Q4 2021 Cepton Inc Earnings Call
Good afternoon and welcome to CEPTOM's fourth quarter and full year 2021 business update and earnings conference call.
Good afternoon, and welcome to snap on fourth quarter, and full year 2021 business update and earnings conference call.
Today's call is being recorded, and a question-and-answer session will follow the prepared remarks.
What do you call is being recorded and a question and answer session will follow the prepared remarks.
At this time, I'd like to call to be turned over to Mr. Paul Hsu, Vice President of Finance and Strategy for CEPDWG. Thank you.
This time like the call turn over to Mr. Oh shoot Vice President of finance and strategy for some time.
Thank you you may now begin sir.
Thank you and welcome everyone to step towards an inaugural earnings call covering FY 2021 results and 2022 business update with me today are Jim Payne, Chief Executive Officer, and the Western food Chief Financial Officer.
Paul Hsu: Thank you and welcome everyone to Steptown's Inaugural Earnings Call covering FY 2021 results and the 2022 business update.
Paul Hsu: With me today are Jun Pei, Chief Executive Officer, and Winston Fu, Chief Financial Officer.
Jun Pei: Jim will provide an overview of CEPTOM, a business update, and objectives for 2022.
Jim will provide an overview of step tone, a business update and objectives for 2022.
Jun Pei: Winston will discuss the fourth quarter and full year 2021 financial performance and 2022 outlook.
Winston will discuss the fourth quarter and full year 2021 financial performance in 2022 outlook.
Jun Pei: During the call, we may refer to our unaudited GAAP financials and non-GAAP measures in our release.
During the call we may refer to our unaudited GAAP financials, and non-GAAP measure as you know a release I would like to remind everyone that comments made in this conference call May include forward looking statements regarding the company's expected operational and financial performance for future periods.
Jun Pei: I would like to remind everyone that comments made in this conference call may include forward-looking statements regarding the company's expected operational and financial performance for future periods.
Jun Pei: These statements are based on the company's current expectations and are subject to the safe harbor statements for forward-looking statements that you'll find in today's news.
These statements are based on the company's current expectations and are subject to the safe Harbor statement for forward looking statements that you'll find in today's news release extra.
Jun Pei: Actual results for future periods may differ materially from those expressed or implied by these future-looking statements due to a number of risks or other factors that are described in our Form S-4 recently filed with the U.S. SEC.
Actual results for future periods may differ materially from those expressed or implied by these future looking statements due to a number of risks or other factors.
Described in our form S. Four recently filed with the U S. S E T.
Jun Pei: We are not undertaking any commitment to update these statements if conditioned.
We are not undertaking any commitment to update these statements if conditions change and as a quick reminder, this call is being recorded and you can find the earnings release, the slides that accompany this call as well as the webcast replay of this call at investors stepped on dot com.
Jun Pei: Just a quick reminder, this call is being recorded and you can find the earnings related
Jun Pei: slides that accompany this call as well as the webcast replay of this call at investors.ceptown.com. Now I'd like to turn the call over to Jun.
Now I'd like to turn the call over to Jim.
Thank you Paul and good afternoon, everyone.
Jun Pei: Thank you for joining CEPTOWN's very first earnings call as a public company. We will provide a business update, review full year 2021 performance, and share our 2022 outlook with you.
Thank you for joining SAP Collins, our very first earnings call as a public company.
We will provide a business update.
We view full year 2021 performance.
And sure our 2022 outlook with you.
But before I dive into the details.
I'd like to give my thanks to all of our employees customers.
Jun Pei: customers, partners, and investors who have supported Ceptown since our inception in 2016 all the way until now as a public-traded company.
Nurse and the investors who have supported the subtitles since our inception in 2016, all the way until now as a public traded company.
When we first started Chubb com.
Jun Pei: We saw an opportunity to equip LiDAR sensors in every vehicle to improve safety and enable autonomy.
We saw an opportunity to equip lidar sensors in every vehicle to improve safety and enable autonomy.
We believe for our economy will be a reality in due course, but in the meantime, Ddos is a very large and near term market opportunity right sport technology disruption.
Jun Pei: We believe full autonomy will be a reality in due course, but in the meantime, ADAS is a very large and near-term market opportunity ripe for technology disruption.
Jun Pei: As a result, we have focused our effort primarily on serving the ADAS market and our...
As a result, we have focused our efforts primarily on serving the Adas market.
And our efforts have paid off.
Jun Pei: Along with our Tier 1 partner, Koito Manufacturing of Japan.
Along with our tier one partner Koito manufacturing of Japan, we.
Jun Pei: We have won the largest series production award in the LiDAR industry from General Motors in support of its...
We have won the largest the series production award in their light our industry from General Motors.
In support of its ultra cruise program.
Jun Pei: Looking back at the competition for this program, virtually every LiDAR company were in the race.
Looking about looking back at the competition for this program virtually every line of our company we're in the race.
Jun Pei: Ceptang was the only company that won this massive program due to our ability to achieve the perfect balance between performance, reliability, and cost.
