Q2 2024 Luminar Technologies Inc Earnings Call

Unknown Executive: will open up the call to Q&A. Our Q&A session will primarily consist of questions from the institutional analyst community. To ensure we're addressing as many as possible, we would ask the analysts to limit their questions to one with one follow-up. Before we begin the prepared remarks and Q&A, let me remind everyone that during the call, we may refer to GAAP and non-GAAP financial measures. Today's discussion also includes forward-looking statements based on the environment as we currently see it, and as such, they include risks and uncertainties. Please refer to our press release and our presentation for more information on the specific risk factors that could cause actual results to differ materially. With that said, I'd like to introduce Luminar's founder and CEO.

Our Q&A session will primarily consist of questions from the institutional analyst community to ensure we're addressing as many as possible. We would ask the analysts limit their questions to one with one follow up.

Before we begin the prepared remarks, and Q&A, let me remind everyone that during the call. We may refer to GAAP and non-GAAP financial measures. Today's discussion also includes 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 presentation for more information on.

Specific risks risk factors that could cause actual results to differ materially with that I'd like to introduce luminaries founder and CEO Austin Russell.

Austin Russell: All right. Hey, guys. Can you hear me?

Alright.

Okay.

All good Austin.

Unknown Executive: Okay. Everything is all good, Austin. Awesome. Well, well, thanks, everyone, for joining our second quarter business update conference. So today we're actually in Boston at our newest office for a specialized chip subsidiary, Luminar Semiconductor, Inc., which is just 10 minutes down the road from our current receiver, R&D, and fab location we own. So, we shared this news a little bit last week regarding the... We've helped grow our semiconductor business overall to break even status on our overall patent profitability. But that's not what we're here to talk about today.

Austin Russell: Well, thanks, everyone for joining our second quarter business update conference call.

So today, we're actually in Boston at our newest office for specialized chip subsidiary Luminaire Semiconductor, Inc, which just 10 minutes down the road from our.

Kurt receiver R&D and fab location would be boats into 2021 so while we shared this news.

Little bit last week regarding the acquisition.

Sure.

Austin Russell: Today, we've signed a definitive deal with our bond investors for Luminar to be able to produce and restructure our outstanding debt, exchanging around 422 million in notes for 270 million in bonds and pushing out their maturity for 2020. We've heard feedback and know how important that topic was for some investors, de-risking the business, so we can realize our full upside. And this is our Additionally, the investor agreed to provide Luminar with $100 million of new non-dilutive debt capital.

Austin Russell: Combined, this gives us the resources and runway to be able to execute on the opportunity to realize our full potential. It's a huge vote of confidence that Luminar is not only here to stay as a cornerstone of our industry, but that we can thrive throughout the decade. And we'll let Tom provide more details on the deal. But, for today, we're going to try something a little bit different.

Austin Russell: I've heard a lot of questions, you know, around the fundamentals of Luminar, and I think people could use a reminder as to why we're all here and kind of going back to basics. So, I'd like to take a few moments to talk through some of the industry dynamics and the thesis of Luminar, including some specifics on our business, technology, and what makes us so unique and best positioned to be able to capitalize on this new era of assisted and autonomous driving.

Austin Russell: Going back to basics may normally be out of character for myself, but I think it's important that we set the record straight as to where Luminar and the broader industry are currently. So, to kick it off, I'd first like to say that it's an incredibly exciting time here at Lippincott, and we are at the forefront of this new era of safety and autonomy for drivers around the world being ushered in. And over the course of the past decade, the opportunity around the autonomous vehicle industry has led nearly every major technology company and automaker.

Austin Russell: And autonomous driving is one of, if not the most significant applications of AI into the real world to be able to make possible. With that said, of course, realizing the benefits of autonomy has been one of the greatest technical challenges mankind has faced since the US delivered on the Apollo space program in 1969. Go get it.

Austin Russell: So realizing the full potential required radical innovations in many areas, from LIDAR to AI, to become a reality. So we can separate this challenge into different levels of autonomy and two district attempts, two distinct trends. One is enhancing drivers, and the other is, So while most autonomous vehicle companies have generally been focused around replacing them, Blumenauer's thesis and corresponding product technology have always been focused around enhancing drivers through autonomous and safety features on existing production vehicles, rather than going all out for driverless.

Austin Russell: You probably know about the different levels of autonomy, but as a refresher, we'll briefly explain them. Level zero through two is what the majority of automakers are shipping today. This includes both basic active safety features like automatic emergency braking all the way to lane. At these levels, the driver must remain attentive at all times and is ultimately responsible for driving the vehicle.

