Q2 2023 Cepton Inc Earnings Call
Greetings and welcome to the Q2 2023 that time, Inc. Business update and earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the.
The conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host she all shoe CFO . Thank you you may begin.
And welcome to step down in the second quarter of 2023 earnings call and business update with me today are Jim pay co founder and Chief Executive Officer, and Mitch Martini Senior Vice President of business development.
During the call we may refer to our unaudited GAAP and non-GAAP measures in our earnings release, and non-GAAP financial measures should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP.
Reconciliations for non-GAAP measures are included in our earnings 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.
These statements are based on the company's current expectations and are subject to the safe Harbor statement relating to the forward looking statements contained in the earnings release and the slides that accompany this call.
Actual results for future periods may differ materially from those expressed or implied by these forward looking statements due to a number of risks uncertainties or other factors, including those discussed in the earnings release or during today's call and those described in our filings with the U S. S D well.
We're not undertaking any commitment to update these statements as a result of future events.
Sept as required by law.
As a quick reminder, this call is being recorded and you can find the earnings release.
That accompany this call as well as the webcast replay of this call at investors <unk> com.
Now I'd like to turn the call over to Joe.
Thank you Paul and good afternoon, everyone.
Thank you for joining us up kind of second quarter 2023 earnings call. We will provide a business update and review of our second quarter financial results with you.
Starting off I'm proud to announce that we have delivered a new company record for the quarterly product revenue and gross margin.
This quarter, we shipped the highest number of lidar units to both of our automotive and the smart infrastructure and customer since our inception.
In automotive.
We expect our shipment volumes to be more than double for each sequential quarter for the remainder of this year as our OEM customers look to launch the startup production at the end of this year.
On smart infrastructure.
We're executing our multi million dollar contract from our largest upholding customer.
This is the largest commercial deployment of our light ours to date for the coating applications.
We have discussed with you our expected growth this year over the past few quarters.
This time I will let the results speak for themselves.
Our record setting quarters reflects the hard work and dedication put forth by our teams executing our current programs.
We expect this trend to continue for the remainder of the year as we continue to ramp unit volumes for automotive serious production as well as for smart infrastructure projects.
Oh serious production execution.
We remain on track to fulfill orders for Oh, Yeah, and start up of production at the end of this year.
We shipped the highest number of pre production units this quarter in support of our lead OEM program, resulting from our continued commercialization efforts to increase our production capacity.
This quarter, we internally developed and deployed automated manufacturing equipment to our contract manufacturing partners in order to meet serious production order volumes.
Automation of our manufacturing processes is a increasing priority for our hardware and software teams as unit volume continued to increase.
This quarter our.
Development effort has expanded into testing and calibration equipment.
Lidar sensors are highly sophisticated instrument that required the expertise of our engineering teams to maintain the required level of precision in all manufacturing steps.
By investing our time and resources are accustomed manufacturing solutions are scalable across different products maximizing production efficiency and minimizing physical footprint.
We remain confident in meeting our production milestones for the remainder of the year.
Last quarter, we announced our point cloud processing ASIC that we developed in house, specifically for our light us.
This quarter, we completed the engineering validation of this AC into our near arranged Nova product.
We have successfully integrated the new ASIC into our Nova B samples and began shipping units to our lead autonomous ground vehicle OEM customer.
We have successfully integrated the new ASIC into our Nova B samples and began shipping units to our lead autonomous ground vehicle OEM customer.
We expect our Nu X 90 product line to start shipping was this a six by the end of this year.
Across our automotive OEM customers, we're seeing increasing interest in protection solutions, and we are developing automotive perception software by leveraging our proven smart infrastructure software solutions.
Lidar sensors very in many different dimensions from scanning patterns to playing cloud density.
This has created the need for a plug and play solution that can easily integrated into the broader Adas software stack.
In addition, automotive Oems have the unique challenge of synchronizing multiple sensor types.
We're proud to be one of the core building blocks, providing valuable input data to help save lives.
Stay tuned for our further progress.
Our accomplishments this quarter are certainly worth highlighting.
But the record quarters like this what are just the beginning of our company.
We will continue to scale our business throughout the remainder of the year.
This year, there are a number of automotive programs progress.
We believe our extensive light our portfolio of short medium and long range Lidar in combination with our experience in executing automotive production program positions us to win additional series production of wars.