That problem was the only company that won this massive program due to our ability to achieve the perfect balance between performance reliability and cost.
Jun Pei: As well as our ability to do all that behind the windshield. So that happened.
As well as our ability to do all of that behind the windshield.
So that happened at the end of 2019.
Jun Pei: Since then, we've been working diligently on the execution of this program.
Since then we've been working diligently on the execution of this program.
Jun Pei: And I'm proud to report that we're on track to meet the timeline requirement from GM.
And then I'm proud to report that we're on track to meet the timeline requirement from D. A.
Jun Pei: As you can see, we have been working on executing this program for over two years now.
As you can see we have been working.
Executing on this program for over two years now and we expect at least another year of intense work of between all three parties CEP Tong Kooi, Teo and general Motors before consumers are able to buy G. M vehicles equipped with step down like ours.
Jun Pei: And we expect at least another year of intense work between all three parties.
Jun Pei: SEPTOM, COITO, and General Motors before consumers are able to buy GM vehicles equipped with SEPTOM LiDARs. Winning the GM program
We named the GM program is a big achievement for stepped up.
Jun Pei: But finally, realizing our vision of SEPTON's LiDAR in everyday vehicles would be a monumental achievement.
But finally, realizing our vision of sometimes lidar in everyday vehicles would be a monumental achievement.
Jun Pei: And we can see that day very clearly in the not-too-far-distance future.
And we can see that they very clearly in the not too far distant future.
Many people asked me.
Jun Pei: how sub-county differentiates itself among all the other like.
<unk> differentiates itself among all the other lidar companies.
Jun Pei: My answer has always been, let the commercial validation be the ultimate differentiation.
My answer has always been let the commercial validation be the ultimate differentiation.
Jun Pei: Even though I have been a technologist all my professional life, I believe technology without commercial success is and will remain a science experiment.
Even though I have been though technologists to all my professional life I believe technology without commercial success is and will remain a science experiment.
Jun Pei: Cephtong invented the unique MMT LiDAR to address a need in ADAS where a perfect balance between performance, cost, and reliability
That's probably invented the unique M M T lidar to address a need in Adas, where a perfect balance between performance cost and reliability.
Jun Pei: must be achieved before wide-scale adoption can take place.
Must be achieved before widescale adoption can take place.
Jun Pei: We believe our MMT LiDAR has achieved this balance, supported by the trust placed in us from North America's number one and number two auto OEMs by volume. And that is General Motors and Ford Motor Companies, by the way.
We believe our M. M. T. Lidar has achieved that this balance supported by the trust placed in us from North America's number one and number two auto Oems by volume.
And that is general Motors and Ford Motor company's by the way.
Many people also asked me.
Jun Pei: What does it take to win a large series production award like ours?
What does it take to win a large series production award like ours.
In addition to having the right product.
Jun Pei: a Tier 1 automotive supplier partner is also critical as they stand behind the product.
A tier one automotive supplier partner is also critical as they stand behind the product.
Jun Pei: Many large auto OEMs will not even entertain a discussion if we don't have a tier one partner, and we are fortunate that Koito Manufacturing of Japan, a tier one supplier to the automotive industry for many decades, is one of our key tier one partners.
Many large auto Oems will not even to entertain a discussion if we don't have a tier one partner and we are fortunate that koito manufacturing of Japan, a tier one supplier to the automotive industry for many decades is one of our key tier one partners.
Looking back the last two years.
Jun Pei: Even though COVID condition constrained many factors of our normal interaction between our engineers, partners, and customers, I'm proud to report that our teams worked around these new challenges and hit every milestone on the schedule that was crafted before COVID.
Even though COVID-19 condition constrained many facets of our normal interactions between our engineers partners and customers I'm proud to report that our teams worked around these new challenges and hit every milestone on the schedule that was crafted before COVID-19 .
Jun Pei: We completed the A samples, B samples, and on track to complete C samples in the first half of 2022.
We completed the eight samples be samples and on track to complete see samples in the first half of 'twenty 'twenty tool.
Jun Pei: We will also complete D samples by the end of the year, such that we will be in a position to ship products to saleable OEM vehicles by the year end.
We will also complete the samples by the end of the year such that we will be in a position to ship products to salable OEM vehicles by the year end.
Yeah.
Well our series production award covers multiple platforms and vehicle models. The same stepped on lidar is used across these vehicles.
Jun Pei: While our series production award covers multiple platforms and vehicle models, the same SEPTON LiDAR is used across these vehicles.
Jun Pei: This allows us to take advantage of the economies of scale to reduce cost.
This allows us to take advantage of the economic economies of scale to reduce cost.
Jun Pei: However, skill is only one of the factors contributing to an attractive cost profile. Cost is a key design parameter in every component choice we make from the very first time when we put pen to paper. As we mature...
However, skill is only one of the factors contributing to our attractive cost profile.
Cost is a key design parameters in every component choice, we make from the very first time, when we put pen to paper.
As we mature our product offerings, we continue to invest in performance and huntsman and cost reduction effort.