Austin Russell: And this is generally enabled by existing camera or radar technologies that have become widely standardized by the industry over the course of the past. There's a strong desire for automakers to begin to realize some of the benefits of autonomy before the higher levels, which is where LiDAR comes into play. This is a fundamental driver behind many of the existing partnerships, as well as the automaker dialogues.

Austin Russell: Our companies recognize that consumers are asking for the most advanced safety and technology. Meanwhile, regulators at the same time at NHTSA have recently announced a mandate for all new vehicles sold, at least in the US, to begin meeting these dramatically heightened safety standards starting in 2020. In automotive years, by the way. Basically right around the corner.

Austin Russell: And we've successfully demonstrated how we're uniquely able to meet these new requirements at speed and at night and are not aware of any other technology that has been able to do so. Our claims are supported by third-party sites, including one from Switzerland. The World's Largest Second Reinsurer that we presented at, Knowing these exact distances to objects is what makes LiDAR so special as compared to legacy camera-based technologies, which effectively have to guess where objects are. The driver has to always be paying a constant constant.

Speaker Change: As reminder, lidar is able to uniquely measure the exact distance of objects in three D. Using laser pulses between the sensor and the object of the road and in our case, we're able to do this millions of times every second.

Knowing these exact distances to objects is what makes a lidar so special as compared to legacy camera based technologies, which effectively gaps where objects of art in three D by extrapolating it from to the images.

Sometimes cameras are right and sometimes the wrong.

Austin Russell: And when it comes to safety critical application.

Speaker Change: That's why when Youre using camera based technologies for our two applications are in that range.

Austin Russell: The driver has to always be paying constant attention ready to take over any given moment.

Austin Russell: From an active safety standpoint, it's also part of the reason why we still lose over 1 million lives every year to vehicle accidents at a global scale, which cameras radars alone have not been able to prevent.

Speaker Change: The enhancements of Lidar also become even more apparent at night. So it's a lidar image looks exactly the same and all kinds of conditions. The camera based technologies experienced significant performance degradation at night and other kinds of incremental weather conditions.

Austin Russell: So moving on from the basics of LiDAR and more fundamental assisted driving features, the next phase of evolution in the industry is to begin to introduce Level 3 autonomous driving. So overall, this trend has already started with some of the higher-end automakers who have upgraded their low-range LIDARs to our technology for higher speed levels we're driving at as an application, which enables us to put up to 17 times the average energy into the environment.

Speaker Change: So moving on from the basis of Lidar in more fundamental assisted driving features the next phase of evolution in the industry to begin to introduce level three autonomy that's driving heaters.

Speaker Change: Lidar is something that can enhance level zero there too it's widely understood by virtually all industry experts and automakers that long range wider as the fundamental requirements for operating autonomously, where the driver is no longer in control and responsible for them.

Speaker Change: The instantaneous supervision of the vehicle at least in constrained scenarios.

Austin Russell: Because we use this 1550 nanometer wavelength that's safe for the human eye, the increased pulse energy delivered translates directly to a dramatically better performance at a longer range for the 3D point cloud, making it all the more important.

Austin Russell: I'd like to dig into each of these factors, starting first with the, given how specialized in gas development and the Fabrication Experts. It was imperative for us to be able to find the relevant teams and companies that can design to our specification, fab the components, and in these cases, some of them are the only ones in the world that know how to do it to meet the required specifications for what we need.

Speaker Change: Alongside receiver chip in 2021, and freedom Photonics, the laser chip in 2022 was ultimately form the foundation for alumina, our semiconductor Inc.

Speaker Change: And of course with the recent addition of the chip packaging operation. We're here right now is <unk> latest edition, which continues to vertical integration trend.

Austin Russell: As a result, our product development and architecture approach drives structural technology from the chip level up, whereas our competitors are essentially built off the shelf lidars that have inherent performance. As a result of this success, we've now achieved an estimated external lifetime commercial program value in the nine figures from our internal forecast and break-even status on the bid. But attracting the best software talent for digital automakers can be quite difficult. And most automakers do not have an in-house solution in development to achieve advanced software capabilities and higher levels of autonomy.

Speaker Change: As a result.

Speaker Change: Our product development and architectural approach drive a structural technology advantage for the chip level, whereas our competitors are essentially built off the shelf lidar that have inherent limitations and.

Speaker Change: In doing this we've also ensured that technological stay sustainability of our moat by vertically integrating all these parts.

Speaker Change: As a further proof point some of our foundational technology breakthroughs, we've actually been quite successful in capitalizing on the IBM technology, we've developed for Lidar, even for other customers and applications with their semiconductors as well.

Speaker Change: Moving onto semiconductor Inc.

Speaker Change: I was calling LSI now has over 100 unique customers, including top technology companies defense contractors aerospace businesses, among others with our chip technology lives everywhere from satellites to Gpus right now.

