding to before, even wider spread adoption on these kinds of capabilities.

Operator

Investor Relations. And a follow-up question for Tom from one that was asked earlier. What specific risks are present given Luminar's Participation in the China market and the U. S. Crackdown on sensitive technology.

Speaker 3

Yes. So you already talked about how important China is to us as a market Investor Relations. Some of the success we've had over there and we acknowledge that the world is becoming Investor. And so as we continue to build and expand globally, we need to keep that in mind as we grow. Having said all that, for our core LiDAR business, in our core automotive market, there are no limitations of investors.

Speaker 3

On us to operate anywhere in the world, and we don't see that changing anytime in the near future. Investor. There are, I would say, obstacles more on the software data collection mapping side, depending upon on the specific region of Investor Relations. And where we do face those limitations in a certain geography, we look to partner with the right people. But on our core LiDAR business and Investor Relations.

Speaker 3

Our goal is to be a major automotive player. And in order to achieve our goal of saving 100,000,000 lives over the next 100 years,

Speaker 1

Investor. I think the risk is actually more the other way around in terms of not Investment. It would be less so the U. S. Not allowing technology to China or China not allowing U.

Speaker 1

S. Technologies into China, it would be the U. S. Not allowing Chinese technologies into the Western market. I think that those are some of the dynamics that we're actually Investment.

Speaker 1

I think those are the questions that are being posed that I'm sure everybody has seen. So that's the relevant factors, I think, at play right now.

Operator

Investor Relations. Next one from retail shareholders before we switch back to the self-service analysts. LiDAR technology is evolving to a place competitors are making similar products for cheaper. Based on your current assets, what's the long term plan to deal with saturation in the LiDAR market? And are there plans to broaden R and D into other related technologies?

Speaker 1

Yes. Of Investor. I mean and sorry, you're saying is it what about the saturation for the LiDAR market? Are you saying there Investment. I think there's like

Speaker 3

a lot of LiDAR companies, a lot of them are raising to the bottom of the list. Here's what I would say. When it comes to of Investor. Getting our LiDAR to a price point where it accelerates mass market adoption, Investment. That's a core tenant of our next generation LiDAR and making sure that it is at a cost point We achieved that strategy with our next generation.

Speaker 3

We are confident that we are going to be a winner, if not the winner, of Investor. In the LiDAR landscape, what we're investing in outside of our LiDAR business is not to create a hedge. Investment. In case we're not successful, it's actually to build those tools to monetize the value that we create. That's why we're getting into software.

Speaker 3

That's why we're getting into mapping. That's why we're getting Investment and that's why we're selling the components that we make in our LSI business for our LiDAR Investor Relations LiDAR is going to have the price point to accelerate the mass adoption and we're confident we're going to be a winner and we're confident that the tools that we're investing in Investor

Speaker 1

Relations. And I think the important part here is like when we see saturation Like the relevant factor here, and again, we have to take a step back. Like the numbers in this auto like in automotive and in this industry, This year's scale is absolutely massive. That's why as we talked about it's like, okay, just 3% to 4% market penetration can be game changing in of Investor. In terms of like increasing the value and business value by like orders of magnitude.

Speaker 1

Because like the point is that right now it's not like 75% of cars are shipped with this new technology on it and it's a $1,000,000,000,000 industry right now. It's something that Less than like only a fraction of 1% of cars and even like what the number the percentage of the market of cars and LiDARs Officially being actively integrated into in terms of the vehicle models right now is still like a couple percent. Of Investor. And most of it probably captured by us. So I think the thing is that when you take a look at the overall market opportunity, it's not a matter of Oversaturation at this point.

Speaker 1

There is an oversaturation of R and D efforts that in terms of people trying to create different systems and technologies to be able to get into the market, of Investment. Obviously, the substantial and vast majority of which all have not been successful in that, which is maybe no surprise and consistent with Methods that we've given for years, that's in terms of the challenges and difficulties associated with this, much less meeting the performance requirements and specifications, requirements and being able to scale a business accordingly to do this. But when it comes down to it, I think it's Less about the slice of the pie, at this point about how big can we make this Investor. How much adoption can we get as an industry, how quickly? And I think that's the most important metric.