Jun Pei: We continue to invest in performance enhancement and cost reduction efforts.
Jun Pei: such as combining multiple electronic components into an ASIC.
Such as combining multiple electronics component into our Egypt.
Jun Pei: We expect to tape out our second ASIC this year as a result of these.
We expect to Paypal dollars seven to Asia. This year as a result of these efforts.
Jun Pei: General Motors announced Ultracruise at this Investor Day event in October and disclosed the location of the LiDAR integration being behind the windshield.
General Motors announced the ultra cruise at this Investor day event in October and disclose the location of the Lidar integration being behind the windshield.
Jun Pei: Since then, several other OEMs have reached out to us to learn how a similar integration can be achieved in their future.
Since then several other Oems have reached out to us to learn how a similar integration can be achieved in their future fleet.
Jun Pei: We expect to advance our discussion with these OEMs and potentially secure additional large series production award this year.
We expect to advance our discussions with these Oems and potentially secure additional largest series production award this year.
From a product perspective, we.
Jun Pei: We saw a need for near-range LiDAR with superior horizontal and vertical field-of-view performance for surround-view applications such as pedestrian detection, automatic parking, low-speed maneuvering, just to name a few.
We saw a need for newer range lidar with superior horizontal and vertical fudo vivo performance for surround view applications, such as pedestrian detection automatic parking low speed maneuvering to just name a few.
To address these applications.
Jun Pei: we introduced our smallest LiDAR, the NOVA.
We introduced our smallest of lidar the NOLA.
Jun Pei: that can easily fit into your palm and cost significantly less than our long-range LiDAR product.
That can easily fit into your palm and cost significantly less than our long range Lidar products.
Jun Pei: by utilizing the same MMT concept in the engineering approach.
By utilizing the same M M T concept and the engineering approach, we're able to further leverage our technology innovation, including our Asia.
Jun Pei: we're able to further leverage our technology innovation, including our AI.
Jun Pei: Our Perception software platform also accelerates NOVA's adoption in automotive and smart infrastructure markets.
Our perception software platform also accelerates the noblest adoption in the automotive and smart smart infrastructure market.
Jun Pei: We expect to complete B-sample design for NOVA and complete NOVA evaluation with multiple global top 10 automotive OEMs and with multiple top global trucking OEMs this year.
We expect to complete be sample designed for Nova and complete nobody evaluation with multiple global top 10, automotive Oems and with multiple top global trucking Oems this year.
On the software front.
Jun Pei: I wanted to mention that we currently have more software engineers than we do hardware engineers.
I wanted to mention that we currently have more software engineers than we do hardware engineers.
Jun Pei: we've taken on the challenging task of embedded automotive software that is required for our LiDAR to be deployed in everyday vehicles that you and I can buy. Well, this work.
We've taken on the challenging task of embedded automotive software that is required for our lidar to be deployed in everyday vehicles that you and I can buy.
While this work is not often.
Jun Pei: well advertised or well understood, it is absolutely table stakes for serious production readiness.
Well advertised or well understood. It is absolutely table Stakes for series production readiness.
Jun Pei: Moving higher up in the software stack, our perception software is already being sold to smart infrastructure customers, and we expect our automotive perception software to be evaluated by three of the global top 10 automotive OEMs this year.
Moving higher up in the software stack, our perception software is already being sold to smart infrastructure customers and we expect our automotive perception software to be evaluated by three of the global top 10 automotive Oems this year.
Jun Pei: Consistent with our vision of enabling safe and autonomous transportation for everyone, we expect to make available our perception software stack to the broader developer community and accelerate the development of various autonomous applications for the automotive and other markets.
Consistent with our vision of enabling safe and autonomous transportation for everyone. We expect to make available our perception software stack to the broader developer community and accelerate the development of various autonomous applications for the automotive and other markets.
Funding 22 will be a momentous year for SAP top.
Jun Pei: 2022 will be a momentous year for SEPTA.
Jun Pei: we will accelerate our commercial engagement, not only in North America, but also in the rest of the world.
We will accelerate our commercial engagement not only in North America, but also in the rest of the world.
Jun Pei: In particular, we have begun executing our China strategy.
In particular, we have begun executing our China strategy.
Jun Pei: and we look forward to sharing more news on that front in future calls.
And we look forward to sharing more news on that front in future calls.
Jun Pei: I'll now turn the call over to our CFO , Winston Fu.
I'll now turn the call over to our CFO wisdom fool.
Winston Fu: Thank you, Jun. As Jun mentioned, 2022 will be a pivotal year as we accelerate our commercial progress on multiple fronts.
Thank you Jud as Jen mentioned 2022 will be a pivotal year as we accelerate our commercial progress on multiple fronts.
Winston Fu: On the automotive front, we expect to increase the number of advanced engagements with OEMs globally, including expanding our presence in China.
On the automotive front, we expect to increase the number of advanced engagements with Oems globally, including expanding our presence in China.
Winston Fu: On the smart infrastructure front, we expect to double the production awards and increase the number of engagements by 50 percent.