With that I'll turn it over to Mitch for details on our efforts with our customer programs.
Thank you Joon this quarter, our lead OEM production customer revealed the third contracted vehicle model plan to incorporate our lidar and you'll see a few more details in a few days.
Recent announcements such as this one has led to accelerated interest from major car Oems competing in the U S market.
The rates for safe autonomy is really front and center now, especially here in the U S market.
Outside of China. The U S market continues to be the biggest for the level, two plus and level three Adas feature set.
This quarter, we received an RFID from one of the largest automotive Oems in the world. This RFID was specifically driven by the U S arm of this OEM.
Another strong indication that the U S market competition is pressuring international automakers to consider their U S offerings to include Lidar for their nextgen level, two plus and level three Adas systems.
For our existing RFID is an RF skus, we completed multiple on site technical reviews this quarter with several top 10 Oems.
Specifically, we are in the final round discussions with what we believe to be the largest open automotive Oems serious production award this year.
Echoing John's comments earlier, we are uniquely positioned to win because of our experience what launching at a north American OEM General Motors, and our strong partnership with Quito manufacturing.
Our industry, leading form factor for behind the windshield integration, coupled with our multi year journey down the cost walk past affords us the opportunity to really be in the final sourcing conversations across multiple Oems.
When we get to this final point and major source things I remain confident that we really have built everything from our technical prowess to our commercial strategy to our tier one partnership the strongest in this industry to match. What these customers are striving for and result in positive outcomes.
For Sept on for the Oems and ultimately for the consumers that will become safer and more comfortable by the Sept on Lidar enabled features.
I'm very hopeful that in the near future, we will be announcing our lidar will be used on even more American cars and trucks.
On the smart infrastructure side, we had record level of shipments to our largest commercial contract in the tolling application.
Which we believe to be the largest for this type of Lidar application.
In tolling, our lidar sensors enable free flow tolling without the need for human assisted tolling lanes.
Our sensors are also used to measure traffic data and incorporate road usage data for predictive analytic applications like road maintenance optimization.
The biggest advantage of white light hours worked better than cameras is that traffic data data can be measured at night and during inclement weather conditions.
Further our lighter has the ability to detect the number of actuals of vehicles, passing through as well as taking detailed height measurements.
These features help systems integrators improve on billing and improved safety in areas, where their hate clearance requirements, such as bridges and tunnels.
Our light ours are currently being deployed across the U S and we're in discussions to expand into additional states and countries over the next six to 12 months.
Finally, I'm happy to report that we recently received our first production order for lidar installations across multiple airports in the U S.
This is an emerging application for our products and we look to share more information with you in future announcements.
Next I'll turn it over to haul.
Thank you Mitch starting with our second quarter results total revenue for the quarter was $2 $8 million, an increase of 9% compared to the prior year period, and 88% compared to our previous quarter.
Product revenue was $2 8 million in your record for the company, an increase of 92% compared to the prior year period, and 123% compared to our previous quarter.
Our strong product revenue growth was driven by an increase in our average selling price for commercial deployments and a product mix shift more in favor of smart infrastructure.
There was minimal development revenue, which is based on timing of completion on all outstanding projects.
We achieved a record gross margin of positive 15.6% on a GAAP basis.
Primarily driven by revenue mix chapter training, Automotives, and smart infrastructure customers and fixed cost leverage on a record level of unit shipments.
As our sales volume shifting in favor of automotive OEM customers for the remainder of the year. Our E. S. P is expected to decrease as incremental production milestones are met.
We began to sell at production volume prices as.
As a result, we expect gross margin to decrease in the short term followed by a rebound as unit volumes grow and economies of scale is achieved.
Second quarter GAAP net loss was $14 2 million or nine cents per share basic and diluted non-GAAP net loss was $11 8 million or <unk> <unk> per share basic and diluted.
Second quarter non-GAAP , adjusted EBITDA was negative $12 6 million.
As of June 30th.
2023, and we had available liquidity of approximately 168 billion.
Total available liquidity consists of approximately 70 million in cash and short term investments and a commitment to purchase up to 98 million in equity to Lincoln Park capital.
And with that I'd like to open the call for questions.
Thank you we will now be conducting a.
