Q4 2021 Luminar Technologies Inc Earnings Call
Couple of women ours VP of Investor Relations with me today are Austin Russell.
And Tom Finamore, our CEO , and founder and Chief Financial Officer as a quick reminder, this call is being recorded and you can find the earnings release and slides that accompany this call alumina our tech Dot com forward Slash quarterly review in a moment, you'll hear brief remarks, followed by Q&A, but ahead of that we're gonna take five minutes. So that you can watch our next.
In the past a series production video series the U R. U R. L for that video is on the screen right. Now. So please take a moment will rejoin the call in five minutes.
Okay.
Yes.
And just one more time for anyone who joined a little bit late welcome to the call. We're taking five minutes to give you a chance to watch our new path to series production video you can find the U R. L. Right. There on your screen. Please take a look at the video and we're going to be back in a four or five minutes.
Got it.
Well I hope you enjoyed the video before we begin the prepared remarks and Q&A, let me remind everyone that during the call. We may refer to GAAP and non-GAAP measures. 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.
A presentation for more information on the specific risk factors that could cause actual results to differ materially with that I'd like to introduce lumina, our founder and CEO Austin Russell.
Alright, Hey, you guys can't hear me okay.
Looks good awesome stuff okay.
But let's let's get to it well I would think fixed trade for the intra hopefully you all enjoyed a chance to be able to look at the the video there in first part of the path to production series, you know Theres a lot that goes into it but are.
We thought it would be great to be able to just jump right in her live I hear from Orlando and would love to be able to welcome all of you guys through our quarterly business update so what.
With that jumping right into the fourth quarter was certainly an incredibly strong finish to our first year as a public company and that was the most successful in our history, we met or beat all of the key company level milestones that we've laid out towards the beginning of the year, which were pretty aggressive.
By many but.
We successfully met even the targets that we raised guidance on mid year like that for example, the number of major commercial wins. So we continue to pioneer this industry with a landmark first for products partnership to Vincent carrying the posture of the industry's first standardization deal with Volvo and of course, adding to our roster of major commercial wins, including leaders like Nvidia pull.
Star Daimler truck Pony AI Airbus Mobile Ly SAIC and of course, most recently the major win with Mercedes Benz.
So we've continued focus on intensive execution on both the hardware and software standpoint in preparation for series production. It starts with the team where we've effectively doubled the size of our workforce and had the best in the industry functional leaders joined the team as you may have seen over the year to drive our company forward. So additionally throughout the year, we partner with key supply chain manufacturing and vehicle.
Partners like Celestica Baronet, with <unk> in an alpha to help derisk, the holistic execution and scaling for Iris into series production on.
On the software side, we've also successfully developed and executed our central solution with an alpha version, culminating in the demonstration of our proactive safety and highway autonomy capabilities live at CES.
Just as prior months.
So people are taking notice and it's beginning to shift the direction of conversation of what's possible with this technology and how it can ultimately be standardized to achieve the vision of the unprofitable car.
So from a financial standpoint, we also couldn't be in a better place as we continue to exceed our targets we've more than doubled our revenue year over year largely from the new series production contract for the development work associated with that as well as increasing our forward looking order book by 61% the.
Original partner, we added 40 and increased it to 60 and we exceeded that of course, we have a very strong war chest of capital liquidity with $792 million in cash following $254 million of stock repurchases as well. So it's still an incredibly strong position and were bullish on ourselves over the long term, we have more conviction than ever and.
As well as in our long term unit economic targets.
And excited to say that we have now also completed all of the core development milestones in our first series production contracts, which is a huge step forward on the path for series production.
It's a new update there.
So with that I would like to take a moment, we can talk through a few of the key progress updates last quarterly update and then I'll hand, it over to Tom to review some of the specifics on the milestones financials in 2020 to business outlook before we're jumping into human.
So first a little bit more detail on execution. They go through a little of hardware and software Ahs over Irish Lidar, we had a really strong finish in Q4 with the kickoff of a significant phase of the path to series production. So we're now in the <unk> phase with Iris we built the initial units at the end of the year for this latest space and over the course of the past couple of months we've been.
Intensely focus on industrializing product and process.
We're now working with over 100 key automotive grade suppliers for the in production intent design and supply chain, which was a massive undertaking it's a huge switchover. Given this is a relatively nascent industry and we have to be able to help work to ensure the supply chain. So that's something that's been a big focus we continue to target being series production.
Ready for both the hardware and of course software standpoint by the end of this year and we know how much of our partners are depending on us to deliver and deliver at the scale that's needed to enable the next generation of safety and autonomy for the industry.
So when it comes to Sentinel I'm proud to say that we've conducted live on track demonstrations as I previously mentioned for a Sentinel alpha solution at CES, including the proactive safety and highway autonomy capabilities. So we actually could.
Alumina or equipped car versus some of the modern vehicles. The latest camera based Adas technologies that are out there and the clear result is the high confidence limit our detection does the avoidance of these kinds of collisions, whereas the low confidence detected from today's systems are just not able to reliably come to a safe stops even avoid some basic safety case scenarios.