On the smart infrastructure front, we expect to double the production awards and increased the number of engagements by 50%.
Winston Fu: These engagements include autonomous trucking, highway tolling.
These engagements include autonomous trucking highway tolling.
Winston Fu: security applications, last-mile delivery, warehouse logistics, robotics, aeronautic and astronautic applications.
Security applications last mile delivery warehouse logistics robotics.
Aeronautics and astronautics applications to name a few.
Winston Fu: Septon has been a very capital efficient company.
<unk> has been very capital efficient company.
Winston Fu: From inception to the beginning of becoming a publicly traded company last month, we raised
From inception to the beginning of becoming a publicly traded company last month.
We raised only 100 million.
Winston Fu: and that funding enabled us to win the largest series production award in the industry.
And that funding enabled us to win the largest series production award in the industry.
Winston Fu: On the closing of the transaction last month, we have access.
On the closing of the transaction last month, we have access to cash and available liquidity of $175 million.
Winston Fu: cash and available liquidity of $175 million.
Winston Fu: and we believe our liquidity position is adequate to support our current growth plans. We exceeded our revenue guidance in 2020.
And we believe our liquidity position is adequate to support our current growth plans.
We exceeded our revenue guidance in 2021.
Like posting a $4 5 million.
Winston Fu: and we are maintaining our prior revenue guidance for 2022 of 15.
And we are maintaining our prior revenue guidance for 2000 $20 million to $15 million.
Winston Fu: However, we expect 2022 revenues to be weighted on the back half of the year because
However, we expect 2022 revenues to be weighted on the back half of the year.
There's some significant development milestones in the second half of the year and we expect the global electronics supply chain issues to ease up a bit by that time.
Winston Fu: significant development milestones in the second half of the year, and we expect the global electronics supply chain issues to ease up a bit by that time.
Winston Fu: Our operating expenses for 2021 totaled $35 million, and we expect our annual operating expenses this year to increase to a total of $55 to $65 million.
Our operating expenses for 2021 totaled $35 million and we expect our annual operating expenses this year to increase to a total of $55 million to $65 million.
Winston Fu: as we accelerate our product development and commercial activities on all fronts.
As we accelerate our product development and commercial activities on all fronts.
Winston Fu: Even with increased operating expenses, we expect to end the year with over $100 million in cash and available liquidity.
Even with increased operating expenses, we expect to end the year with over $100 million in cash and available liquidity.
As many of you know.
Winston Fu: The electronic supply chain is stretched, and Septon is...
The electronic supply chain is stretched.
And sub con is not immune from that condition.
Winston Fu: In the near term, we do expect certain components to have extraordinarily long lead time and or cost multiple times their normal cost. As Jun spoke earlier, each component was designed by taking into account its normal cost basis.
In the near term, we do expect certain components to have extraordinarily long lead time, and our cost multiple times their normal cost as John spoke earlier each component was designed by taking into account its normal cost basis.
And as.
Winston Fu: as an automotive safety device, components are not easily replaceable even if cheaper alternatives functionally are available.
As in automotive safety device components are not easily replaceable, even cheaper alternatives functionally are available.
Winston Fu: These near-term constraints present challenges for our supply chain management, but do not affect our long-term outlook.
These near term constraints present challenges for our supply chain management.
But do not affect our long term outlook.
A word on Capex.
Winston Fu: As a technology company, we do not expect to manufacture our products.
As a technology company, we do not expect to manufacture our products.
In large quantities ourselves.
Winston Fu: For automotive scale production, our Tier 1 partners will be responsible for manufacturing units and ship to OEM.
For automotive scale production, our tier one partners will be responsible for manufacturing units and shipped to Oems.
Winston Fu: For smart infrastructure customers, we will use contract manufacturers for the bulk of the volume production.
For smart infrastructure customers, we will use contract manufacturers, where the bulk of the volume production.
Winston Fu: As such, we anticipate just a little over two million this year in CapEx to maintain our small pilot line and certain equipment for prototyping and engineering milestones.
As such we anticipate just a little over $2 million this year in capex to maintain our small pilot line.
And certain equipment for prototyping and engineering milestones.
Finally.
Winston Fu: I would like to end my remarks by saying that CEPTAN is executing well.
I would like to end my remarks by saying that <unk> is executing well.
Winston Fu: With our public listing, we are well-equipped to execute our growth plans and secure additional wins.
With our public listing we are well equipped to execute our growth plans and secure additional wins.
Now I'd like to open the call up for questions.
Winston Fu: We'll now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone.
Well now begin the question and answer session.
You May press Star then one on your Touchtone phone.
We are using a speakerphone please pick up your handset before pressing the keys.
Winston Fu: If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2.
It's all your question. Please press Star then two.
This time, we'll pause momentarily to assemble the roster.
First question comes from Matthew Blanco Maxim Group. Please go ahead.
Speaker Change: First question comes from Matthew Galinko, Maxim group, please go ahead.