Speaker 1

Now, When it comes down to it, the other relevant factor is you have to survive to see this through. And that's where because like obviously, if you don't survive, Investor. There's no market penetration on anything. But this is where I think that consolidation factor obviously serves as an advantage to us Investment. In that respect, in terms of the long term outlook for what we can do.

Speaker 1

But We're building Luminar to last for decades and hopefully Well over that 100 year I mean, there's a reason why we have 100 year goal, well over to the goal is to have it be a long term company that outlives ultimately all of us and towards Investor. Realizing that life saving objective and being on all of these vehicles for decades or centuries to come. So I think that's really what we're doing. And in the immediate term, the focus is to continue to meet those respective goals, Investment. And that's exactly what we've been set up for success and deliver on what we promised that we would do from the beginning.

Operator

Next question comes from Jamie Perez at RF Lafferty.

Speaker 5

Hey, everybody. How is everything going? Investor Relations. Thanks for taking my question. I know you've spoken a lot about Volvo and Mercedes.

Speaker 5

How about What I mean the other customer is Polestar. I think a couple of months it was announced that Polestar was going to be equipped with LiDAR, of Investor. Luminar LiDAR, but I mean, Polestar has a pretty aggressive series of models coming out from the Polestar 5, 4, 5 and 6 coming up. So could you tell me give a little bit color on the relationship between you guys and Polestar And the outlook for that relationship?

Speaker 1

Yes. So Polestar is great and they are like a fantastic company. They have been producing some Investor. Very real product and starting to really scale that up successfully. And first, with tens of thousands of deliveries, now going into 100 of thousands of deliveries, Investment.

Speaker 1

Very impressed as a company in terms of what they're able to do in that quarter more. New World EV Company, Obviously, there's like the Lucid and the Rivian's and everything out there. We got to sort of pick 1 up to be able to start out with, again, to contribute to just focus Investor Resources. I think Polestar was the best partner to be able to do that and gives us the biggest kind of revenue and order book opportunity associated with the business Contracts there. So I think it should be public out there what we're following enough that we had with the Polestar 3 and the Polestar Investor.

Speaker 1

And again, this incredible partner, incredible team on this. Investor. I would suggest and everyone here should tune in for Polestar Day as well. They actually have it out What's going on tomorrow? So it will be great.

Speaker 5

All right. Thanks for the question.

Speaker 1

Investor Relations. Absolutely. Thank you. Thanks.

Operator

Our next question is going to come from Mark Delaney from Goldman Sachs.

Speaker 8

Investor. Yes, good afternoon. Thank you very much for taking my questions. I'm hoping you can give some more color on the path to being gross margin positive next quarter. Maybe, Tom, can help us better understand how much of the COGS in 3Q were launch related costs and where those launch costs may go to in the Q4 and then what the other factors are Equincially to bridge to being at positive gross margin in 4Q.

Speaker 3

Yes, we had about a $9,000,000 gross loss during Q3 of that about 17,000,000 of Investor Relations. That was down from about $24,000,000 in Q2. And so the path there is to really continue to bring those launch related costs down So that we reach gross margin positive in Q4.

Speaker 8

That's helpful color. My second question was just trying to better understand is there any work Luminar still need to do in order to help Volvo Get ready for the launch of the EX90 or is everything you guys need to do now ready after having successfully done the run at rate test? And then maybe just more broadly, operationally, what does Luminar need to do in order to be flexible depending on when that Vehicle may launch just in light of some of the delays Volvo encountered on their side, but hopefully will be resolved soon.