Speaker Change: As a result of the success. We've now achieved an estimated external lifetime commercial program value in the nine figures from our internal forecast and breakeven status on the business.

Speaker Change: This is the first major step in our path to profitability with the next major milestone being at the lighter level as we ramp up series production over the coming quarters with Volvo.

Speaker Change: Zooming back out I'd like to talk also about software for a moment.

Speaker Change: So on the software and AI front, we think it's clearer than ever that the artificial intelligence capabilities are there to be able to help unlock the next levels of autonomy and with AI, It's really all about the data and the quality of the team.

Speaker Change: So for each of our dozens of customer deployments of wider it's generally paired with a matching software and AI system screened on moving our three D data.

Speaker Change: AI models developed on a wider or a big leap forward compared to traditional models that are powered for Judy data because it's true ground truth data. So it's eliminating the guesswork as to where the optics are and achieved an accurate true to life model.

Speaker Change: So at an industry level some of the most advanced vehicle Oems do have their own extensive software.

Speaker Change: But attracting the best software talent traditional automakers quite difficult and most automakers do not have an in house solution and development and to achieve the advanced software capabilities and higher levels of autonomy.

Speaker Change: So we predicted this wasn't the case quite early on in <unk> and in 2017, I'd kick started our AI and software initiatives centered around the required lidar related software in order to help assist automakers and their developments.

Speaker Change: All of our technologies have been primarily developed in our Silicon Valley offices, as well as Munich, Germany, and we work closely with our Silicon Valley Technology Development Partners software development partners ranging from scale AI to apply an intuition.

Speaker Change: Yeah.

Speaker Change: So our work with a few of the more technologically advanced automakers it started.

Speaker Change: Earlier on including companies like Bolo Mercedes at Nissan.

Speaker Change: With some software all they do although they do much of their software in house being some of the leading player that said again, the vast majority of the automakers the industry don't have a viable solution.

Speaker Change: And preferring to the fast follower approach as they've done in other kinds of advanced technology adoption cycles.

Speaker Change: So this embedded software capability for aluminum not only helps expand our addressable market.

Speaker Change: From a lidar standpoint.

Speaker Change: Content value and margins per vehicle, but also importantly enables our wide ought to be.

Speaker Change: Be able to reach the majority of the automotive market that otherwise wouldn't be possible without software it.

Speaker Change: It also further expands the stickiness of our product and boat.

Speaker Change: And we've really seen a developed fantastic partnerships over the years with top ecosystem companies, bringing from Nvidia to mobilize which allows us to collectively advance industry as a whole.

Speaker Change: These software capabilities make luminary unique in this respect and I'm proud to say that after five years of development. We recently launched our sensible software sheets suite shipping the first hit in Q2.

Speaker Change: We expect the initial shipments to major automakers to begin shortly.

Speaker Change: <unk> to be in their hands before year end.

Speaker Change: In recent history. We've also seen an increased demand for direct engineering collaborations with automakers as well as rfps for software capabilities from us.

Speaker Change: So our software and ecosystem strategy is not too dissimilar from the strategy that Apple happened early days in what Steve jobs as planned was for the initial iPhone launch.

Austin Russell: You know, it's all about getting disruptive products to market at a global scale and then, in subsequent years, building up the ecosystem around them. And really, we've taken a similar approach. And I truly believe that with the Volvo launch for our industry, this is truly the iPhone moment, you know, as the technology becomes widespread on a global basis for the first time and takes off a plethora of subsequent vehicle launches for us over the course of the next. In the near term, there are headwinds where automakers have faced timing and production ramp challenges for some new plans.

Speaker Change: All about getting the disruptive products to market at a global scale and then in subsequent years building up the ecosystem around them.

Speaker Change: The first product didn't even come as you remember what the first iPhone opens an app store.

Speaker Change: But importantly, as consumers increasingly realize the value that we'll be able to deliver with both software and hardware enhancements working in tandem. It ultimately kicked off one of the greatest technology revolutions of the century.

Speaker Change: And really we've taken a similar approach and I truly believe that with the global launch for our industry. This is truly the iPhone moment.

Speaker Change: As the technology becomes widespread on a global basis for the first time and kicks off a plethora of subsequent vehicle launches for us over the course of the next 24 months.

Speaker Change: Now with all of these tailwind technology advantages and industry success, you can see why we continue to be so excited here.

Speaker Change: But nevertheless, I think it's important to take a step back and recognize despite this positive outlook for lidar being arguably greater than ever over the long term.

Speaker Change: As it evolves to become a more foundational part of the broader automotive technology industry in the near term there are headwinds, where automotive automakers have face timing and production ramp challenges for some new platforms and while this is not related to illumina or lidar, specifically, it's widely understood that new automotive platforms industry, which would be used to introduce new kinds of technologies.