Matthew Galinko: Hi, thanks for taking my question and congrats on making it to the public market.
Hi, Thanks for taking my question and congrats on making it to that.
Public markets.
Matthew Galinko: you frame the investments you're making in OPEX for 2022? Is that going to be relatively linear through the year and where the focus is, or is it going to be back end-weighted as well?
Frame.
The investments you're making in Opex for 2022.
Can it be relatively linear through the year and where the focus is or is it going to be back end weighted as well.
Speaker Change: Thank you very much for the question. I'll let our CFO Winston answer that question.
Thank you very much for the question I'll, let our CFO Winston answer that question.
Winston Fu: Thanks, Matt, for the question, and thanks, Ken. The investments we plan to make are going to be focused on the key milestones that we outlined for 2022. For the most part, there is some linearity to it, because the sooner we're able to invest, the quicker the engineering and manufacturing team can get those milestones done. So.
Thanks, Matt for the question and thanks, Ken.
The investments we plan to make are going to be focused on the key milestones that we outlined for 2022.
For the most part there is some linearity to it because.
Sooner, we're able to invest the.
Clinton or the engineering and manufacturing team can get those milestones done.
So.
Speaker Change: Yes, the investment is planned to be more linear.
Yes, the investment is planned to be more linear.
Okay.
Speaker Change: Got it, thank you. And then in terms of the infrastructure, smart infrastructure engagement,
Got it. Thank you and then in terms of the infrastructure smart infrastructure engagements.
Speaker Change: what is the geographic distribution of your current pipeline and can you talk about the kind of the time to convert?
What is the geographic distribution of your current pipeline and can you talk about the.
Kind of a time to.
Convert on a sales cycle there.
Yeah.
Speaker Change: Yeah, the infrastructure projects are unlike the automotive projects that's very concentrated. The infrastructure projects tend to be little distributed. So I will ask Mish to describe a little bit more in detail of where those projects are and maybe
The infrastructure projects are unlike the automotive projects. So that's very concentrated infrastructure project tend to be a little distributed so I will ask Michele to describe a little bit more in detail of where those projects are and you know maybe comment.
Sure.
H.
Yeah. Thanks June I'm, Mitch Marchini senior VP of business development for some time off for those that don't.
Mish: Yeah, thanks, June . I'm Mitch Horkany, Senior VP of Business Development for Cephthon, for those that don't know me. Yeah, good question. So the smart infrastructure market and the production partners that we've outlined in our deck.
Oh my.
Yeah. Good question, so the smart infrastructure market in the production partners that we've outlined in our deck.
Mitch Horkany: are primarily located in the North American European regions, although there are a few outside of that space today. As you can imagine, like June said, compared to automotive, they're more dispersed across the globe.
Are primarily located in the North America and European regions. Although there are a few outside of that they are today as you can imagine like June said compared to automotive there are more dispersed across the globe.
Got it thank you.
Speaker Change: Can you, last question for me and then I'll jump back in the queue, in terms of the supply chain challenges that you're facing, can you opine on whether
Can you last question from me and then I'll jump back in the queue in terms of the supply chain.
<unk> you said, you're facing can you opine on whether.
Speaker Change: your competitors are up against similar challenges or do you think you have an easier path through given your product design? Just any sort of comparison there would be helpful.
Your competitors are up again, similar challenges or do you think you have a much easier path through given your product design, just any sort of comparison there would be helpful.
Speaker Change: Mitch, would you like to take that and I can compliment your end?
Mitchell would you like to take that.
And I can come to you about in your answer.
Mitch Horkany: Yeah, sure. I'm actually going to answer that because I'm on the front end of the business working with customers.
Yeah, sure I'm actually going to answer that because I'm on the front end of the business working with customers.
Mitch Horkany: I think all of the players in the industry are probably facing similar challenges, but there's a priority process that's well known within the supply chain, and when you have a customer like Coedo Manufacturing and General Motors, you get very high priority. So, I do think we have an advantage when it comes to that process, and we've seen that play out.
I think all of the player.
Players in the industry are probably facing similar challenges, but there's a priority process, that's well known within the supply chain and.
And when you have a customer like Quito manufacturing and general Motors are you get very high priority. So I do think we have an advantage when it comes to that process and we've seen that play out.
Yeah.
Okay.
Speaker Change: Thank you. That's helpful. I'll turn back in the queue.
Thank you that's helpful I'll jump back in the queue.
Speaker Change: Thank you. Our next question comes from Richard Shannon of Craig Hallam. Please go ahead.
Thank you. Our next question comes from Richard Shannon Craig Hallum. Please go ahead.
Richard Shannon: Hi, guys. Thanks for taking my questions. I think I'm going to follow up on the topic of supply chain that you just talked about in a slightly different way. Can you characterize the issues here in terms of more commodity type of ICs versus ones that are designed specifically for Stepton?
Oh, Hi, guys. Thanks for taking my questions I think I've got a follow up on the topic of supply chain that you just talked about in a slightly different way can you characterize the issues here in terms of more commodity type of of Ice's versus ones that are designed specifically for stepped on.