Much less particularly complex scenarios or at higher speeds or even at night and by the way the majority of accidents happen at night.
So goodbye.
It's a sentinel already used by our customers today.
Many of them and it's only getting better and better every day. So we're targeting a beta release of central before year end.
So ultimately it's the combination of the sensor and the software that will help accelerate ushering of the next generation of vehicle safety and autonomy for passenger cars and trucks.
So.
Some of you may have questions around the recent win with Mercedes Benz. We can go in a little bit more color on that and some of the other events that happened this past quarter.
From a commercial standpoint, so obviously the.
Significant one Mercedes which was announced.
Towards the beginning of this year were hot off the heels of this landmark series production, when adding with them having partnered with Illumina to enable enhanced safety and autonomy for the next generation production vehicle platform.
So Mercedes really represents the pinnacle of the automotive industry as the leading luxury vehicle Oems and it represents big validation of both our technology as really the person only system that can meet all these key performance requirements to enable these capabilities and of course validation reinforcement of the company level as we work directly with them to deliver the solution, which by the way is a huge.
<unk> aspect from a business and relationship standpoint of having worked directly with them rather than the traditional model of being required to license your technology to a traditional automotive legacy supplier to be able to provide in the solution.
Which optimizes our case, the product economics et cetera.
But anyway.
The only other example, this probably in recent history, that's relevant is Nvidia, but as you guys know, we're working closely with Nvidia as well.
So one special aspect of this deal also relates to data, which we will be able to access the data for both the development vehicles as well as the production vehicles for continuous improvement and updates such that our technology will only get better and better overtime.
That's a hugely significant in all contributes to the economies of scale from a hardware and software standpoint, but for product and technology, which is ultimately required to be able to make this viable for the industry.
Not just.
Tens or hundreds of vehicles that you need you need tens or hundreds of thousands to get out on the road to achieve.
Unit economics.
At scale, that's really necessary and this only further enhance that.
So our mission from the start has been to democratize safety by integrating Iris.
Consumer vehicles and this deal with Mercedes is really just another example of us continuing to execute on that strategy.
One last thing as well that you guys may have.
May or may not have seen us at CES, we actually launched blade for trucks.
<unk> was just a for the first time conversion of what we had showed up as a long term vision that studio day earlier this past year about what the future of autonomous trucking could look like.
So it's a pretty pretty sleek integration you can see some photos of it in the deck that was also provided as part of the quarterly update.
Made it real made it happen, it's not just a vision anymore, it's a product.
So with that inclusion before I hand, it off some want to underscore our purpose as a company I mean.
We know where technology is going to have a profound impact on transportation Society as we know what we're in this for the long haul.
And to that extent at CES. It presented a 100 year vision for the company.
Our ambition is to be able to have the opportunity to save 100 million lives and 100 trillion hours.
Time over the next 100 years and this is possible if we see through the successful standardization of this technology and the eradication of accidents out on road.
Solvable problem, we just need to make it happen.
So obviously change the world and it starts and ends with relentless execution and we're well on our way towards this vision of delivering the unprofitable car by making luminary lifesaving capability available both on the consumer side.
And some of the biggest automakers on the planet already starting to adopt it.
Into series production of course, so with that.
It over to Tom discuss how the execution for the year track towards 2021 business milestones that we laid out previously as well as our outlook for 2022, Okay. Thank you Austin, let's start by reviewing our 2021 milestones and financial performance.
Pleased to say that we achieved all five of our 2021 milestones our first milestone which could enter the sea sample fees, which we did in Q4 by producing initial see sample sensors.
During the first few weeks of 2022, we went through extensive testing and review of these initial sensors as well as our manufacturing process.
As we said in the past manufacturing complicated opto electronic devices.
Series production scale and that auto grade quality is not an easy task and it's never been done before to this extent our team has been working around the clock to make the necessary industrialization advances, including working with over 100 suppliers to ensure automotive qualification and scalability.
Key financial metric that illustrates the progress we made is that we completed all the core development milestones under our first awarded series production contract in Q4.
This allowed us to fully recognize the remaining program revenue within this contract during the quarter.
Our second milestone was to deliver an alpha release of our Sentinel software product.
We successfully achieved this in publicly showcased our proactive safety and highway autonomy capabilities at CES.
The third milestone was to achieve six major commercial wins, a target we doubled the middle of last year.
This milestone was achieved with our ingredient pollstar announcements in Q4.
This telling excludes other important customer wins during the year, including embark Kodiak Zen fact, and robotic research.
Our fourth milestone was to grow our forward looking order book by at least 60% an increase from our original 40% target.
We ended 2021 with an order book size of $2 1 billion up.
Up 61% for the year.
Our final milestone was to end 2021, with a greater cash balance than where we started which was $486 million.
We ended the year with $792 million in cash and adjusting for the convertible notes we issued in December our yearend cash balance would have been approximately $500 million.