Speaker 1

So I mean, we're working with them obviously hand in hand to be able to ensure a successful launch on that. I'm sure Investor. Probably maybe more appropriate to ask them in terms of the details there. But we're supporting with everything that we had. We also there's the hardware side that we have for the Investment Run It Rate that we successfully did with them.

Speaker 1

And then there's also the software side, which I think we also said that we completed the successful integration of the software with the Zensact system and middleware associated on the vehicle. And then on top of that, We actually now successfully implemented everything that it takes to be able to actually when you have the sensor Investment. On the vehicle, on the production line, in this case, it started out in Charleston, South Carolina. The end of the full end of line calibration, all of Investor Relations. And I think the intrinsic and extrinsic metrics in auto calibration associated with that specific factory in line that will then scale from there on out.

Speaker 1

So Investment. We're in a great position to be able to support as they successfully launch. Obviously, Iris as a product is Investment Independent of just Volvo alone like Volvo is the first kind of global large scale Investor Launch that we have with us that we think is that very clear inflection point. And this run rate was really that fundamental milestone of Investor Relations. So we're excited for this.

Speaker 1

Obviously, we've already we have dozens of customers that You use Iris, but this is where it starts to get into the big leagues when you have 100 of things 100,000 of Luminar equipment cars Investment. Driving around and then ultimately scaling to 1,000,000 and beyond with Mercedes and everything there out. Investor Relations. That's great. Thank you.

Operator

All right. We'll transition back to a few from our investors. The next one is, how does Luminar think about accountability in terms of recent business performance and financial losses? Are there any review processes for unsatisfactory performance?

Speaker 1

I assume these are all the say questions for the retail platform? Yes. Great. Thank you. Yes, Investment.

Speaker 1

I'd say from an accountability standpoint, we have a high performance culture and management within that culture. I think that's something that we've structured Luminar very much as a merit Investment. And I think it's a sync or swim type approach as people come in and certainly can attest to it in terms of what Investment. But when it comes to the overall goal, like when talking about accountability and the overall goals and everything, I mean, I think in terms of the business goals Investor. For what we set out in terms of the key corporate company level milestones that we had for 2020, 2021, 2022 and 2023, I mean, we've effectively achieved all of those respective milestones that we've laid out, plus or minus.

Speaker 1

We actually beat many of them along the way In terms of what we laid out from the beginning and overall have set up as a business to put us on a great trajectory there. So like, obviously, overall from our performance standpoint, that's been fantastic. We all know the frustrations with respect Investor Capital Markets on that and reflecting that execution and success. But when it comes to the actual core business performance there, we have Investment. The relevant KPIs that for each respective leader in OKRs that we have, and that cascades down throughout the entire company that rolls up to that.

Speaker 1

And Like I said, we've largely met those along the way. So, I think, nevertheless, again, I have the saying internally, it's going to never stop it good enough. And that's something where we always keep pushing the bar and keep pushing the battery of what's possible and what's achievable in this company. And we'll continue to do so with everything that we got into the foreseeable future.

Speaker 3

Investor Relations.

Operator

All right. And our next question from one of our investors. There's been some rumors and some talk about some management turnover within company including Tanner Augelek and Jason Eichenholz. Can you provide some color or comment?

Speaker 3

Yes. The Jason Eichenholz, that's fake news. Jason, He's been a key part of Luminar as our co founder since the beginning. Investor. He has been, is and in my mind always will be a critical part of our team.

Speaker 3

Jason, I I don't know where that rumor came from. He's at Luminar. He's chairing for us.

Speaker 1

No, I think it's probably because people like this, they wear different hats in the business along the way Investor Relations. So we recently appointed him as the Chairman of Luminar's semiconductor. So he's basically Overseeing that side of it. When it comes to the operational aspects of the business, you guys may be aware we recently hired Investment. Kevin Hinge, who's been taking charge of the respective operations and scaling of some of the core aspects of the business.