Speaker Change: Well, like Mitch mentioned a little earlier, it really across the board, of course, the commodity is really being impacted in a big way. It's not only affecting us, it's across all LIDAR space and all space in general.
Well like Mitch mentioned, a little earlier it really across the board of course, the commodity is a is really being impacted in a big way, it's not only affecting us.
Across all our all lidar space in all space.
In general.
Speaker Change: but specifically to our design modules.
But specifically to our design modules.
Speaker Change: our ASIC, for example, we're actually fine. We have plenty of preparation in anticipation for this shortage, and we actually have a lot of reserves that's good enough for literally the foreseeable future.
Our Asia for example, or were actually fine we have a plenty of preparation and anticipate patient for this foretastes Chad. We're actually has a lot of reserves. That's good enough for a literally in the foreseeable future. So I don't know whether hall you have any other comments on this.
Speaker Change: So I don't know whether Hall, you have any other comments on this, Hall is our VP of Finance and Strategy.
Hall is our VP of finance and strategy.
Yeah, Hi, Richard Yes, so its more commodity electronics as the whole industry is that it.
Hall: Yeah, hi Richard. Yes, so it's more commodity electronics as the whole industry is
Hall: experiencing. So think, you know, things like, you know, op-ed and those kind of things that that could be tied across the board. It's not, it's not specific to our own design.
We're experiencing so I think you know things like Oh man and those kinds of things that that could be tight across the board it's not it's not.
Specific to our own design.
Okay perfect appreciate that characterization.
Hall: Second question is, I think a couple times in your prepared remarks, June , you talked about future focus in China. Obviously, your first big customer automotive is in North America, and I think you're engaged elsewhere as well.
Second question is I think a couple of times in your prepared remarks, Oh June you talked about a future focus in China. Obviously your first big customer on the automotive is in North America, and I think you've got you're engaged elsewhere as well we haven't heard you mention.
Speaker Change: We haven't heard you mention much about Europe or Japan, which, you know, is the site of your Tier 1 COETO that you're well-partnered with there. Maybe characterize the, you know, kind of the profile of expected business across all the geographies outside of North America, that'd be great.
Much about Europe , or Japan, which you know is.
Is the side of your tier one koito that youre well partnered with there maybe characterize the kind of the profile of expected business across all the geographies outside of North America that'd be great.
Speaker Change: Okay, yeah, we did mention China and it's an exciting place. We just set up our office there and have quite a number of engagement already. But I'll let Mitch comment on the Japan market, European market, which is also quite exciting.
Oh, Okay, yeah yeah.
Yeah, We did mentioned China and its exciting place I always just set up our office, there and I have a quite a number of engagements already but I'll, let Michelle comment on the Japan market European market, which is also quite exciting Mitch.
Mitch Horkany: Yeah, definitely. There's a lot of activity in Japan, especially because of our relationship with Kuito manufacturing, probably not as much out in the public space.
Yeah definitely there's a lot of activity in Japan, especially because of our relationship with Quito manufacturing I'm, probably not as much out in the public space.
Mitch Horkany: If you think about the Japanese automotive OEMs, they have a little bit longer development cycle on the front end, but we're very much engaged with all of them. On the smart infrastructure side, we have, I would say, you know...
Do you think about the Japanese.
Automotive OEM.
A little bit longer development cycle on the front end.
And but we're very much engaged with all of them a smart infrastructures side, we have I would say you know.
Mitch Horkany: just about as many engagements in Japan as we have in North America, so quite a bit of penetration in that region. When it comes to Europe , there is a bit of regional difference within automotive as far as features.
Just about as many engagements and in Japan as we have.
In North America, so I'm quite quite a bit of penetration in that region.
When it comes to Europe , there is a bit of regional difference within automotive as far as features.
Mitch Horkany: when they adopt LiDAR, so there's a bit more focus on luxury and high speed with the European OEMs compared to North America and Japan. But in smart infrastructure, again, we've partnered with quite a few companies in the European landscape. I would say to a lesser extent in the China region for smart infrastructure, but with the opening of the office there and the building of the team, I think you'll see a lot coming out of that region as well.
When they adopt lidar, so theres a bit more focus on luxury and high speed with a European Oems compared to North America and Japan.
But in smart infrastructure again, we've we partnered with a quite a few companies and European landscape I would say to a lesser extent in the China region for smart infrastructure, but with the.
The opening of the office there and the building of the team I think you'll see a lot coming out of that region as well.
Speaker Change: Just to add a comment here, Richard, being a public company really has helped in terms of increasing our profile with all the OEMs. We're certainly being taken notice of by all the notable Japanese OEMs and European OEMs. So we have the momentum going.
Just a comment here just added a column here Richard you know being a public company really has helped us in terms of increasing our profile with all the Oems. So we're certainly being taken notice up by all the notable Japanese Oems and European Oems out so.
We have the momentum going.
Okay perfect I appreciate that one more question for me and I'll jump out of line here correct me if I heard this.