Onto our 2021 financial highlights.
Revenue for Q4 was $12 $3 million up over 400% year over year and 55% sequentially.
The increase was driven by higher program revenue as we perform development work for our customers to prepare for series production.
Program development revenue comprised over two thirds of our 2021 brand.
Because of our industrialization progress, we incurred a $1 million Contra revenue charge during Q4 related to previously issued customer awards with the inclusion of this contra revenue charge. Our 2021 revenue of $32 million was at the top end of our guidance.
Our non-GAAP gross loss for Q4 was $3 9 million.
Our contribution margins continuing to remain healthy of the approximately $16 million and non-GAAP Cogs in Q4, approximately $14 million was nonrecurring engineering expenses and fixed manufacturing costs.
We remain on track to achieve our medium and longer term series production bond targets, which are critical to meet our longer term goals.
Our Q4 cash spend was $56 million increasing to support our faster than expected commercial win rate.
Our Q4 cash spend was higher than the current run rate due to an increase in working capital to both support the C simple ramp up as well as approximately $10 million of customer payments, which incurred in January instead of December .
In December we raised $625 million in convertible notes and concurrently announced a $312 million share repurchase program. We also purchased a call spread overlaying with the intention to negate any dilution from the convert assuming our stock price, we just $30 per share in the next five years.
The net result of this transaction has provided us with additional capital to accelerate our growth at very attractive terms to date, we have repurchased $254 million of our stock.
Turning now to our 2022 milestones and financial guidance.
Our first milestone for 2022 was to achieve series production readiness for Irish Lidar and poor software by the end of the year. We also expect to build up the series production manufacturing line and automation equipment necessary to meet our 2023.
Provided production targets.
Our second milestone is to deliver the beta release of our full stack Sentinel software solution by year end.
Our third milestone is to grow our cumulative major commercial wind totaled by at least 40% from our 2021 year end total of nine we expect these new wins come from both new customers as well as new programs with existing customers, we already publicly announced one major commercial win in 2022 with a REIT.
<unk> Mercedes Benz announcement.
Our final milestone is 40% growth in our forward looking order book for from our 2021 year end total of $2 1 billion.
With regards to 2022 financial guidance, we expect revenue this year to be at least $40 million. We expect our net cash spend for the year to be moderately higher than 2021 total of $155 million. We also expect our operating loss for the year to be higher than our net cash balance.
We.
Specced, our net we expect our share count to end the year in the mid 360 million share range.
One final note on 2022 revenue.
Program revenue is expected once again to be a significant contributor.
This program revenue can be nonlinear from quarter to quarter, depending upon the level of work performed new development contracts rolling on and the completion of development work as we approach series production.
As mentioned earlier, we recently completed the revenue milestones in our first series production development contract.
This won't be dynamic, we expect Q1 2022 revenue to be incrementally higher than our Q1, 2021 revenue and $5 million, but lower than our Q4 2021 revenue.
In closing I'd like to thank the entire alumina our team for a great 2021, and a strong start to 2022, Trey let's move on the Q&A.
Dan.
Thanks, Austin and Tom as.
As we move to Q&A.
<unk>.
I'd like to tell the analyst if you can please.
One initial question and one follow up question that would give us a chance to get through all of the analysts.
To ask a question so with that let's start with Josh Boone Kalter from Cowen Josh You're ready ask first question yes.
Yes, thanks, and congrats to the team on getting all those milestones I guess first question anything you can share about the composition of the 40% order book growth.
Particular at Mercedes was announced after the year started so are you able to share how much is from Mercedes Mercedes is expected ones for future announcements.
Yes, so to be to be clear, Josh the $2 $1 billion that we had at the end of 2021 comprises the business that was one whether it was publicly announced are not publicly announced at that time.
In that $2 $1 billion.
Mercedes we're not breaking out.
How much of the order book as each customer so we haven't gone into that level of detail nor do we plan to got it. Okay. So Mercedes is in the two bottom line. Thank you that's helpful.
And then in the video I noticed you demo feature called the highway comfort is that new is that a subset of highway autonomy and then bigger picture.
Wins for software, but Youre also progressing from alpha to beta. So I'm just wondering how bank is a software solution as youre, bringing into customers versus how much is being jointly developed thank you congrats again.
This is good.
Thank you.
When it comes to the software side, its definitely going to be a critical aspect of the future and what we deliver the highway comfort so to say as you can see it's the German term for highway autonomy from when it comes down to it it really starts to the highway assist type system, and then evolves ultimately to be able to be hands off IHOP holistic system as it relates to when it's fully integrated.
<unk> with the Oems.
You'll get the proactive safety capabilities really from day, one note when it comes to aid apps feature standpoint, and rollout in terms of what's on and this is where the objective is to be able to see these engagements with with Oems continued to expand and also be able to help enhance and accelerate their roadmaps with our software offerings to accelerate thereof. So.