Question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Thank you.
Our first question comes from Matthew.
<unk> with Maxim Group. Please proceed with your question.
Hey, Thanks for taking my question.
I was I wanted to touch on.
You talked about.
So kind of the gross margin dynamics, we should expect through the balance of this year.
In terms of gross margin.
Scaling back up.
Thats automotive volumes.
Ramp up are you sort of able to get there on your existing OEM relationship or do you expect you need.
More volume from additional wins to sort of get to a you know sort of high volume expected gross margin and to the extent that you could.
What kind of margin range can we expect debt at maturity.
Yeah, Hey, Matt Thanks for the question Yeah.
Short answer is that yes, we can get there from our existing contracts with that with G. M. Obviously more units will be helpful.
But we do expect to get to the mid Forty's gross margin.
Somewhere around 2025 ish.
It depends on volume obviously.
Got it Okay. That's helpful and then in terms of the.
In terms of the outstanding decisions that take your.
Expecting to be made I guess through the balance of this year.
Can you give us some.
Sense of.
Do you feel you have a leading position in some or a number of them. How many are you working towards just any more color you could provide on what you're working on today.
Yes, Matt this is <unk>. So I made some comments on that earlier. So we're in the final round. It at what we believe to be the biggest automotive opportunity to be sourced this year.
Yes of course, we are hopeful we're in a leading position.
Because of our experience on the General Motors project, I'm, working with Detroit Oems and our partnership with Quito. So we're in good shape.
And then yes, we are in and in you know.
Final rounds at multiple Oems is what I mentioned in.
I think you know.
I think the comments are the same there everyone values the relationship with Quito.
The technology evolution from our lead program at G M.
And.
We're gonna be one of the leaders in this space. The next few years.
Got it.
And maybe last question for me on the Smart tolling.
Contract that I think we've talked about them over the last quarter.
I think we talked about there being potential for expanded scope within that contract.
It sounds like it's progressing relatively well from your comments, but just curious if there is.
If there is opportunity for expanding that scope.
In 2024 or <unk>.
How we should be thinking about.
Timing of that.
Yeah. Good question, we did recently meet with the executives from this lead customer.
We only have a small fraction of their available market share even in the U S.
So we did talk about those expansion opportunities both in the U S and abroad Theres some opportunities in eastern Europe and Southeast Asia.
It should be coming in early 2024 as well. So we think that business can be four or five fold the current contract and in the short term.
Great. Thank you.
Thank you.
At this time there are no more questions I would like to turn the floor back over to <unk> Xu for closing comments.
Actually I'll I'll actually it looks like there doesn't question and Oh.
Policies, they just joined in.
Alright. Our next question is Richard Shannon with Craig Hallum Capital. Please proceed with your question.
Yeah.
Well, thanks, guys for taking my questions. I guess, you have to signal a few times to get one ends, but I guess I just need.
Thanks.
Thanks, Eric.
Hi.
Lets see here a couple of questions from me I may have missed the comments and I can't remember the key vehicle or niche, but I think you talked about units doubling here in the next couple of quarters was that specific to the automotive Tam or to the total business.
Yes, I believe it was hey, Richard This is Matt I think it was in june's commentary about doubling our automotive volume shipments each sequential quarter the rest of the year. So.
So thats specific to the automotive OEM business that we have.
Okay, and you've talked about in the past related to your your early first a major automotive win here.
You talked about kind of having 10000 plus units in the in the order book here would you update that number is it sounds like it could be more like 20000 or do you want to update us on how we should think about that number.
Yeah.
No we're going to keep that number for now.
Okay fair enough.
So you Didnt update us on the yearly guidance number, which I'm, assuming you still want to keep in place I think 15 to 20.
So with a fairly good number for the second quarter in automotive doubling what does that say about.
The smart infrastructure business was this a large order for filling in the second quarter and then waiting for some of these new orders that come in airports are totally or how do we think about the progression of that.
Automotive segment here.
Yes.
So we were not changing any guidance what are you first of all the smart infrastructure shipments that is largely from the tolling contract, which which we had since the very end of last year.
So most of that contract will be shipped.
Sure.
Third of it will be shipped this year and one third will be next year.
So the automotive units are going to increase in Q3 and Q4.
As we ramp up our wrap up the the current program.
