Q1 2022 Luminar Technologies Inc Earnings Call
Alright, everyone I hope you enjoyed the video.
One comment before you started in the spirit of continuously improving our shareholder outreach. This quarter, we implemented that say platform were verified shareholders can asking questions. The questions have been great and we will be addressing some of the top questions at the end of our prepared remarks today, followed by analyst questions. We hope that our shareholders will find this at <unk>.
Useful avenue to engage with us before we begin our 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 update presentation.
For more information on the specific risk factors that could cause actual results to differ materially with that I'd like to introduce limit our founder and CEO Austin Russell.
Yes, it's going live.
Hey, everybody seeing here.
Yes, absolutely alright awesome.
Okay, I will just jump, Brian and well try and welcome everyone to our quarterly business update today rely from the office of our industrial and board member of our core to the Gores group in California.
Jumping right in the first quarter was an incredible start to the year for Illumina as we remained focused on in terms of execution for our business and our milestones and I'm proud to say that we remain on track to meet or beat each of our four key public 2022 milestones that we outlined at the beginning of the year and the business is only accelerating as we take a look forward. So at the same time we've continued.
Our win streak with Mercedes and Nissan So far this year and are planning on expanding our series production capacity as we look at increased series production program volume indications from our partners at the same time, we've made significant advancements over the past few months with regards to industrialization and technology roadmap advancement with our optical manufacturing partner fab.
<unk> live and ramping as you saw in the video as well as the new acquisition of Freedom Photonics.
So with that I'll jump into more detail on some key areas of the business before handing it off to Tom to review, how we've been tracking to our milestones in our financials.
So taking a step back it all starts with the vision statement and division of what we had outlined at the beginning of the year at CES and our 100 year vision is to have the opportunity to save 100 million lives and 100 trillion hours on the road over the next 100 years and I'm proud to say that our new partner Nissan is aligned with that vision of saving lives and time.
And are making major moves towards that goal.
Nissan announced and is now demonstrating its integration of aluminum technology into its new driver assistance system designed to dramatically reduce accidents and increased vehicle safety or performance enabled us to dramatically improve the collision avoidance capabilities of the vehicles, while advancing towards next generation autonomy.
We expect to be able to complete the development of the system and introduce it on initial vehicle models by mid decade and deployed the technology on virtually every new vehicle model by 'twenty three.
That into perspective, Nissan produces around 4 million vehicles every year.
This is the first major commercial win with a mass market automakers as well as luminaries foray into Japan, and we're excited for what's ahead.
So on our last call. We also talked about the landmark series production win with Mercedes Benz, which supercharge our start to the year and with these two major wins, we're now halfway to achieving our 2022 goal for growth for additional major commercial wins.
So given the increased volume indications as was noted from our series production partners will also now be increasing our series production capacity to ensure we can successfully scale levels needed to meet heightened demand from these OEM partners.
So from a series production readiness standpoint, that's probably the most significant effort that is currently underway at aluminum.
All about industrialization and making sure that either as a serious production ready by the end of the year. So.
So as you saw in today's video the <unk> bring up and ramp has been an intensive undertaking for the illumina team.
Now beginning to see the fruits of our labor as we meet this milestone. So as a reminder, fibernet is one of our two key series production manufacturing partners alongside for Leicester Cough and is responsible for assembling the specialized optical and chip level technologies in our product.
Say that it's the engine so to say for the Lidar and week by week, our industrialization efforts are progressing as we make our big push forward.
So from a software standpoint, while it's not the focus for this quarterly call. Our software development efforts are also on track for a central data released by year end just last month, we delivered our latest software alongside Iris for independent testing that will benchmark alumina ours proactive safety versus today's best in class assisted driving systems out there.
This really will have the opportunity to prove the step function improvement in safety that we're showing in our lives more ad hoc demos.
But in a more quantitative capacity and looking forward to sharing all of those independent benchmark results in the not too distant future.
So from a technology standpoint, and technology leadership, we are ensuring that while we execute in the near term. We're also able to strengthen and accelerate our product roadmap and after a multiyear partnership with freedom Photonics, We acquired the company, bringing that in house high performance diode laser chip technology as well as the capabilities associated with <unk>.
Okay.
So component level innovation and integration is absolutely critical to enable this level of performance and economics and freedom was the last remaining pillar to achieving a full vertical integration across the three core lidar components with the receiver of the processor and the laser.
And which is now accelerating development widening the competitive moat and substantially reducing cost to be able to further the ability to achieve the 100 dollar long term bill of materials target.
And this is all aligned with what you guys were seeing in the video between Blackhawks engineering operation and Freedom Botox.
So in conclusion delivering on our long term vision requires the wireless execution and continuous innovation and I'm incredibly proud of what the alumina. Our team has accomplished already this year and we're just getting started.
With that I'd like to hand, it over to Tom to discuss more details about our Q1 financials and provide an update on our 2022 business milestones and where we stand.
Great. Thank you Austin.
Let's start by reviewing our progress towards our four key 2022 milestones that we outlined at the beginning of the year.