Speaker 1

And he's been already off to the races off the bat for an incredible start. So that's been fantastic. We actually have As well. I think at the same time that we announced and we also announced Emily, who's here, who came from leading our marketing and was doing so and leading the respective Investor. But as it relates to Tanner, yes, he's no longer with the company.

Speaker 1

So that's where we're Thankful to have Kevin to be able to come on and take the reins of some of those responsibilities.

Operator

Our next question we are going to take from Kevin Cassidy at Rosenblatt.

Speaker 9

Okay, thanks. Maybe if you could remind us or maybe tell us, so what the strategy is for expanding your Investment. Footprint in other models that your current customers say at Volvo and Mercedes and Nissan, how do you get into more Models and what would be the timeline for that?

Speaker 3

Kevin, we've already started to do it at Volvo. We did it at Mercedes. We've done it at Polestar. We initially had the 3 and then we of Investor Relations. And so as you get in with that initial win with the customer and continue to execute, it kind of They're being honest and competitive on pricing and so they'll run RFQs to kind of test the market and keep you honest.

Speaker 3

But as you execute, Investor. As you deliver, as you build the relationship, as they kind of design their software and autonomous systems around you, you execute, you have a real good shot at the next Investment Business. That business comes as they renew certain vehicle lines or renew the platforms. Investor. And so the timing of that is more driven by kind of their product launch cycle.

Speaker 3

Investor. But I think you're going to see us we've done it already and I think you're going to continue to see us expand our business with our existing customers. And I

Speaker 1

Investor. The perfect example of that is Mercedes, right, where we start off like with 1 vehicle line and one vehicle model, like S Class, okay, this is a high end thing. It's of Investor. It's real volume, but it's only so much there. And you see an expansion by like 20x in In terms of the respective volume and across the vehicle models and lineup and everything as they continue to see our successful technology execution and The details around that to be able to make that decision 6 months ago to be able to really of Investor.

Speaker 1

And once they're in, you're in to be able to make that happen. Now obviously, these vehicles do ultimately have some kind of respective lifetime, As Tom pointed out, but these are like 5 to 10 year cycles on the platforms there. So that's really why Also we have such confidence around the respective order book and contracts that we can scale the company with.

Speaker 9

Okay, great. That was my next question was around the competition. And even if they change their domain controller, you are in with all the different domain controllers. So it wouldn't matter much to you?

Speaker 3

Yes. Look, we try to plant as many seeds in the market as we can, whether it's directly with the automakers of Investor. And we think that that's going to maximize the ad backs and ultimately the wins we get in the

Speaker 9

Investor. Okay, great.

Speaker 1

Thanks. Thank you.

Operator

I think that we are through most of our research analyst Questions. Before we get to our final question from the investor community, we do want to make a note that we received many great questions through all of our platforms this quarter. So considering we could not get to all of them within the 60 minutes that we had, we will look to provide answers and commentary through other mediums in the future. Both that. Our most popular question coming through the SAVE platform is pretty repetitive.

Operator

The stock has been moving in one direction for much of the last 2 years. While it's not unusual for start up, there still seems to be little information on what Luminar is doing, development, partnerships or other news. What is management's strategy to raise confidence in the future?

Speaker 1

No, I think it's a great question around all of this and Investor Relations. This, of course, what's in our control and what we've really been focused on is execution to the key milestones in terms of what we laid out Investment. From those past couple of years, we've largely executed to. We are going to continue to be able to execute along the way with this. Investor.

Speaker 1

When it comes to updates, news, everything, we're always welcome to feedback in terms of like frequency level and What we can do in terms of further insight into the business. These are also as we kind of think about some of these things, this is like one of the drivers, for example, why Swiss Re started to help commission this independent study of the efficacy of the technology in terms of how Investment. You quantify the respective safety benefits associated with this versus, say, the like just how much Substantially better is it than the existing assisted driving systems. How much better is it? How do you sort of force the hands of automakers as well To be able to ensure that their cars aren't unnecessarily taking lives out there.