Okay, Alright fair enough.
And then you talked about it I think this is the first time, you talked about an airport opportunity, which I think I have subsidy they already with there but.
If you think.
Especially you mentioned relative to your comments about the tolling opportunity hadn't got before.
To five X multiplier effect, if you can get more share or get more international business. There. How do we think about the total airport opportunity over couple of years period of time relative to the opportunities you have in tolling is a commensurate or one much larger than the other.
Yes. Good question I think at the beginning they are commensurate with the tolling application Theres, probably one to two dozen major airports that are strongly considering adopting lidar technology, but then there's probably also a dozen applications within the airport itself.
So it's going to start off in a few thousand unit range here at the beginning.
Okay.
Okay.
Fair enough.
One last Big picture question for me just related to your large.
Automotive customer GM.
I think there is a well known contract out there with another smaller OEM with a public Lidar company that's had a delay in deploying its a lidar do.
Due to some software somewhere in that in the system there.
I'm wondering if you can make some comments about how you see general motors dealing with.
The software and integration of all the other sensors you can make up the cohesive system.
And to what degree are you seeing any issues that they may be having or seemed to avoiding.
It'd be great to hear please.
Okay.
Sure, Yes, I think Theres a couple of different approaches out there amongst the Oems want is they do all the sensor fusion and perception software in house, which is the case for general Motors and some smaller Oems opt to buy pieces of the perception software from the sensor providers.
As the case with a few of our competitors and I do think that that creates a bit of a risk. When there are software issues. They can't be solved in house by the OEM. They have to be solved together with these smaller supplier companies. So I think I think that's what we've witnessed in that case that you're talking about and <unk>.
Just to general Motors.
Again, they do all of the sensor fusion and perception software in house. So they have a lot more control a tie.
<unk> grip on the end results so.
So I think that's maybe why you haven't seen similar issues publicly from general Motors.
Okay Fair enough I appreciate all the detail on this that is all from me guys. Thank you very much.
Thank you. Our next question comes from Gus Richard with Northland. Please proceed with your question.
Yes, thanks for taking my question.
Could you give us the mix between infrastructure and auto in the quarter in terms of revenue.
Oh, Yeah, Hey, guys and this is how the unit mix, it's about a two third one third two third automotive one third.
Smarting from.
Okay got it and then you had a couple of site visits.
I know your customers.
Customers are going through their process.
Can you give us a little bit of a sense of.
Sort of what they need to do to sort of come to a conclusion and sort of what do you think the timing of decisions are for the people you're talking to.
Yes, that's a good.
Question.
Gus this is Mitch.
So the timing for the biggest opportunity is probably the quickest I would say within the next couple of months.
There will be a decision it's quite a lengthy process inside the Oems theres nothing unusual this time around I think we experienced a similar timeline with our initial contract. So we kind of know the process.
And again Quito as part of this process as well as our preferred tier one partner.
Some of the other opportunities.
Be closer to the end of the year.
For their decisions.
Again, nothing out of the ordinary on the processes. These these typically take.
Six to 12 months.
Got it and then.
In terms of your ability to ramp output.
Do you see any constraints.
In the near term or are you getting everything.
Ducks in a row to ramp as your volume increases.
Yes, I think we of course, we have had challenges.
That's the fortunate position we're in as we have Quito, helping us with the supply chain. So they are really helping us put everything in order we've met all the deliveries to the OEM at this point.
You know were not very high on their concerns list. If you look at things like Altium battery packs I think those are a lot [laughter].
That higher concern than anything like a step down later, yeah and Jim here.
To supplement what Mitch said you know I.
I did mention that a lot of the engineering effort within the company is slowly but surely are emphasizing the production efficiency production tooling manufacturing automation. All of these efforts are actually ongoing and will continue to go.
As the volume cranks up so all of those are you know a very fortunately for us it will be taken care off.
Got it. Thank you that's very helpful. I think that's it for me.
Thanks, guys.
Okay.
Thank you now I believe that there are no further questions at this time I would now.
Like to turn the floor back over to you and Pete for closing comments.
Yeah again, thank you everyone for attending this call and it's quite a meaningful quarter for us and exciting time for <unk>.
As I said this is just the beginning there'll be more a lot more to come so have a great day everyone. Thank you.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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Uh-huh.
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