Speaker Change: This has generally been shifted out by around one to two years.

Speaker Change: And the reality is that the new vehicle platforms are incredibly complex on the supply chain software and engineering standpoint, and require more time than some of the automakers were originally targeting to begin with and to ramp deliberate scale. We've seen the effects of some of these delays across the industry and the downstream implications of alumina or if not then you need the most important provenance or the most prominent example.

Speaker Change: This is in the EV space, but it's also very important to note that when it comes to limit our technology, we are agnostic to the underlying powertrain in the car and where people oftentimes try to bucket. These technologies together with our lidar and he's theres actually no underlying technical correlation in fact, the majority of new vehicle platforms limit our planned into actually.

Speaker Change: <unk> combustion engine vehicle buried.

Speaker Change: In light of this our focus is to come not just in the long term, but also in the near term and we've taken two major actions direction. So as a result on the operation one on the operational side and the other is on the finance our balance sheet.

Speaker Change: So from an operational standpoint start off with the first one the focus was to start increasing the efficiency of our opex overhead now that we've already made the required technology investments and achieved the series production launch that we are all waiting for for years and are excited to succeed with that.

Austin Russell: And as part of that, we were moving towards an outsourced model for certain parts of our business with partners that were willing to dedicate the appropriate resources and action we took last quarter, which included a reduction in our internal workforce by around 20%. One major action that we took this quarter to save tens of millions of dollars, as an example of this, on product development costs, was to better unify the Autumn and Iris product families by increasing the percentage of shared components from a technical and supply chain standpoint between products and customers.

Speaker Change: And as part of that we were moving towards an outsourced model towards certain parts of our business for partners, who are willing to dedicate the appropriate resources and actions. We took last quarter and included a reduction in our internal workforce by around 20%.

Speaker Change: Additionally, we are actively tackling variable cost fixed cost overhead in order to ensure that we can maximize our success as we ramp the volume starts to really matter post SLP.

Speaker Change: The next step in streamlining the.

Speaker Change: The next step beyond that is also streamlining our product development processes among other things that we'll do it.

Speaker Change: Over the course of the coming quarters.

Speaker Change: One major action that we took this quarter say tens of billions of dollars. As an example of this on product development cost is to better unify the audit of Iris product family by increasing the percentage of shared components from a technical and supply chain standpoint between products and customers.

Austin Russell: This is reflected in a one-time charge in our financials that has some downstream non-cash accounting implications for the quarter that Tom will discuss in more detail. As I mentioned at the beginning of the call, today we signed a definitive agreement with the consortium of these bond investors to restructure the debt, provide new capital, and push out the maturity of these bonds from 2026 to 2030. Importantly, this gives us sufficient freedom to operate and thrive in a world that we described earlier as being characterized by one to two year delays in the ramp of new automotive production. Tom can get into a few more details on the details of the deal and the capital structure here.

Tom: This is reflected in a one time charge in our financials, but some downstream noncash accounting applications for the quarter, the Tom will discuss in more detail.

Tom: We will look to continue advancing our operational efficiencies as we achieve economies of scale over the coming quarters and bring down both overhead and variable costs, making it easier to ultimately achieve profitability on our journey.

Tom: So critically today I'm proud to say that we do directly tackling second topic as it relates to the balance sheet.

Speaker Change: As I mentioned at the beginning of the call today, we signed a definitive agreement with the proportion of these bond investors to restructure the debt provide new capital and push out the maturity of these bonds for 2026 to 2030.

Speaker Change: Importantly, this gives us the sufficient freedom to operate and thrive in a world where he described earlier has been characterized by one to two year delayed the ramp of new automotive production platforms and programs.

Speaker Change: While this is a major step in boto competence that enables us to responsibly invest and grow is not the last step that will take to support our capital structure.

Speaker Change: And <unk>.

Speaker Change: Importantly top to get into a few more details on the details of the deal and the capital structure in his section.

Speaker Change: So I would like to round out my comments with a few updates on some of our extensive industry partnerships as well and some new developments.

Speaker Change: So closing loop on Volvo as you know they began their startup production this past quarter for the new platform in the flagship exciting following our previous announced but aluminum our day that we hadn't started our series production or sop piece of them.

Austin Russell: We've since successfully ramped up our production to meet all key Volvo deliverables, and we're looking forward to seeing them continue to scale. So with that moderated ramp, as would be expected, it will really take until next year before you start seriously seeing the big step up in revenue from this ramp. So as we scale up, you know, we've been realizing substantially higher yields, lower supply chain costs, and improve overhead absorption. And, of course, the marketing benefit that comes when Illuminar gets exposure to consumers for the first time as they'll see all the technology prominently featured on the EX90's roofline across the globe.