That's going to be an important part and I think that what we showed at CES shows that this isn't just a pie in the Sky thing. This is something we're we're showing off the things that everyone's been talking about so that's an important thing that we're going to want to make this industry happened with all the all the different Oems to ultimately realize this system and technology.
Thanks, guys.
Thanks, Josh next question comes from Aileen Smith with Bank of America.
Hi, guys.
So first question I wanted to check in and clarify that your definition of a total theories production readiness on Iris hardware and software is the same is actually going into series production in 2020 tail, maybe splitting hairs at that and finance X, but I think for the investment community has been very much anticipating <unk> going into production in commercial.
In 2020, Kale and just given supply chain and logistics constraints I want to make sure that the definition of itself remains intact.
Yes, I think thats, the full and text in terms of what we're talking about here I think the only caveat is that obviously, we can't speak on behalf of the customer. So there is a there is a distinction between us going into serious production that ultimately.
The customer actually integrating onto their vehicle in consumers' hands on roads, which isn't 100% controlled by us.
But what what.
Theres nothing thats out of the ordinary in terms of the expectation there obviously that's done.
But when it comes down to it we're talking about milestones for alumina or that are in our control for this.
It's probably not.
The best wording, but but that's the full intent of what we're talking about.
And I think just to clarify on that our goal is.
We are going to be prepared by the end of this year to make parts that are going to be capable to put on vehicles to be sold the consumer for series production.
I would say we have multiple customers that are kind of on that target to be in a position for sop sometime around the end of this year. So it's not like we're just relying on one party there's actually.
Multiple customers that are on that timeline plus or minus.
Okay got it that's very helpful commentary and then I wanted to follow up on the on the commercial win.
And going to the final question on the competition.
Do you think that is a greater likelihood that the commercial wind you're anticipating for 2020 Kale come from entirely new customers or rather that you transition over and locked down some major contract from some of the customers that you've cited that have not major commercial and put some of those important win like embargo kodiak or others, yes.
I think it's going to be.
It's going to be I would say a mix of.
New customers and I think you see that with the one we have already this year with Mercedes Benz.
As well as growing business with existing customers, where we already have major commercial wins and you saw that last year with Volvo, where we went from an option to standardization. So I think it's going to be a mix of those two things, it's going to be new brand name customers like a Mercedes Benz and <unk>.
Growing business with one of our existing customers, where we have a major commercial bank.
Exactly.
And by the way one on one side note as well with the embark in Kodiak examples and everything.
We're going to continue to win those but they don't they didn't we.
We didn't qualify them at the threshold of a major commercial win so in terms of the major commercial lines is going to be significant but ultimately the way that we see it is that there is a bit of a transition between.
It's really not just about.
Winning and winning and winning and winning anymore.
We see this industry playing out just for further commentary is that it's kind of like a 90 10 rule. Unlike the top 10% of programs are probably going to be delivering 90 plus percent of the value.
At least for the immediate foreseeable future.
As a result into the focus is really all in on seeing through successful execution of those and seeing those like the opportunity is just as much to realize the expanded value of the existing programs that are one rather than just winning new programs. So that's part of the significance of also what we're seeing I mean, obviously, we're not going to stop winning here, but I think thats also.
An important point just in terms of just the level of focus that we want to continue to have.
And because there are.
At the end of the day.
Things are not infinite.
We have to pick winners as much as anyone else too.
Understood. That's very helpful color. Thanks for taking the question. Thanks.
The next question comes from David Kelley of Jefferies.
Hey, good afternoon, guys a couple from my end and congrats on.
Solid ended the year here the six major commercial wins can you just talk a bit about what that meant.
With conversations and kind of bidding and getting into the door with other potential major OEM customers, how thats changed it to Pat other announcements.
It's impacted a lot in a very positive direction David.
When you start to see not only the.
Quantity of wins that we have but when you start to see folks like Volvo Polestar, Shanghai Auto Mercedes Benz and others, putting their technology.
Putting our technology on their vehicles, starting around the end of the year.
There is a real sense of fomo developing in the other Oems to make sure that they don't start trailing behind it and I think there's one other important factor David.
Which has been <unk>.
Very impactful once again in a positive way in getting the attention of our customers and I would really say accelerating the thoughts and that was the proactive safety demo that we've been doing I know, we've released a lot of videos on there for the automakers that didn't make it to <unk> as well as those that we were able to have 101 demonstrates.
<unk> with thereafter, when they actually see real hand, getting behind a car that has proactive safety and it and part of that doesn't and driving an epic test dummies adjust.
It's a wow moment for our customers and when we kind of walk them through that this is technology that we developed internally at luminary not only the hardware and the software and we have this ready to go around the end of this year. They are like we got to get this on the vehicles very soon and so.
Your point about the accelerating.
<unk> commercial wins as having a major impact, but I think actually going from having good Powerpoint slides about our technology to actually having real life demos that work with fully integrated capabilities, that's just as impactful.
Okay got it. Thank you and then maybe one more you hinted at kind of the software opportunity, but just.