Our first goal is to achieve series production readiness this year.
We remain on track to achieve this goal as you saw in our video update Fibernet is ramping up the manufacturing of our most critical and complex sub components. The laser transceiver. This is a crucial step in our series production process.
On the software front, we have now progressed, our proactive safety system development to the point, where it is ready for third party testing and validation.
This testing is being performed by reputable third party experts to quantify the safety improvements of our system relative to today's Adas systems.
We remain on track for our goal of achieving the Sentinel beta release by yearend.
Our third milestone is to grow our cumulative major commercial win total by at least 40%. So far this year, we have two major new wins, Mercedes Benz and Nissan putting us on track to meet or beat this milestone this year.
And finally, we are on track to meet or beat our 40% growth target and our forward looking order book.
This growth will come from both new customer wins as well as higher requested volume from existing customers.
As a reminder, we take a conservative view on the business. We include in our order book and include only customers and programs, where we have a major commercial wind and often times with a significant level of conservatism or haircut building.
Let's review our financial highlights for Q1.
Revenue was $6 9 million.
Up 29% year over year.
Program revenue as part of one series production deals comprise the majority of our Q1 revenue.
As I stated on our last business update call program revenue can be nonlinear and lumpy from quarter to quarter, depending upon the type and level of work performed new contracts rolling on and the completion of development work as we approach series production.
In Q4 2021, we completed the revenue milestones in our first series production development contract because of this lumpy dynamic Q1, 2022 revenue was sequentially lower than Q4, but still up year over year, we expect revenue to be sequentially higher in Q2 in part due to this program.
Revenue Lumpiness.
For the quarter, we reported a non-GAAP loss of $8 million and non-GAAP Cogs a $15 million.
Of this $15 million the substantial majority of approximately $14 million was from costs associated with preparation for scaled series production launch fixed manufacturing overhead and R&D expenses associated with our program development revenue.
These factors and Slater reported Cogs and gross loss at this stage as we frontload cost for series production.
In the near future as we approach series production, we plan to provide more disclosure and analysis of our Cogs and adjusted gross profit.
From a unit economic standpoint, we remain on track to meet our series production Bill immaterial or bomb and conversion cross targets for our first full year of series production.
Our Q1 cash burn was $38 million excluding share repurchases.
As I mentioned on the last update call.
Q4, 2021 cash burn was higher than run rate due to increases in working capital, including customer payments that occurred in January of this year instead of December last year.
At $360 million range, including the shares we recently issued for our freedom acquisition.
Before we hand, it over to Trey for Q&A I'd like to hand, it over to Austin for some closing remarks.
Sure.
Thanks, Tom well good good perspective on everything and thanks for giving some insight there.
So.
I have to say, we've never had greater conviction around the long term business and financial trajectory of Illumina offer averaging that we had at <unk>.
I think one important point is to illustrate when there's times, where you had to put your money where your mouth is so to say.
For example, one thing that will.
Come out in the proxy and who says an example is that when the board is discussing compensation packages for a CEO .
Sure.
To be able to make sure that illustrated in that spirit and have waived any normal CEO compensation package, we would take.
In favor of actually not taking a single dollar of compensation as part of that until our stock price reaches $50 per share.
As well as a critical operation milestone for series production, but that said.
100% all in to be able to make this is amazing the success as we all know it can be and to do it.
As we accelerate towards our long term successful business trajectory here, so with that let's give it back to Trey for Q&A.
Thanks, Austin, we're going to start the Q&A with a couple of the questions that we received on the same platform and then we will move to analyst questions. So in the top three questions in terms of shares voted on the same platform. We're all focused on a similar topic around software both our offerings our design wins monetization I'll give a little more let me read a little more.
Detailed.
For all three of those questions were in that vein. So one question was what elements of software, we're providing the Nissan and whether that involves any sentinel software development.
The second one was on Sentinel in general.
And if we can expand on any elements of Sentinel software deals, where we've won with Sentinel and then the third one is really around software pricing and how we think about monetizing the software stack.
I'll kick that back to you Austin, and let you kind of shape the answer around those three.
Yes, So I'd say software is absolutely a critical part of the overall business and this is really as we make the transition from a.
You could even see a component company with systems and solutions company, It's a critical transition and we've done that a different layers of the stack all the way up even from like a poor lidar components to the outflow of Lidar system too.
That goes on top but I think what is absolutely important and critical to realize is that at the end of the day you have to be able to have a software solution to be able to enable this for automakers to be able to make the most of the lidar lidar alone in a car won't do much of anything in fact it.
We won't do anything at all until the point of where you can actually be able to enable and functionality for the user and the consumer and this is why we have been really all in on this obviously there are certain key keep folks like the.
<unk> and the Mercedes and videos or.
Nissan to this world that it started off with some of the software development, but there are critical complementary aspects that are required that are needed to be able to make this happen and make this a truly successful in terms of realizing the yen functionality. So we are really all in on two key aspects of this one is for proactive safety as we call it which is dramatically improving the next generation.