Speaker Change: We have since successfully ramped up production to meet all key Volvo deliverables, and we're looking forward to seeing them continue to scale.

Speaker Change: In the last earnings call. They provided some commentary that the initial ramp will be a little more moderated than their initial target, but nevertheless, its still growing exponentially.

Speaker Change: We expect to ship more sensors in the second half of this year than all of our prior years as a public company Smart <expletive>.

Speaker Change: As noted in the commentary series production Asps are a bit lower than our sample asp's. So with that moderated ramp as would be expected. It will really take until next year. When you start seriously seeing the big step up in revenue per Tran.

Speaker Change: So as we scale, we've already started to see some of the benefits.

Speaker Change: Thats it.

Speaker Change: The economies of scale and the production deployment.

Speaker Change: And imminently Youll start to see our technology on the road in a more widespread capacity for the first time at a global scale, which is driving a virtuous cycle for us across multiple domains.

Speaker Change: So as we scale up.

Speaker Change: Been realizing substantially higher yields lower supply chain costs improve overhead absorption and of course, the marketing benefit that comes with aluminum exposure to consumers for the first time I saw sealed technology product feature on the Es ninety's roofline across the globe.

Austin Russell: We're proud to be enabling the first global production consumer vehicle with LiDAR as standard on all vehicles and are looking forward to an additional SOP in China by year end, which will further drive vehicle volumes for them and product sales for us. Excited, uh, just got a note of being able to do a test drive to go check it out. So excited to be able to do that. They've continued to impress me with their assisted and autonomous driving capabilities, and I'm as excited as ever about their vision to standardize the technology across all vehicles they produce to realize the benefits of improved safety.

Speaker Change: We're proud to be enabling this first global production consumer vehicle with Lidar and a standard on all vehicles and are looking forward to an additional upcoming sop in China by year end, which will further drive vehicle volumes, but them and product sales for us.

Speaker Change: So moving on to Mercedes we're moving full speed ahead, and recently have made some improvements into our product roadmap as I mentioned will be unifying our iris platform with a greater percentage of proponents of content value share, which we should expect to substantially reduce development costs and the timeframe for bringing this program a lot.

Speaker Change: So we're excited about what the future holds for the partnership and look forward to updating further as we achieve further milestones.

Speaker Change: Our partnership with Polestar also continues to progress well and they remain on track to watch their first vehicle with our Lidar. The Polestar 40 next year now of additional modestly to do incorporate within our technology for release after that.

Speaker Change: Excited just got a note of being able to do a test drive to go check it out so excited to be able to do that also soon next.

Speaker Change: Next month.

Speaker Change: So with Nissan we have also recently completed the most recent phase of our technical collaboration and our scoping out the next phase of our work together.

Speaker Change: Continue to impress me with their assisted and autonomous driving capabilities and I've been excited as ever about their vision to standardize the center or.

Speaker Change: The technology across all vehicles, they produce to realize the benefit of improved safety and autonomy.

Speaker Change: Meanwhile, our partnerships with companies like Nvidia and mobile I continue to be as strong as ever as we make forward movement in our joint systems development. These ecosystem partnerships and collaborations are highly complementary and will drive further acceleration of our long term success as we designed a new vehicle platforms together and working together.

Speaker Change: As it relates to other automakers is meaningful to note that the majority of them already have Walgreens lidar as a requirement planning into the roadmap.

Speaker Change: Keep in mind the vehicle program cycles can last as long as a decade. So this is not like the consumer industry or smartphones for new technologies are introduced over here.

Speaker Change: These vehicle platforms and the automotive technologies and certification that goes into it is highly complex People's lives are at stake in this industry. So it moves at a very deliberate pace.

Speaker Change: Very high barrier to entry, but also very high Bill your desks.

Tom: So we're actively engaged with these various automakers and the majority of major automakers. Halo is what will enable this technology to become widespread. So that's the big update. A great update on where we are at Luminar. Let me start by reviewing our Q2 financial results. Revenue for the quarter was $16.5 million, up 2% year-over-year, but down 22% sequentially. Specifically, it resulted in a four million sequential decline in revenue, and our revenue would be roughly flat if not for this, and a ten million dollar contract lost the call.

Speaker Change: So we're actively engaged with these various automakers and the majority of major automakers at this stage and we look forward to updating with more specifics on new customer awards into the future.

Speaker Change: Before I close out my comments I'd also like to add that we're making great progress on the development of the Halo product, which as we discussed alumina date mixed rafik improvements form and size as.

Speaker Change: As well as cost.

Speaker Change: It is enabled to be seamlessly integrated into the vehicle, whereas the Iris product family was created to show the industry what was really possible.