Just curious what youre hearing from potential customers. It's early days.
One's fighting for software within the autonomous stack and some Oems are looking to do some of it themselves. So.
What are you hearing from your current customers or potential customers as it relates to the software opportunity.
So yes. So I think there is the fundamental aspect of it if there is a layer of software when it comes to some of the different aspects of perception all the way to like Horizon patrol systems, a simulation to other things you need to do to make it a viable system just on top of the core lidar itself and that's the kind of stuff.
We're going to have series production ready by the end of this year and capable to go into production vehicles, but when it comes to other layers on top of it and Thats really why we made this big bet with Sentinel to be able to build out the rest of the software stack and do it as we see it is that like I said Theres. Obviously, some some folks that are trying to do certainly in.
The house developments, but the reality is most of the software development are still focused on robo taxi systems or other types of alternative software approaches that don't directly relate to the kind of systems that we're developing here. So it's not really competitive in that sense. Its the goal objective is actually to accelerate the adoption of this kind of technology to be.
Able to add more value to it and to be able to really realize this holistically throughout the industry. This is going to be the accelerant to standardization.
I think I think that's kind of how we're thinking about it in that context.
I think Oems are seeing it in many ways.
People are already adopting some of the components of central central that'll be going into series production.
And then it will just build and build on itself lower overtime as the software that we have matures.
Okay, great. Thank you.
Thanks, David.
Next question comes from <unk> <unk> at Citi.
Great. Thanks, Hey, everybody.
Just a question.
I think back on the Q2 call if I remember correctly.
Did that I think 60% of the original 2025 revenue had already been booked.
I was curious if you could update that based on your order book today, and maybe where you think you might be if you hit your 2022 objectives.
Yes, so it's a good question <unk> and we're planning.
Later in 2022.
To have an investor and analyst Forum, where I think we're going to be updating.
Our longer term plan because it's.
It's been a couple of years since we actually done that.
What I would say is.
I think the number I mentioned over Q2 was that we were over half the way there to some of our 2025.
Volumes and I think that that is still a consistent number it's too early for me to kind of forecast, where I expect that to be in 2022, but the one thing I would say.
Is.
The level of optimism, we have in the business as well as where we are today is significantly better than where it was in 2020 and I think you kind of saw in 2021 as part of our spec process, where we're forecasting revenue of $26 million. We came in at 32.
For 2022, I think we were forecasting from memory $35 million, we're now guiding the $40 million and I think that that really exemplifies that we're kind of meeting or beating the initial plan that we send out.
Great terrific and then just a follow up you also you mentioned in both accidents occur at night I think there was a recent IHS.
First for poor testing a bunch of the different ddos pedestrian detection systems at night I think they all kind of fell short I'm curious kind of how quickly the industry is moving on that front from a safety perspective and that is what we could show maybe a bit more feedback from the OEM customers CES demos I'm, just kind of what you're seeing along those lines.
No.
It's amazing actually honestly I think people are blown away by just two things one how effective the system that we have is in too just how ineffective systems are today I think there's a little bit of.
How do we say <unk>.
Self denial, sometimes it happens where it's like.
All my car doesn't do that or whatever.
<unk> X OEM and they hop in the car.
One of them here.
Try it out.
And of course, the results are no different.
There is plus or minus little differences, but it's not fundamentally different and Thats I think thats just completely resetting the paradigm behind this.
I think there's just been so much.
Bose that people will come with a term like a ton of Washington.
Thanks.
Washington behind those around what the real capabilities are behind this and the reality is is that it's just not even remotely close to where it needs to be today much less with the just basic camera system. So it's not a big surprise at the end of the day.
So those deepen the industry or to mid so the other thing is just that.
The safety bar has been so incredibly low people will just gotten used to it like passing.
The tests that are required for five safety stoppages.
It's not difficult when it when it comes to these kinds of assisted driving systems for the actual collision avoidance prevention and in some cases.
If you fill it out but if you pass on enough other things that you can you can still get these these significant ratings. So I think thats, where there has to be a fundamental reset it will be a fundamental reset from both an OEM perspective, a consumer perspective, and a regulatory perspective over the next few years that will accelerate the standardization of this technology and that's where do you see.
The breakthrough again as it relates to our model I mean, we only model in about 3% to 4% market penetration by the end of the decade four five.
$5 billion revenue, two 5 billion EBITDA business with a $60 billion forward looking order book so to the extent, we do better than that which we think we can and that's how you create the breakthrough value.
Perfect Thats all very helpful. Thank you. Thanks.
Thanks, Steve.
Next question comes from Richard Shannon at Craig Hallum.
Richard you there Richard.
Richard If you are talking to you on mute.
We'll come back to Richard.
We'll go to Mark Delaney Goldman.
Hi, Margaret.
We're going to go for <unk>.
Hey, Mark.
Yeah. Thanks, Thanks, very much for taking the question I was hoping you talk a little bit more on how important it is.
<unk> for your customers to actually certified that the systems are level three I mean, maybe it's more just in terms of.