Safety systems on vehicles and the other part is highway autonomy functionality and capabilities. So that's something that we're very proud of the progress. That's there we can see that for as it relates to these these deals there generally is a like some element of software components with this in the case of Nissan I don't think they've actually publicly discuss.
Any of the specific details about the.
The software plans for this so I can't comment on that at this stage, but I will say that.
At some later you could probably expect.
Nearly the majority of.
Deals that we move forward with to have some software component associated with it.
The one thing I would add on Nissan as we've been doing work with them for a development work for them for about a year now we have been collecting program revenue for that work we've been doing.
And that program revenue has been associated with where we've been doing not only in the lidar hardware side, but as well as the software side and as Austin said, they really haven't shared that planned Jeff on what their plan.
Is going to be for software in series production, but the development work, we've been doing so far it hasnt put it software.
Great. Thanks, guys.
We also had two similar questions.
Around the topic of when folks will actually see limit our lidar on the roads in production cars. One of the question was when we're going to see this technology on vehicles. The other question. When we can we see vehicles fully using limit our lidar not just for tax testing purposes, but actually ready to go.
So it.
It'll be it'll be exciting week actually be able to get this stuff out there I think.
Both.
There are two kind of lead partners that we have from a China standpoint, SAIC as our lead partner on there'll be able to have the opportunity to introduce this in the not too distant future and as well as Volvo.
Similarly is on a relative basis in the not too distant future. So very excited to be able to see these guys get a chance to be able to wrap up but I think we've said.
As part of one of our key milestones that Irish will be series production ready.
By the end of the year as part of this but.
I think we've continued to be able to see acceleration in greater aggressiveness on.
The timelines are what people are excited to be able to deploy this so I think the answer is it depends on the specific automaker.
Stay tune for win.
SAIC and Volvo announced.
The formally announced the launch of their their vehicles, so that'll be that'll.
That will be an exciting one but that's in the Oems hands to say, but I can certainly say.
Incredibly excited to be able to see this come to fruition in the not too distant future here.
Thanks, Austin and thanks to everybody who submitted questions on the state platform, we're going to continue to use this as a platform to increase shareholder engagement with us and with that let's transition first analyst question on the call and so Kevin the first analyst who is going to be on the call is Gus Richard from Northland.
Alright. Thanks, Thanks for letting me ask the question.
Just.
Real quickly.
Can you talk a little bit about the cadence of.
New serious ones of share do you expect them.
Proportionally throughout the year or or are they later in the year.
Yes, so so from our perspective, we're sitting here with just completed April where early in May we've already announced two but just a little over halfway to our goal for the year. These are these are difficult to predict.
We only make our announcements when our customers are ready.
Both.
So its announcements we made this year, we did a fair amount of work with each of them.
Last year as well and so.
I think youre going to see them throughout the year, but it's difficult for us to predict the exact timing because as we talked about we go only when our customers are ready to make an announcement.
And I think most importantly is that it's in.
Almost all cases, a year or two it's the customer really making the announcement as soon as anything like in the case of Nissan recently that wasn't alumina iron out, but that was a nissan announcement, although sometimes it feels like there could be alumina or announcements given that they are accompanying us which is which is fantastic but.
That said, we already start seeing.
People, putting out like I said.
I see in China over Wechat, and other stuff theyre, putting out ads for are tapped out on our own vehicles for what's what's coming up ahead.
People, making the push but I think we'll be.
As Tom mentioned, we're on track to meet or beat the goal, which 40% growth would imply four additional ones, but as we noted we are also seeing increased volume indications from existing Oems, which would also mean that.
Greater likelihood to introduce on.
Accelerated timelines for new models as well so.
Which of course.
It's really the important perspective for all of this is that it's not just about.
New wins for us.
There is putting into everything in a perspective I would just take the Nissan example alone. Okay. We just said that that was 4 million vehicles per year, you know their ultimate antennas.
I'd be able to standardize this kind of capability and technology in the vehicles by the end of the decade.
We modeled out when.
When we first went public we modeled out the scenario of what what the target market penetration was off our 2013, and we modeled out three years to 4%.
So three months to 4% gets you <unk> 5 billion revenue $2 5 billion EBITDA with a $60 billion forward looking order book at that rate So just that alone.
Can be able to pick up that level of market penetration now obviously, we're not stopping there and frankly I would be very disappointed if we only have 3% to 4% market penetration with that but it just goes to show just the law of large numbers just how meaningful. This is when you take a look at the other tech names in the examples like the and videos and mobilize and other type of stuff that have gone along that that trajectory with this and how it.
Makes all the difference.
And then I will follow up.
Recent laser acquisition.
You sort of alluded to.
Our product roadmap. If you will if you could talk a little bit about how it's going to help you out.
A bomb and capabilities and sort of what exactly that roadmap looks like.
So theres a few different things there, it's three different aspects one yes, it accelerates tech and product roadmap to widen the competitive moat three it reduces cost.
All of those three independently are probably very valid reasons to do something like this when you combine it all together, it's a no brainer for us to be able to vertically integrate in.
It's not like there is 10 different companies that can do these kinds of things you have these very very specialized niche.