Speaker Change: Hello is what will enable the technology to become widespread throughout the industry and we expect quite profitably as.

Speaker Change: As we accelerate the program will also be delivering samples now it's less automakers by year end so.

Speaker Change: That's the big update there.

Speaker Change: And with that happy to be able to turn the call over to Tom excuse me more details on the financials.

Tom: Go ahead, Tom. Thank you alright, Thank you Austin, Great update on where we are alumina, let me start by reviewing our Q2 financial results revenue for the quarter was $16 5 million.

Tom: Up 2% year over year, but down 22% sequentially as we previewed during our Q1 earnings call. We expected Q2 revenue to potentially be lower let me provide a bit more color on this.

Speaker Change: We saw unexpected monitoring ramp in series production standards or sales during the quarter. We are continuously meaningful those weekly production schedule and are prepared to ramp up our production as Volvo ramps up theirs as discussed on their most recent earnings call, although expects to ramp <unk> 90 production in the U S facility in the back.

Speaker Change: End of this year and early into next year, while production in their China facility will commence more towards the end of this year. Early next this represents more moderated ramp than we were initially anticipating but we remain confident in reaching targeted production levels next year.

Speaker Change: During the quarter, we've revised the product design and project scope for Iris plus with our lead customer to increase utilization of virus in the product architecture is often discussed earlier this move should improve operational scale and efficiency as well as de risk execution. This revision resulted in a largely noncash accounting adjustment.

Speaker Change: This quarter to both revenue growth gross law, specifically and resulted in a sequential.

Speaker Change: Sequential decline in revenue and our revenue would be roughly flat if not for this and a $10 million contract loss cost.

Speaker Change: For the quarter, we reported a gross loss of close to negative $14 million on a GAAP basis and about negative $12 million on a non-GAAP basis. Our gross wells. This quarter included about a $10 million contract losses that I just mentioned so excluding this contract as well as we would've been close to breakeven.

Speaker Change: Little less than a $2 million loss to be precise on a gross basis.

Speaker Change: This quarter over quarter improvement was helped by lower inventory charges scrap and other launch related charges from ongoing process improvement, including our manufacturing union or.

Speaker Change: Our change in cash during the quarter was negative $57 million an.

Speaker Change: An improvement from almost negative $72 million in the last quarter.

Speaker Change: We ended the quarter with $211 million in cash and liquidity, which includes marketable securities and our $50 million Undrawn line of credit it excludes the actions, which I'm about to discuss more detail that we announced today.

Speaker Change: During the quarter, we bring $19 million under our equity capital Finance program now, let me talk about the balance sheet actions, we announced earlier today.

Speaker Change: We announced that we entered into a private separately negotiated exchange transactions with certain holders of our existing convertible notes. These noteholders will exchange at a 35% discount $422 million of convertible debt due in 2026 in Q2 hundred <unk>.

Speaker Change: $74 million of new convertible senior secured notes maturing in January of 2013. Additionally, as a sign of their confidence in alumina. Our future. These investors are also providing a $100 million of new capital in the form of nonconvertible non dilutive senior secured notes this transaction will reduce.

Speaker Change: Our total convertible debt by nearly $150 million, while raising $100 million of new capital. We filed an 8-K after the close with further details on this transaction.

Speaker Change: This transaction is the first and most important step in improving our balance sheet over two thirds of our convertible debt maturing in 2026 has now been extended each of the next decade, while capturing the 35% discount and reducing our overall debt over the next two years, we will continue to chip away at the remaining 200.

Speaker Change: So of convertible debt that is maturing in 2026.

Tom: During last quarter's call, we estimated that we needed approximately $200 million of additional capital to reach profitability. Half of this additional capital has been raised as part of this transaction. Our current top priority is to improve our sensor unit economics and reduce our COGS overheads to reach positive growth, partners to improve contractual economic terms, and we're making good progress on this. We plan to update investor students with more precise timing of when we expect to achieve positive growth.

Speaker Change: During last quarter's call, we estimated what we need approximately $200 million of additional capital to reach profitability. After this additional capital has been raised as part of this transaction.

Speaker Change: We have multiple alternatives to raise the remaining $100 million.

Speaker Change: And we will do so in a thoughtful way that minimizes the ultimate ultimate dilution and economic impact to our company in the meantime, we expect the additional capital raised in connection with this transaction to extend our liquidity runway from the end of 2025, so at least the end of 2020.

Speaker Change: Let's talk now about our cost reduction efforts and path to profitability in.

Speaker Change: In May we announced shortly after we reach Volvo SLP.

Speaker Change: A major cost restructuring effort that will include outsourcing more of our industrialization efforts to existing partners like keeping this.