Speaker Change: OK, perfect, appreciate that one more question for me and I'll jump out of line here. Correct me if I heard this.
Speaker Change: Incorrectly, but I think you said that related to your software for automotive OEMs, you expect them to be evaluated by three of the top 10 OEMs worldwide. Is this accurate? And if so, can you characterize how long those evaluations go on and any other color you can add there? Thanks, June .
Incorrectly, but I think you said that your it related your software for automotive Oems do you expecting to be evaluated by three of the top top top 10 Oems worldwide is this accurate and if so can you characterize them.
How long this evaluations go on in and any other color you can add there. Thanks Jim.
Speaker Change: Yeah, thanks. I mean, software is always a big aspiration for the company. We have developed static perception software that's on sale already, and we actually have developed the perception software stack for the automobile that is, as I have mentioned, you heard it right, being evaluated right now.
Yeah, I think so I mean its offer its always a big aspiration for the company. We have developed the static perception software that's on sale already and we actually have developed the perception of a software stack for the automobile that this as I have mentioned that you heard it right that would be evaluated at that right now and.
Speaker Change: and I certainly would not be able to disclose who's evaluating and to what stage, but these are very desired features coming out of LiDAR, not just a plain point cloud data coming out, but with perceived data in a more abstracted form. And OEMs really love
I, certainly would not be able to disclose who is evaluating and what stage. But these are very desired features are coming out of lidar, a not just a plain point cloud data coming out, but with perceived that data in a more abstract it for them and the Oems are really loved it.
Speaker Change: Of course, that will have to go through a process of evaluation and validation and making sure the reported objects, for example, are correct. So that will take a little while.
So that won't have to go through a process of evaluation and validation and making sure they reported.
Objects out for example are correct. So that will take a little while a missed that do you have anything to add on this subject.
Speaker Change: Misha, do you have anything to add on this subject?
Misha: Yeah, I think you're right, June . That process can take anywhere from six months to 18 months, depending on the evaluation criteria at the OEM. But it is true that we will have at least three top 10 OEMs evaluating our automotive perception products.
Yeah, I think I think you're right June that process can take anywhere from six months to 18 months.
Depending on the evaluation criteria at the Oh, yeah, but it is true that we will have at least three top 10 Oems evaluating our automotive perception product this year.
Misha: Yeah, this is Winston. Let me just also remind everyone that we have not baked in a big contribution from software to our financials. So this is
Yeah. This is Winston let me just also remind everyone that we have not baked in.
A big contribution from software.
Two our.
Financial and so.
This is.
Misha: really laying the groundwork for future 2025-2026 revenue.
Really laying the groundwork for future 2025.
2026 revenue.
Yes.
Speaker Change: Okay, thanks for the perspective. That's all the questions for me. Thanks guys.
Okay. Thanks for the perspective, that's all the questions from me Thanks, guys.
Speaker Change: Thank you. Again, if you have a question, please press star then 1.
Thank you again, if you have a question. Please press Star then one.
Our next question comes from somebody Chatterji of J P. Morgan. Please go ahead.
Speaker Change: Next question comes from Sumit Chatterjee of J.P. Morgan. Please go ahead.
Sumit Chatterjee: Yep, hi, thank you and congrats guys on the first quarter here. I guess maybe if I start with the Nova product, June , if you can talk about.
Thank you and congrats guys on the first quarter.
Maybe if.
If I start.
With the Nova product June if you can talk about.
June: How do you think about the design cycle with an automaker related to some of the longer range products? I understand maybe some of the opportunities more.
How do you think about the design cycle with an automaker relative to some of the longer range product I understand maybe you can tell what the opportunity is more longer term, but how does the design. The design cycle Logan is it an acceleration once the automakers start going to multiple like dollars per vehicle.
June: longer term but how does the design, how will the design cycle look and is there an acceleration once the automakers start going to multiple LIDARs per vehicle? Is there just an acceleration just given the design cycles might be shorter? And then the other question that I had for you, I know in your prepared remarks you mentioned that
And expiration does given the design cycles might be shortly and then the other question that I had for you I know in your prepared remarks, you mentioned that.
June: being having that tie-up with Kuwait was a tier one is helping you in terms of win.
Having that tie up with great was a tier one is helping you win them self wins I mean, we do have a lot of builders that you complete those that you are running up against that some of them don't have tier one tie ups at this point. So how do you really see sort of see that market playing out is it that the automaker.
June: I mean, we do have a lot of peers that you, or competitors that you're running up against that some of them don't have tier one tie ups at this point. So how do you really see sort of see that market playing out? Is it that the automakers are more dependent on having a tier one relationship when it comes to ADAS and when they're working on longer term projects, they're more flexible on the tier one relationship? Just wanted to understand because we do see some of your competitors without tier one relationships also winning awards.
Those are.
More dependent on having a tier one relationship when it comes to eat as and when they're working on longer term projects. They are more flexible on the tier one relationship just wanted to understand because we do see some of your competitors without deal one that issues. It's also winning awards.