Technology developers that have largely been like government funded for for like specific one off projects at a time and it's just really interesting to see the these these developments here. So we partnered with some of them over the years often exclusively.
With exclusive contracts to be able to actually do core development with them for at the component level with Illumina or design in women of architecture and leveraging these capabilities is absolutely critical to being able to continue to improve continue to improve performance could you give a group cost to you to prove everything and those results are absolutely going to be realized so when you when it comes to the laser that was the last.
Missing puzzle piece to this with the receiver and the ASIC to this between now Youll believes that received where they used to call. The core lidar components that are there that are needed to be able to get towards that long term to a 100 dollar bond trajectory as part of this so we can see cost benefits.
Already that can enable us to.
For roadmap acceleration, but.
I would say in addition to cost like I said this is going to be critical for whats next after iris as well, obviously, we want to be careful about talking too far into that into the future with this but there's more to come but we're.
Making sure and also not take our heads off the ground with them.
Execution for our providers and everything that we have ahead.
Incredibly important to get this locked in with the.
The key major automakers.
Got it thanks I'll pass it on.
The next question comes from Dan Levy of Credit Suisse.
Hey, good evening, Thank you for taking my questions.
Want to start with.
Meson agreement, maybe you can give us a little color about how this came about and just on the agreement itself. I think we know Nissan is generally more of a mass market brand.
And so the price points or lower which means that the cost of the vehicle or lower so what does that imply in terms of the types of asps that you would have which are probably going to be different than what you would have for say Mercedes or <unk>, which are more premium vehicles.
No. It's interesting I think we're noticing that trend now of sort of the Oems going out publicly saying, what they want the price to be like.
I think actually Nissan went out and said yeah. It would be great if like luminary charges $300 for the products.
I mean, you get it.
But it can ask for stuff. The reality is as I have been publicly said that listen it's going to start out more on the order of $1000 type Asps and progress towards 500 dollar type asps over the over the longer term when you go truly mass market at that scale now obviously that's like.
10 years from now here, but.
I think that it makes a lot of sense now obviously there is a significant software value that's contributed on top of that too.
Arguably you could see the cumulative value that you're providing for this in with the whole between hardware and software is into the thousands even in a standardized case and.
And obviously, we're also leveraging other second order opportunities not to get too deep into it but things like the trajectories around insurance and other aspects to be able to capture significant value in central even as much or more value than what the lidar itself. When it comes to these kinds of things. So it's really interesting to be able to.
To see that.
That said I think that when it comes down to the product. There's no question that the idea behind this only being in certain specific luxury models as an option is going by the wayside and actually having the opportunity to truly go mass market and this is really the first public bold statement from someone to make that happen.
We've talked in the past about.
Initially our Bom is going to be a target of $500 and longer term, we wanted to take a closer to 100, there is two things.
Needed to kind of take it from that 500 to the 100.
One is there are some I would say.
Product development goals that we need to achieve freedom is critical and doing that we know that have in house. The other thing is you need substantial volume and economies of scale to bring the costs with the recent major commercial wins, we've had including Nissan.
You now see a path for us to do that.
And so this is this is really self fulfilling getting the volume allows us to continue to innovate and bring our cost down it gets us that economies of scale.
And so that's the roadmap that we have to kind of.
We're always going to be FERC customers to bring the cost down, but youre right in order to penetrate that mass market you need to change the price of the lighter than what you initially charging in the luxury or premium segment.
Great. Thank you and then as a follow up often so you noted that your compensation plan is going to be.
Updated or at least in the proxy and you said there were some operational milestones alongside the stock threshold can you just elaborate what those operational milestones are.
The key is launching with series production.
The fundamental business value inflection point, that's there now.
<unk> and that was something that the board.
It did put into place, but I think the most relevant and valuable.
The hardest hit one obviously is going to be the $50 per share.
There since that.
That's why we haven't had but I'm oligos that it couldnt have more conviction in terms of the long term business value of everything that we have and that's what I'm signing up for.
So as I said as part of that wouldn't.
It wouldn't make a dollar.
Are there revenue or EBITDA thresholds attached to that.
No, but there is a time vesting schedule its like a seven year period, that's there there'll have to be with.
With the company as part of this so no.
I thought I was planning on not being here in seven years, but.
That is another condition thats part of it great.
Great. Thank you thanks, Dan.
Next question comes from Aileen Smith of Bank of America.
Hi, guys.
Why do you ask the first question from I think it's slide five in the deck, specifically that you are accelerating capacity expansion in light of commercial momentum can.
Can you elaborate a little bit more on that and specifically what timeframe. This is for I think now you are at something like 10, plus commercial win the outlook. You gave when you went public was a model based on far wins, but I'm, assuming that most of those commercial programs don't go into production until mid decade.
The capacity expansion something immediate for our planned production in 2023 are the near term or rather further out in the business plan.
It's more in the immediate term aileen and.
As we've talked about in the past we are launching with Celestica as our contract manufacturing partner, that's going to be doing the final assembly fabric that's doing the most complicated.