Speaker Change: This will allow us to move faster with our product and industrialization efforts streamline operations and most importantly increase our path.

Speaker Change: Are the speed of our path to profitability as a result, we have to make some tough decisions, including reducing our workforce by approximately 20% as well as other cost reduction efforts.

Speaker Change: In total we estimate at approximately $80 million run rate savings to be achieved with these actions and we are on track to achieve this target by the end of this year, we have largely completed our head count reduction plan and continue to complete other actions like contractor reductions and facility sublease.

Speaker Change: Our current top priority is to improve our sensor unit economics and reduce our Cogs overheads positive gross margin as discussed earlier, we expect our gross loss excluding the contract loss, we announced earlier to increase over the next couple of quarters since our series production sensor ASB.

Speaker Change: Is lower now and we need a bit more time and production scale to reduce our sensory cost match, we expect to achieve positive same center economics and gross margin sometime next year. After we ramp series production further.

Speaker Change: Further to achieve this we are actively engaged in real time negotiations with key partners to improve contractual economic terms and we're making good progress in this effort.

Speaker Change: We plan to update investors soon with more precise timing of when we expect to achieve positive gross margin.

Tom: Now let's close it out with guidance for the remainder of this year. We expect our Q3 loss to increase versus Q2 levels of $2 million, excluding the contract loss I referenced earlier. A slower production ramp-up over the next couple quarters, while negative for revenue, is actually helpful for our gross loss and net cash spend level, given our current pre-scale sensor economics. In the coming days, we expect to file another supplement to increase this to fund the incremental interest expense as part of this convertible debt transaction we just announced.

Speaker Change: Now, let's close it out with our guidance for the remainder of this year as well as the next quarter.

Speaker Change: Due to more moderated.

Speaker Change: Ramp up in series production, we're pushing out our prior guidance to reach a quarterly revenue run rate in the mid $30 million range from the second half of this year to next year for Q3, we expect revenue to be in line to modestly higher versus Q2. This reflects a sequential increase in series production revenue.

Speaker Change: Offset by a potential decrease from a non series production customer contracts. We are currently renegotiating.

Speaker Change: We expect our Q3 loss to increase versus Q to Q2 levels of $2 million, excluding the contracts loss I referenced earlier, a slower production ramp up over the next couple of quarters, while negative for revenue is actually helpful for a gross loss and net cash spend levels given our current pre scale sensor economic.

Speaker Change: Consistent with our prior guidance, we expect to end the year with greater than $250 million in cash and liquidity.

Speaker Change: This includes both marketable securities as well as our $50 million line of credit. This increased guidance reflects a $100 million in new capital.

Speaker Change: It is coming in as part of this transaction announced earlier net of fees and OID and the higher interest expense.

Speaker Change: I would also note that we have $131 million remaining on our equity finance program in the coming days, we expect to file another supplement to increase this to fund the incremental interest expense as part of this convertible debt transaction. We just announced we are also evaluating under various stress case scenarios, whether we need to hold a special shareholder meeting in the near term.

Tom: We're also evaluating, under various threat case scenarios, whether we need to hold a special shareholder meeting in the near term to increase our authorized share count given our recent and contemplated balance sheet action. I have no doubt that the product talent and work ethic to succeed exists at this company, and we will all capture it. Rest assured, we at Luminar are laser focused on making this company a success. I also wanted to thank my wife and family for moving out with me in the middle of COVID to join this job over four years ago and putting up with a suboptimal version myself as we kind of got earnings in this balance sheet restructuring over the finish line here. With that, Aileen, I think we're ready for Q&A.

Speaker Change: Term to increase our authorized share count given our recent and contemplated balance sheet actions.

Speaker Change: To conclude I want to thank the broader alumina our team I just celebrated my fourth anniversary at the company and been amazed at how much we've accomplished in my short time here, we've achieved a lot as an organization and we have a lot more to improve with continued excellent execution I have no doubt that the product talent and work ethic to succeed exists at this company and we go.

Speaker Change: While capturing rest assured we alumina are laser focused on making this company a success.

Speaker Change: I wanted to thank my my wife and family.

Speaker Change: Moving out with me in the middle of Covid to join this.

Speaker Change: This job over four years ago, and putting up with a suboptimal Virgin myself.

Speaker Change: Got it got earnings in this balance sheet restructuring over the finish line here in the near term with that alien I think we're ready for Q&A.

Speaker Change: Fantastic. Thanks, Tom all right, we're going to hand, it over to our analysts community. Our first question is going to come from Josh Burkhalter at TD Cowen.

Josh Burkhalter: Hey, guys. Good afternoon, and thank you for taking my question.

Josh Burkhalter: Wanted to ask about the Volvo ramp.