Speaker 1

So I think this is where it's really important to be able to obviously continue to share different aspects of the world. Again, we're always open to feedback. When it comes to the overall business and the key thing that we already have confidence in is that we have this long term View and outlook that I think is as strong as ever in terms of this. Nothing for example, even just and I think Tom noted this in the shareholder letter, There's obviously been an insane amount of volatility. I think it was like a 50% difference in the like the market trading where it was this quarter versus literally what it was 3 months ago.

Speaker 1

Like nothing has fundamentally changed in our business, but like there's like arbitrarily different value implied valuations there that are Investor. Irrational and Scott, no point of where there's just a complete market dislocation in implied value relative to fundamental value of what we've had and what we've delivered. I think the point is that at some point as you continue to execute on this and really prove this out, there's a reversion to rationality and reversion Investment. To demean on that in terms of what we can do and obviously like I said it's impossible to predict every hedge fund short and market dynamic and order flow and everything that goes along the way. But what is absolutely relevant and what we have the very clear commitment and promise to be able to do is to be able to execute, to be able to meet these Longer term targets as well as our near term targets too for that matter to support that.

Speaker 1

And that's what we're really all in to be able to make successfully happen. So I think there's really no two questions about this that we can build this into hopefully one of the most Investment. Valuable businesses or technology companies of our generation in the industry as we do this and do this right. And I don't think that's a doubt in anyone's mind. Obviously, the key consideration here is having greater credibility around these different aspects and key metrics.

Speaker 1

For example, I think one thing that we'll take a look at is that how we can get greater confidence in terms of people's view and ability around like, Say, for example, the order book metric, I think as it stands right now, say, For example, from a capital markets perspective, we're probably getting little to no credit, respectively, for order book if we're valued at Even just a fraction of that order book alone, at this point in terms of implied value. So it was just kind of a joke. So then the question is that How can you instill for the comments, okay, did there use that 1 to 1 conversion in terms of what happened to the order book to what ultimately makes its way into the company's revenue? What does that path look like as you continue to execute? How do you continue to scale all these different aspects of the business?

Speaker 1

And not just the LiDAR, but beyond the LiDAR itself. And try and leave little nuggets along the way, like, for example, this great partnership Investor Relations. I don't know if anybody asked a question on that, but that's something that's in the shareholder letter We have in there delivering we'll be now delivering our product to great customers like the Walmarts and Kroger's and everything in the world for the next generation Vehicle. So I mean, we're doing stuff, the intermediate steps along the way. But when it comes to long term outlook, that's where we're going to continue to emphasize Investment and really just be all in to help support.

Speaker 1

We're doing everything to be able to make this as big of a success as we all know it can be and will be. Investor Relations.

Operator

All right. With that, I think we are at the top of the hour. We would like to thank everyone for their participation on the call and the great questions submitted. We look forward to seeing everyone at our next quarterly business update and we thank you for your continued interest in Luminar.

Speaker 4

Thank you everyone.

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Key Takeaways

  • The company successfully passed a run-rate test with Volvo and Celestica in Mexico, clearing the way for IRIS production next year with a facility capacity of up to 250,000 units annually.
  • Luminar has deep partnerships with Mobileye and NVIDIA, moving from development into production and positioning its LiDAR systems for programs like Mobileye’s Chauffeur and Mercedes’ Advanced Driver Assistance.
  • In Q3, Luminar cut its non-GAAP gross loss by nearly 50% and reduced free cash burn by $20 million, ending the quarter with over $320 million in cash to provide more than two years of runway.
  • The company remains on track to secure $1 billion of order-book growth this year from a mix of existing and new customer contracts, despite minor timing shifts pushing some deals into Q4 or early next year.
  • Luminar’s next-generation LiDAR development is largely complete at the core technology level, with a TPK China facility gearing up for C-sample production in early 2024 and SOP by late 2025 targeting 600,000 units.
AI Generated. May Contain Errors.
Earnings Conference Call
Luminar Technologies Q3 2023
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