And.
Technically advanced sub component, which is the transceiver they didn't send it over to Celeste I guess it does the final assembly and then from there they ship it to our customer.
Were initially planning to launch at a shared facility, where celestica makes it would make our lighter, but a bunch of other components that they make for their other customers are volume indications from our customers have now reached.
A plane in the near term, where the run rate, where we're being asked to produce kind of exceeds the available capacity in that shared facility.
So we're going to be working with Celestica.
To build out more or less a dedicated facility.
Located right near their plant in Monterrey that will be dedicated to illumina are and being able to handle the capacity that we need not only in the near term, but in the medium term as well given the.
Better than expected volume guidance, we've done from our customers as well as.
From our better than expected commercial win momentum.
Okay great.
And then I wanted to ask a question around the Nissan partnership and roll through scale. Other automakers, specifically youre launching on select new models first around mid 2020, then by 2030.
Price.
So really across all of their new vehicles, and that's a pretty big commitment and.
Preemptive announcement of standardization in a sense.
In terms of the conversations with other automakers, how many would you say are structured in a similar capacity when you start off more on premium models, but are planned to be rolled out across the entire product portfolio over time.
Or rather do you most automakers wanted to see the technology perform an initial model first before committing to rolling it out further.
Well I think generally the strategy of the industry is to try and introduce the cool new stuff in the high end models and then ultimately have a trickle down over to the rest of it over the course of a decade or two I think what people are realizing is that.
This isn't something that's just a.
A cool widget.
On the vehicle as part of this is this is fundamental to the overall driving experience. The overall safety of the vehicle the value of the vehicles the consumer impression.
Not to mention pressure from a regulatory standpoint insurance causes <unk>. There's so many different factors that come into play here.
Really making incredibly strong almost no brainer business case to standardize across our lineup. So I think it is.
There is no question that the conversation is certainly shifting from.
A matter of win at this stage on a more holistic capacity and I think.
That's happening as well now that's not to say that people won't start on this you have to start so I'm wondering if you were to try and.
Launch on millions of vehicles all at the same time with this that would that would <unk>.
B.
A bad idea with this but this is where I mean automakers, where they introduced this.
The key is is that what is the trajectory of what of what the actual product roadmap. They have and what is and I think we're seeing whereas historically you would be like a decade plus long cycles by the time you introduce a new tech first vehicle model their time and by the time of proliferative throughout the industry I mean, even with like <unk>.
<unk> belts and airbags and everything I mean, it took decades. This happened now we're talking years for this so it's it's.
It's really accelerated and that's obviously.
In the tech world that sounds slow, but in the automotive world that moving of believing speed when it when it comes down to it and this is just because it's such a significant commitment to be able to try and plan for these things and cigna huge huge investments events and also it's incredibly sticky on this stuff too. So it makes it makes a big difference over a long.
Term periods I think a lean it really comes down to.
<unk>.
There is there's really two major systems that our technology enables that we've talked about one is the highway autonomy, which fits very well with the luxury and the premium brands.
Particularly with what that trim package king.
Cost of the consumer and the additional profitability. It brings two two.
The OEM. The other is the proactive safety and we've always viewed the proactive safety is what drives standardization. We've been very public recently initially showing demos last year showing it live at CES and this is really starting to resonate.
With the Oems, particularly the mass market Oems, we think proactive safety should be available to everyone. Just not the people who drive luxury vehicles. This technology will save a lot of lights Nissan recognizes that they recognize the power of our lidar and what that can enable an additional safety functions and so they wanted to design it.
System that they are probably going to start in on the high end vehicles, but they wanted to put it on every vehicle because they see the impact that this can have on making our roads a lot safer.
Okay. That's helpful. Thanks for taking the questions.
Thanks Helane.
Next question comes from Joshua culture accounts.
Hey, guys. Congrats on all the commercial and operational progress and thanks for taking my question.
So first of all a bit of a clarification I believe on.
The order book target.
The Mercedes wasn't included in the 40% growth because it was in the 'twenty one number.
So I guess I wanted to ask I assume that's not the case for Nissan.
And is there any amount in the 40% growth you could give me in the 40% growth, creating its latter half of a decade wasn't the majority of the volumes will be sure. So let me let me, let me talk a little bit more about that.
The most recent order book that we have a $2 $1 billion as of December one 2021.
Did a lot of work for Nissan last year.
But it didn't progressed to the point, where we kind of declared that a major commercial win as I talked about before were very conservative with what we put in there and it needs to meet a certain threshold in a certain certainty where we felt comfortable on that.
E Sun and the $2 $1 billion in 2021 zero Nissan in there there was some mercedes in there because the Mercedes.
Agreement kind of progressed to a point and you can see in some of the public filing some of the agreements we entered into last year with them, where we did it included.
What I would say, though is the numbers for both of those.
Customers can go up this year and in the future if they give us more programs if they give us more volume.
We're going to update our.
Forward looking order book at the end of the year.
We declared Nissan a major commercial wins, which means that which will be in there, but the amount. We're going to include this year is going to be very very conservative.