Leading to follow on business. If these early deployments go while they get positive data and they certify them as all three of them that would just create these future follow on orders, but is there any difference to you guys in terms of whether or not these systems are certified as level.
And level III capable.
For consumer use in the early phases.
Well I think Theres two two factors there one for what it's worth everyone has a different definition of <unk> and Theres a lot of.
How do we say level of inflation.
Need to happen in the industry.
But the reality is as it relates to US no. It doesn't it doesn't really make any material difference.
How people talk about these things and Thats why we kind of generally avoid trying to talk about the levels altogether. It's funny the proactive safety capabilities for what we're doing is actually I mean.
This is where people get really confused but it's technically a level zero capability. The reality is there's just levels Aero was never actually fully solved.
People still get in accidents, all the time it doesn't.
There are there is no such thing as ground truth Detections today that can actually prevent collisions and accidents from happening and Thats, where honestly a lot of the fundamental value that we're talking about here is provided and even the majority of it.
Actually maybe definitely in the majority of it right off the bat.
Part of the objective.
Of course autonomous capabilities are only going to continue to advance over the course of the next handful years and over the decades.
You know Volvo recently announced.
Their rollout plans without starting.
Starting in California, and then expanding thereon out from the autonomous features and capabilities.
So that's going to be.
That's not slowing down at all and solving for the constrained highway problem I think it's obviously.
<unk> gotten a lot more of a focus we see a lot of companies trying to pivot towards working on exactly what we've been working on and these Oems have been working on for years.
People going into pivoting into trucking and other stuff for example, as well for that has the same kind of highway problem, obviously not for series production scale of cars.
<unk>.
We are working to trucking as well, but but that said.
The perspective that we have on that.
Yeah.
Okay, and any sense of I realize this is up to your customers, but do you have a better sense at this point as to how long customers may want to have these systems on roads before they're willing to certify a hands off is off on highways and the NOI for the use cases. Thank you.
It's a fair question it really just depends on the safety case with each OEM and the specific road as the highway I think the objective it's going out.
It is going to start on like divided interstates and it's going to go into undivided highways and then it's ultimately going to go to.
Hmm.
Surface streets like Strode type things that eventually it will work its way over the course of the decade urban environment. So at oil.
I'll take the time, but I think.
I mean this is not like I think that's like five or 10 years. How this is this is a matter of youre, probably talking like a year.
Maybe two years worth of validation out on roads, depending on how conservative you are.
So that's it.
But it's also not overnight either it doesn't just instantly flick a switch you actually have to get the data at scale no one's ever done that by the way before it no one's ever had.
Tens or hundreds of thousands of these cars riding around collecting this level of data so.
Obviously.
The feedback to us like in the case of the Mercedes deal that we're talking about so thats.
That becomes a pretty valuable.
Extremely valuable.
Thank you.
Thanks Mark.
Next question comes from Tristan <unk> at Baird.
Yes, Hi, this is Tyler on for Christian Thanks for taking the questions are automotive Oems choosing the Nvidia drive platform bound it you assume an RSA decided to use lidar given that luminaries.
Alumina is part of that reference design.
And what is the recently announced Nvidia Jaguar land Rover partnership imply for alumina.
It's a good question. Unfortunately, I can't comment on programs from Oems or.
Tech partners of ours for whatever it may be but.
But we aren't we are partnered with Nvidia.
As noted.
But can't comment on anything specific there.
But I will say that working with key partners and platform providers has been a key part of our strategy holistically to be able to further accelerate market adoption.
Great and then for my follow up with serious production right. Now is expected by the end of the year can you talk about the expected revenue ramp of that I know youre not going to provide guidance, but maybe can you comment on the linearity of that production ramp.
I think it's fair to say that.
As we get to.
Around the end of this year that we would expect 2023 revenue to be significantly higher than this year.
And we are not going to give any specific guidance for 2023 at this time, but we will give some later this year.
Great I really appreciate the time.
Thanks Tyler.
Next question comes from Gus Richard of Northland.
Yes, I guess.
You may be muted there got it just hands raised.
Real quick operator.
Yes.
You talk a little bit more about your relationship with Nvidia and.
Are they opening up doors for you and being in the reference design.
Is that helping your market penetration.
Yes, I'd say there is no question that platform providers and video included are accelerating.
We're helping to accelerate market penetration and that's really the core objective is building the right ecosystem of key partners and reference designs and other stuff in terms of.
This is an incredible amount of work it is not.
It's not just a walk in the park were a.
A couple of companies say they work together and then just walk away. If it's a lot of deep integration and intensive amount of work that has to happen on a day to day basis.
For all of this or like literally day to day and week to week managed so but yes.
There is no question that that set.
Part of the objective and by the way I think I think ultimately these things work both ways as well for both us and them.
Our partners generally.
And then just by the end of 2022 can you give a sense of how many.
Production models will be shipping.
Customers.
As in one model five.
Any color there.
I don't think we can give specific commentary for <unk>.