Speaker Change: Thank you so much for those two questions. I'll answer the NOVA question first. Well, first of all, CEPTOM's NOVA sensor is built on the exact same technical principle, the MMT technology. So in fact, it will for sure carry a shorter development cycle, whether it's the LiDAR itself or actually integrating into the vehicle.
Hum.
Thank you so much for those two questions. So I'll answer the Nobel question first so well first of all sometimes nobody sensor is filled on the exact same technical principal with the M. N E and M. T technology. So in fact that it won't for sure carry a shorter development cycle, whether it's the lidar itself Oh.
Or actually integrating into the vehicles. So just you know I keep.
Speaker Change: So just, you know, I keep on drawing this parallel between LiDAR and the cameras in the past. The first camera got into cars, took a very long time, and later on, it just get accelerated, accelerated. More and more cameras are, you know, showing up in many, many cars. So indeed, I can, you know,
Keep them drawing this parallel between lidar and cameras in the past that the first camera cut into cars took a very long time and later on it just get accelerated accelerating more and more cameras are oh.
I've been in many many cars. So Ah indeed, I can no pretty much to assure you that the NOLA and arranged I'd argue about it but it won't be a shorter cycle.
Speaker Change: pretty much assure you that the NOVA and near-range side, our development will be a shorter site.
Speaker Change: Well, the second question is about Tier 1. There has been a lot of debates on whether Tier 1 is needed. CEPTOM is actually, we're the believer that Tier 1 and this well-established automotive supply chain from the OEM to Tier 1 to Tier 2, we actually believe in that model. In fact, the top 10 global OEMs currently demand Tier 1 part.
Well. The second question is about tier one there has been a lot of debates on whether.
Tier one is neither adopt satcom is actually a weird a believer that tier one and this well established automotive supply chain from the OEM to tier one to tier two we we actually believed in that model.
In fact that the top 10 global Oems currently the men a tier one partner for all of these advanced sensors, our advanced technology.
Speaker Change: for all these advanced sensors or advanced technology.
Speaker Change: Yeah, you probably do hear 1C, 2C direct relationships, but it's rare. And I actually don't know how that will actually unfold. We're the solid believer that just from the product liability perspective, you need a tier one to stand, to vouch for your technology first and stand behind the product. So that's our position.
Yeah, you would probably do here onesie, twosies directories and ships.
But it's rare and I actually don't know, how bad well actually unfold.
Where are the solid believer that just from the product liability perspective, you'll need a tier one to two two stent to vouch for your technology first and stand behind the product. So that's our position.
Okay, and if I can quickly slip one in for Winston who Winston I think.
Speaker Change: Winston I think if I'm looking at the fourth quarter numbers here you're slightly negative in terms
Looking at the fourth quarter numbers, you would have a slightly negative in terms of gross margins.
Speaker Change: You mentioned that the revenue will be back half-weighted for 2020.
You mentioned that the revenue will be back half weighted for 'twenty. Two how are you thinking about the gross margin trajectory, particularly in terms of getting to maybe closer to breakeven on gross margin in the back half of this year.
Speaker Change: How are you thinking about the cross-margin trajectory, particularly in terms of getting to maybe closer to breakeven on cross-margin in the back half?
Yeah.
Speaker Change: You know, the supply chain issues, as we talked about, continue to bring down the margins a bit, and
The supply chain issues as we talked about continue to sprint.
Bring down the margins a bit and.
Speaker Change: So we are confident we'll be definitely positive in gross margin in the back half of this year. And one of the things, one of the questions earlier from Matt is regarding our investment pace. I mean, the reason we are putting a more linear investment pace quarter by quarter this year is to also lower the cost, not just through supply chain management, but also through engineering and just being smarter and integration.
So we are confident will be definitely positive gross margin.
In the back half of this year and.
And one of the one of the things one of the questions earlier from that and regarding our investment pace and the reason we are putting a more linear investment pace corner by corner. This year is to also lower the cost of.
Not just through our supply chain management, but also through engineering and just being smarter in integration.
Great. Thank you thanks for taking my questions.
Yeah.
Okay.
That concludes our question and answer session.
Speaker Change: That concludes our question and answer session. Now I'd like to turn the call back over to Mr. Junpei for closing remarks. Please go ahead.
I'd like to turn the call back over to Mr. Joon pay for closing remarks. Please go ahead.
Yeah.
Junpei: Okay, if that's all the questions, I would like to close with many thanks to all of you who participated today. If anyone would like to reach out to us for further discussion, please contact us and we will for sure set something up. CEPTOM will be riding on the momentum of the largest LiDAR design win with General Motors and continue charging forward. Please pay attention to us. Meanwhile, thank you and thank you again. Good day.
Okay. If that's all the questions I would like to close with many thanks to all of you who participated today if anyone would like to reach out to us for further discussion. Please contact us and we will for sure set something up.
Well I'll be riding on the momentum of the largest light our design win with general Motors and continuing charging forward. Please pay attention to us. Meanwhile, Thank you and thank you again good day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Junpei: Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Okay.