Based upon where we are in that specific time at the end of the year with Nissan. This is where you see the multiplier effects even from existing wins is there even if it may EMEA startup for example, like some specific model or something that's there, but then as it expands to.
More and more vehicle lines and other things there too that that's what makes it obviously makes all the difference and that's what we're also experiencing and seeing with greater volume indications across the board not to name specific names but.
That's a driver in that.
Not not not a fundamental surprise, but something that was even more than expected from promote behind.
Alright. Thank you I appreciate all the color there and then for my follow up.
A good deal of time talking about vertical integration on the <unk>.
Call it in the video in.
In particular, one basket opportunity to photonics I believes that allow us to start having Robert as you could go to.
Laser diode and sort of a fiber laser.
Can you walk me through some of the benefits from either performance costs.
And form factor.
Why acquire versus sourcing.
Yeah.
So, yes, I would say the fundamental laser chip design capabilities of being able to have that in house is definitely something that can accelerate our road map when it comes down to it.
We obviously took the.
Build by partner decisions very seriously you don't when it comes down to it.
But I think this is one of those things that is just so fundamental that partner is great but.
Let's continue to be able to industrialize. This stuff because one other aspect is you have to be able to make sure that you can actually up auto grade components for a series production product and this is not something that frankly exists historically in this industry. So we have to really be able to focus to make sure that we.
We have the full capacity secured we have industrialized.
Industrialize to meet automotive grade and quality and standards and we're at a stage, where we can scale accordingly, but obviously, what's the initial driver behind it is the attack.
Yes.
You could probably do something by the notion that this.
Guys have truly <unk>.
Breakthrough capabilities when it comes to.
Laser power and efficiency in everything out of out of a diode with that which is able to be able to significantly reduce costs that are there versus.
The current systems that are app, so without talking too much or giving too much away on that front. There is no question.
The final pillar to what we needed to have to be able to ultimately meet our long term cost roadmap from from what's there. So that's why that was a really important part of that.
But obviously, it's a breakthrough new capability that we have in house leveraging the platform that they have today.
From the chip design capabilities for lasers, we truly are from the chip level up across all aspects of the Hawaiian are defined in.
This is obviously a fundamental differentiator versus everyone that has historically used the same.
Low performance off the shelf.
Bonus that are available readily from the existing.
The existing.
Component suppliers have been around for decades, which doesn't get you anything close to the level of performance capability that you need or the economics needed to be able to truly deliver this in series production for what's needed.
Okay. Thanks, Josh.
Next question comes from Michael Philosophic Ehrenberg.
Hey, guys. Thanks for taking my questions.
So first I just wanted to nail something down.
The annual filings you talk about if you don't achieve a major commercial win with respect to a particular vehicle model. It may not have the opportunity to supply your products that OEM for many years and so I'm just wondering a.
How many of your commercial wins are for specific models or committed to specific models or platforms right is Nissan and a commitment to supply a specific models our platforms.
And then I suppose Ken supplier or maybe a competitor theoretically supply you know Mercedes even though you have sort of a commitment with Denver series production, maybe in a future platform when they're watching if you get what I'm, saying, yes, so Michael typically what happens and its different by each OEM I would say most of the time, we typically.
Start with a specific program it doesn't jump to standardization across all vehicles. All makes all models are programs.
On day one.
Typically.
<unk> with a specific program.
And then the Oems kind of design the autonomous system around you and that gives you a design advantage as you go win more and more business, let's take Mercedes for example, what we see with a lot of these Oems is.
Some of them have started with.
Specific lidar projects that enable traffic jam pilot assist or something.
For that.
You don't need the robustness of our Lidar, you, probably arguably don't need a lidar at all in order to enable that but if you want to take it to the next generation of safety like Nissan wants to do or the next generation of economy, which Mercedes wants to do you tend to need to use our lighter. So for example, Mercedes is using it enough.
Another existing legacy lighter for that T. J P and some of the lower end systems buffer that next generation stuff.
They decided that that technology doesn't work and they really need to use the robustness of our lidar.
And so winning those initial programs it tends to be a select few and then.
That technology is proven and they develop it the roll it out to more programs over time, but going back to what we said before those major commercial wins for our customer. What we include in that order book are only the programs that we've been delegated as wins, but I think it's fair to say that firm nearly a dozen major commercial wins that nearly all of them either.
We have identified the lead programs that we've been working with them on for some time or.
Or will.
Certainly <unk>.
Developing on a specific platform as part of something that they are still figuring out the details for specific models that they have.
Launch and everything usually Oems actually get to the stage, where they don't even they don't announce vehicles. The other stuff I mean up until like right right. When things are things launched litter, there, but I.
I think people have been excited enough about the capabilities that would enable they want to be able to get out there with it goes to show a great. Great example, with the Nissan of showing off the vehicle capabilities that makes all the difference.
Got it and just one more following up on <unk> question actually.
On your target $100 bomb again, it seems like Theres got to be an architecture change there going from a fiber laser to 15 50 laser diode. So if you were doing that switching to a laser diode without fiber amplifiers I mean, I can see how they can certainly achieve significant cost reductions just given the cost of fiber lasers, but.