OEM.
<unk> lines, yet until they are.
Got it unveil it says your question our OEM vehicle models like our customer vehicle models are your questions. How many different variations of the Iris.
Now the question is.
You've got to stay volatile when we got it okay. Okay.
The one that Austin answer but.
But.
There is no not really.
The other one is going to be a lot ahead on that.
There is some exciting new items.
For sure by the way one of them.
Is that part of the background.
Totally coincidental.
As the new Mercedes EQ U S.
There too.
Credibly beautiful car.
There.
It goes to show like for those for the next Gen <unk> lineups of.
These different brands is there.
It's impressive stuff, so I think it'll be.
This.
It's not going to disappoint.
With different Oems for that matter, but the other ones that we're working with for sure.
Got it thanks, so much.
Thanks, guys next question comes from Michael Philosophic Bahrenburg.
Hey, guys. Thanks for taking my question.
So two questions. The first one I mean, you kind of just referenced it is relationship Mercedes right.
I'm curious if you could just clarify just whether or not that is a concrete supply agreement right. That's in contracts for specific models.
<unk> started production timeframe and if so how many models that could potentially encompass and were you involved in an RFP process for that win.
How how that relationship evolves so Michael the answer to that is without going into too much detail, but I think it's fair to say that Mercedes did a very extensive study not only of our technology, but the other ones out there. They made a conscious decision to work with us.
We have.
A lot of detail, which I'm not going to go into it.
<unk> that we have with Mercedes Benz Thats executed Youll see in our 10-K tomorrow.
That we have two customers that comprise north of 10% of our revenue in 2021, one of them was Volvo. The other one is Mercedes Benz and so we are working extensively with Mercedes Benz to develop our technology to the point, where theyre going to deploy on.
Production vehicles, we have a list of production vehicles and timing.
We're not going to talk about it because Mercedes Benz Hasnt talked about it but that list does exist and they would not be paying us.
As much revenue to work with US. If this was just a science project as opposed to something serious.
With the goal of putting this on vehicles that theyre going to sell to the consumer.
So straight to the point answers.
Yes, yes, yes.
Understood Fair enough all right and then one other quick one I just I was looking back at your original stack presentation. It shows expectations for day sample production in Q1 of this year and then series production by Q3 of this year. It seems like I don't know if it was.
Something to do with you guys and your customers, but maybe the timeline got pushed back a bit.
Because I took that to mean serious production isn't going into vehicles in the back half of this year and then it seems like Youre currently see sample I mean is the expectation to get the sample middle of this quarter.
We're nearly there but.
Is anything pushed that timeline back in terms of the product development and then the actual series production launch.
No it's effectively tracking to it I mean, the objective is to be able to get two series production by the end of the year here, that's the big Big launched it I think.
I think I think it's been public with our first.
Series production OEM in terms of what they've talked about for that timeline.
So we're deeply aligned as it relates to with them.
There should be able to ensure the successful launch.
By the end of this year, so that I would tell you that theres, probably plus or minus a few months of entrants.
In terms of how people customers will <unk>.
Qualified different stages differently of their respective programs for example, a lot of our customers don't actually use the same kind of sample terminology and other separately there just like they have customers.
They have different types of milestones that going through the validation, but effectively the way to think about it is that this year is all about.
<unk>.
The refinement and validation of the industrialization process.
That's what it's all about in preparation for various production. So we're all in on that as it relates to core technology to design everything for the product.
That's done and that's where we still have there's still optimization to be done in terms of what we need to do to get the cycle time down and get all that other stuff.
That's all on track in terms of what we do what we need to do for series production.
Understood Alright, thanks, very much guys.
Thanks, Michael appreciate it next question comes from Dan Levy of Credit Suisse.
Hey, good evening, thanks for taking the questions.
First I just wanted to.
To start with a question.
A comment in your deck about the cash use.
In 2002, so youre guiding for cash spend to be slightly higher year over year.
Usually in autos when when a company is approaching commercialization.
New product the cash spend accelerates more significantly and youre, taking on new customers as well so.
Why is it that it's only a moderate increase as opposed to what might be more significantly or is it just something about you've already heard that standard theres just efficiency.
It's a great question, Dan and you are correct in my reply to you would be if you look at our 2021 cash spend relative to 2020 it doubled.
So we're not going to double it again this year.
We're going to grow it modestly from here.
And so I would argue if you actually look at the spend relative to 2020, you see that significant increase in investment that you would typically see in the automotive industry and so we've been working on our industrialization plan now for going on two years and the growth in our investment has reflected that.
I would also say that I do think that this is important is that this is not this is also not by us.
It's like Super easy to be able to spend twice as much three times as much for top 10 times as much money when it got I mean, we see other companies that have been trying to do this and didn't actually even far earlier.
Along that curve and the answer is that you have that like we were extremely intense about driving extreme efficiency with everyone from it when it comes to a financial standpoint across the board here. This is not us.
That said there are still significant investments that need to be made it is incrementally higher but I think to the point is is that we've we've effectively gone from.
What three major commercial wins two now were at 10, but our spend is only increasing moderately so it'd be like well what that.
That's crazy how is it even possible.
And there's one simple answer which is standardization of the product. This is very different than pretty much almost all of the types of companies in the automotive supply chain. Because we are the standardization of this kind of technology everyone's going for the same technology that we have it's the same product. It's the same core system. That's there.
Obviously, that's worth they've done integrating the different vehicles different systems, there, but theres, an incredible amount of unification and even for a couple of stragglers that we had that hard deviations that would end up with significantly greater expenses for this coming year.
Actually just over the past quarter, we actually entirely unified under the exact same product track and roadmap that we were doing so that probably avoided hunter.
Hundreds of millions of dollars worth of worth of expenses. So there's that.
Didn't just fall into our lap it it's been a very intentional incredibly intensive exercise.
This level of efficiency, but it's something that we're also incredibly proud.
Great. Thanks, and then the second question is just.
Unpacking the order books, so I think you're essentially guiding to you ended the year at just over $2 billion and Youre guiding to be just under three so a couple of points on this for a couple of questions.
Should we expect an additional inflection of the order book as you start commercialization I mean is that just going to continue to bring in more programs or is that just going to track while commercial programs. You have and then the second maybe you can just give us some sense of what that order book comprises up now in terms of hardware versus software slip because I think you were talking about it and I noticed that.
Youll give us a 2025 update later in the year, but how youre tracking to being call it half half software hardware.
Thank you.
I think from memory I don't have the numbers here in front of me, but I think it was.
A little less than half of it for the software we haven't disclosed nor do we plan to what the breakout is the order book between hardware and software, but what I would say is that software element and the software percentage continues to increase and we expect it to continue to increase.
Over time.
Remind me your first question again.
How should we expect the order book to trend as commercialization begins is it just as you have more programs, it's going to linear increase or here's.
Here's what I would say when you actually kind of look at the dynamic and what really moves that.
<unk>.
Clearly there is some correlation between major commercial win growth and order book growth.
I would say, though that dynamic is the initial programs that we win with a customer the first time tends to be more on the small side and the big cycle and what do I mean by that.
The trend and I think you've played it to see this play out with Volvo is our initial win with Volvo was as an option on the <unk> successor, then it moved into standardization on that and then from there.
We expect to win more and more programs from Volvo overtime.
And so.
The first one with a customer that counts the major commercial in total, but it's not I would say.
Not going to have a huge impact on the order book initially what drives that really drive the exponential growth in the order book is standardization and really winning more and more and more business and an existing customer and not not only rolling it out standardization among a specific vehicle program, but rolling it out of <unk>.
<unk> on every vehicle that that OEM producers, so theres really three ways that your order book increases one is new.
New major commercial wins.
New customers altogether to is additional programs in existing customer three is increase in volume towards the programs that are already won by the way number three is not to be underestimated. On this is that this is where I think we even mentioned at one point last year that part of the driver behind the higher order book was actually people increasing the volumes on the existing.
Is that are there.
I think that Thats, a general trend I don't think we've actually seen anyone decrease the kinds of targets.
Volumes in terms of what they are what they're planning for models and actually it's really been a general trend of increasing it as people realize the significance of this.
Everybody is competing with each other they all want to be went up in each month or two so that's certainly doesn't hurt as Tom mentioned earlier, but for good reason I mean, the people can afford to just be static anymore. They have to be able to move and move quickly.
You can't just can't be a traditional automotive adoption cycle, but it's like seven years long thats why it accelerated so quickly.
And sorry, just to clarify on what's already in the order book and what Youre guiding to.
It sounds like that that's.
That's only reflecting very slight benefit from standardization, meaning youre not youre not seeing any of the benefits yet from standardization in the current order book or the guidance correctly. So let me give you let me give you.
An example, which I think answers your question at the end of 2020 and order book with only us being an option on the Volvo XC 90.
On one off on the one model at the end of 2021. It was the standardization on that one model.
The <unk> and all the other.
Vehicle models that Volvo mix.
Other than the <unk> 90 or not.
Order book, we're very confident as a management team that we're ultimately going to win that business. Although it has made public comments if that's their intention to none of that is in the order book, yet because we haven't officially been awarded that only stuff where.
We have been.
Written agreement an agreement with our customer.
It is a contract right.
And by the way there is a distinction versus what many others have.
Provided in some of the EV space or died or space or whatever it is for order books versus like assuming.
<unk> innovation on some PR thing of without any kind.
Our agreement or whatever it may be so there's a lot of business out there for us to go get from Volvo and other Oems grave existing business, which isn't in our order book, Yes, Yes, that's exactly right. Thank you.
Hey, Thanks, Dan.
Thank you and thanks to everyone for joining our Q4 business update we look forward to talking to you again at the end of Q1 and with that Kevin. If you can please close our call up.
I appreciate it. Thank you guys. Thanks, everyone.