Could that impact.
Performance right the range of the Lidar sensor given that you've taken away fiber amplifiers and then when would you expect that transition and architecture that happened right is just a couple of years away or is it five 510 years down the line.
I think it's fair to say that.
Every version of what's after Iris, what's after that has significantly higher performance than that not not the other way around well, while also driving that thought that costs down. So there is some.
Secret sauce behind it in a few different dimensions, but this is where the core driver behind it. It takes a combination of you have to have the most sensitive receiver in the world of its kind to be able to make all of this work and it's effective and that's what we've been able to do between Blackboard engineering and operation of this as part of these four components combined with our overall system design.
So as part of this there's a few different factors that come into play with the overall architecture, but we've been able to pull it off without getting into too.
Too much detail on that.
Alright, thank you.
Thanks, Michael next question comes from David Kelley of Jefferies.
Hey, good afternoon, guys. Thanks for taking my questions maybe.
Just starting with fabric.
Hoping you could talk a bit more about some of those process improvements you've seen over the last quarter or so.
And what are the next steps there.
That youre looking to achieve there as you prep for automotive grade scaled production.
Yes, so I think in terms of the critical next steps for <unk> is really just about continuing the process.
Rapid iteration continuous improvement being able to reduce cycle times being.
Being able to make sure that we can ramp up with the necessary capacity I mean, theres capacity do we have to put in.
Tom was alluding to with so that's the guy there is stuff that we have to do with sovereign debt, but it's great to be able to have these guys live in ramping with this as we go through the sample stage and leading up to series production. So thats a critical step I would say.
Yeah.
In terms of whats.
Wouldn't say, there's anything this was kind of the major milestone there.
There's still a lot of work left to do but I would say, it's relatively tactical when it comes to an execution standpoint for that and they've got a great team out there that we're working closely with in Thailand.
But.
Would say that the.
<unk> is really doing.
The core Transceivers, the Lidar engine behind it and then that can shift over to <unk>, who does the final assembly for everything that's there. So it's really a matter of just continuing the industrialization process improvement cycle times, it's kind of boring but.
Important nevertheless to be able to make sure that we.
We do it well do it right and do it all throughout the course of the year.
Got it boring is not a bad thing thank you.
But I guess as a follow up.
Yes, you are now vertically integrated receiver process our laser.
Maybe to ask a question a little bit differently, but but hoping you could talk about some of the competitive advantages and specifically, we always think about global Oems.
Leading technology, but also some assurance to scale production visibility from their supplier. So I guess, it's clearly early you've just completed the third acquisition, but.
Have you seen it or do you see being fully integrated driving any aspect of differentiation as you think about the bidding process with customers going forward.
Absolutely and I think actually well one interesting example, Adam do somebody sent over us a bit of a screenshot from like for example, the Nissan presentation Thats there.
Again like this isn't our slide. This is this is stuff that the Oems are presenting live like you take a look at an example.
See this.
Yes so.
Goes to show.
As you can see of life for these next generation lidar capabilities that are here.
People are doing these extensive benchmark throughout the industry in terms of the different tech capabilities that are there and it's really luminaire, that's ending up on top each time around as opposed to.
This is the fundamental underpinning of what can be enabled for from a next generation safety standpoint, as well as the highway autonomous standpoint so.
You take a look and from a both a ranging <unk> performance as well as the resolution at range across the entire field of view.
And the horizon, where it matters most is very important.
We really end up in that critical target performance Fox.
They are at the cutting edge of what's to be hard.
That's not to say that there won't be more in the future as part of this and there will be but would say when this is all enabled by the fundamentals of these core components from the companies that we've acquired.
From the design direction of everything that we had within alumina from the poor Lidar engineering experts in.
We basically acquired the majority of the world's supply of relevant relevant folks that actually work on all of these things.
And that's where you're starting to see like realizations of.
Of what's actually going to happen.
Okay, what does all that mean well.
Maybe answer some other questions that people had about the functionality of what you're trying to do but this is a good example of where you see like you can see the tire coming out on the road here too as an example of where they ought to be able to model and simulation.
What had to be able to be able to avoid that.
And this is exactly the kind of stuff that you can be able to prevent crazy scenarios in collisions and stalled car out on the road.
Kind of deal Theres a longer.
Half hour hour long video that Nissan has as an example, with that goes into detail on some of these things, but it's just this is the kind of fundamental differentiation that now automakers are starting to put out.
Not us anymore, it's the actual automakers themselves that are literally doing.
And that's what I'm, saying, it's almost like Illumina, our marketing at some stage, but but that's where I think I do think people are seeing it as a differentiator for their vehicles and next generation technology buccal wines and everything that's there and that's why people were so shocked to see folks like <unk> and folks in the industry like Nissan as mass market, but I'm starting to adopt this and David one unexpected.
Benefit that we're starting to see and look it's still early innings is now that we have the DFT up the duration and freedom teams.
On the same side and wearing the same jersey.
And kind of our R&D work, just having all those bright individuals sitting at the same table and brainstorming on where to take the next generation of the product. They are really unlocking some very interesting things and so there are what I would say some R&D synergies.
By taking cost out by just having smart people collaborate by all sitting at the same table that we're starting to see.
In the early stages here.
Okay. Great. That's helpful. Thank you. Thanks, David next question comes from Shar any surgery SMB CLEC.
A screening.
Thank you hi, guys. Thanks for taking my question Austin a question on the software readiness I know you said you expect Sentinel can be production ready or.
Beta version by end of this year.
As you shift to Volvo and sake I believe.
End of this year do you expect both hardware and software to be available at the launch or is this something thats going to be available down the road.
Okay, and just as a follow up to that obviously, it's a great start but you are selling a platform onto this.
Models do you see any additional OTH upselling opportunities down the road on this.
<unk> design wins.
Absolutely and I think when it comes to this from a software standpoint. The answer is is that yes. There are.
<unk> is expected to be.
Our software content with with these Oems off the bat. That's there now the capability will continue to improve over time and it will continue to get better and the performance will get better and the capabilities will get better and this is because it was a foreign concept just a handful of years ago and now it's really coming into full light with OTI capabilities with pretty much every took a new vehicle.
It would be.
Launching on so that's an important part of that but but yes in terms of additional opportunities I mean, absolutely like it's the same kind of thing when we were when we were first talking to Oems about dynamic pricing models and subscription pricing models and all these other things. There people are now taking a page out of our book to be able to actually implement these things all the way down to the consumer level and some <unk>.
Cases, so it's happening and there is absolutely additional opportunities that are out there on both the onetime on a recurring basis. So I would be in fact, I would be surprised if thats not the dominant model by the end of the decade in terms of how all the rest of this evolves and plays out with to being able to have.
With recurring revenue streams from this it's still it's going to.
It's actually ultimately most advantageous it's not just for us for the OEM as well and in the consumer for that matter with.
With this but it's it's a transition time.
I'm, obviously to be able to fully realize that.
Thank you that's helpful. And then my next question is for Tom Tom.
Looking at your annual guidance.
Greater than 40 million if I just annualize your Q1 number I think we get pretty close to that and given your comment that both Volvo and safe are going to.
Start ramping later this year I would've thought that number would be actually meaningfully higher.
I'm looking at my back of the envelope math here I think the Sam opportunity at Volvo alone just for hardware is north of $100 million annually. So I'm just curious as to why you're not being more aggressive on the outlook for the year.
Sure.
Good question and look we're not.
We think.
The vast portion of our revenue this year is going to be from the program revenue.
As well as preproduction sensor sales so we're being conservative in terms of what we're estimating for anything from series production revenue and I think quite frankly, you are not going to see a significant amount until next year and then some of your high level math that you just talked about for series production.
Does it sound too far off to me.
But I think it's fair to say in a world of companies that over promise and under deliver in this in this space, we want to be the company that under promises and over delivers and Thats something thats kind of core to the philosophy everybody hears it for me.
Consistently so.
Yes.
Yes.
If we end up doing better than expected on our goals that would be that would be my bet.
Okay great.
Yeah.
Right.
Was one more analysts.
And then we'll close out the call. So the last question will be from <unk>.
Great. Thank you hi, everyone.
Just wanted to go back to the comment around increasing capacity in your customers' increasing demands first I'm curious how much of that is reflected in the order book to date and be.
Curious like what is happening there is it higher take rates on trends is it expanding into other vehicles.
Sort of what's kind of driving some of that demand maybe gets you can quantify to some extent.
So what I would say is once again at the $2 1 billion that we had at the end of 2021 that had some assumption in there for what the business would be not only in 2023, but in the future.
The decision to kind of.
Yes.
Work with select to go to build out. This dedicated facility was only made recently this year and so you can kind of back into there that theres probably.
Some.
Higher volume requests from our customers that werent fully incorporated into our 2021 year end target.
Perfect just a quick follow up a backpack and Nissan what are the next milestones.
Our relationship with what should we be thinking or anything you might announce.
The next six to 12 months, Yes look right now the teams are working real time together on developing this system.
We've already invested a lot of time to kind of get this to the stage, where Nissan kind of shared some of their live demos for those that didn't see it because it's in Japanese but they do a good job of England English translation, it's up there on Youtube and I think we have a link to it in some of the earnings materials that we released but we're working on developing this system.
And then we will work with Nissan to figure out what is the cadence that they wanted to deploy this out to each specific.
Vehicle platform that they have and so they have a framework for what they want to do but right now the teams are focusing on getting the system to work the right way.
I don't know whether the next step at the end of the day as we got to execute continue to deliver scale what it takes to make this happen to make this successful.
It's a pretty.
It's not an easy one, but it's but it's clear.
Absolutely that's very helpful. Thank you, thanks, Lisa and thanks to everybody who joined our quarterly call we'll end the call now.
Thank you everyone. All right. Thanks, everyone. Appreciate you joining ends up we'll see it.
Again too.