Josh Burkhalter: The slower ramp than expected was that related to anything with the software issues.

Speaker Change: Pretty public regarding some of the features not being turned on at the initial launch and maybe you can just provide some background and I think that's an area of concern for investors given some of the comments that were made last year, and then sort of a bumpy rollout of some of the software issues with the initial launch of the car.

Speaker Change: Yes.

Speaker Change: <unk> once again.

Speaker Change: It's unrelated to the software any automotive launch that you have there as well.

Speaker Change: We couldn't be bumps in the road and it's not a it's not going to go is to me that's like everybody with hubs.

Speaker Change: It's taking a little bit longer, but they are ultimately going to reach those.

Speaker Change: Production levels and May take just a quarter or two longer from.

Speaker Change: From our perspective, we're meeting their weekly production targets and as they ramp up we are ready to ramp up. So there are certain things we can control certain things, we can't but we're ready to go and Volvo remains optimistic that they're going to get to ultimately where they want to be from a production level.

Unknown Executive: It's all supply chain stuff.

Speaker Change: It's all supply chain stuff.

Speaker Change: Got it thank you and then I'll.

Speaker Change: Wanted to ask about some of the component changes it sounds like an iris plus could you provide some background on why those changes are being made any performance or commercial implications of the change roadmap with Iris Boston and bigger picture, how many initial engagements with Halo probably more importantly, thank you.

Unknown Executive: Yeah, so basically what we're doing is utilizing more of the Iris architecture for Iris Plus. That's going to allow us to capture more efficiencies, both in the industrialization process, as well as once we get to series production for that product. I think as Iris comes together, it's performing better than expected and will allow us to borrow more of that technology to kind of de-risk Iris Plus.

Speaker Change: Yes, so basically what we're doing is we're utilizing more of the Iris architecture for Iris plus that's going to allow us to capture more.

Speaker Change: Patient fees, both on the Industrialisation process as well as ultimately once we get to series production for that product I think as Iris came together, it's performing better than expected and allow us to borrow more of that technology to kind of derisk the iris plus.

Speaker Change: The accounting wise this is very complicated it's multi year.

Speaker Change: Engineering work that we're doing and as part of that re scoping.

Unknown Executive: Accounting-wise, this is very complicated. It's multi-year engineering work that we're doing. And as part of that re-scoping, we had to take the accounting charges for this quarter that we talked about. But the underlying economics of the contract have not changed materially, and we actually believe that it's going to allow us to move more efficiently going forward as well as de-risk overall economics.

Speaker Change: We had to take the.

Speaker Change: Accounting charges for this quarter that we talked about.

Speaker Change: The underlying economics of the contracts have not changed materially and we actually believe that it's going to allow us to move more efficiently going forward as well as de risk overall execution.

Speaker Change: Alright, I appreciate it Tom afternoon, I'll hop back in the queue. Thank you.

Unknown Executive: Great. We will take our next question from John Babcock at Bank of America.

Speaker Change: Great. We will take our next question from John Babcock Bank of America.

Speaker Change: Hey, John.

John Babcock: Hey, guys. Thanks for taking my questions.

Speaker Change: Yes.

John Babcock: Just start out could you bridge, the new target for cash and liquidity.

Speaker Change: Two year old target.

Speaker Change: 150, there's $100 million in new capital coming in when you actually look at some of the OID as well as transaction fees. It's closer to 95, and then the incremental interest expense brings us to $91 50, plus 90 equals $2 40.

Speaker Change: Okay got you pretty simple none of them okay.

Speaker Change: Thanks, and then I guess.

Speaker Change: Just generally I mean, it does seem like you know the adoption of autonomous driving technology in cars has been slower than expected.

Speaker Change: Particularly in the North American and European markets.

Speaker Change:

Speaker Change: Can you just talk about how you what your plans are to drive growth from here.

Speaker Change: And why did that obviously, we've seen a number of vehicle models I mean, both Tvs, but also even nani these get.

Speaker Change: Pushed out.

Speaker Change: So if you could I don't know whether it entails maybe looking at opportunities and Oems in China, and perhaps trying to penetrate that market more or maybe looking at other sectors.

Speaker Change: Sort of you.

Speaker Change: You know kind of discussions you've had internally.

Speaker Change: Might help to drive volumes, you don't quite have what's kind of occurring.

Speaker Change: From a macro level.

Unknown Executive: No, it's a great question around that. And when it comes down to it, I think it's all just about the timing of the automotive platform for this, you know, as we had said during the call. I think it's well understood. And as you see, many of the EV companies that you know, the timeline for the new platform launches, which are generally used to introduce these new kinds of technologies, is pushed out on the order of about a year or two, you know, versus earlier in the 2020s here, as we sort through, as I said, supply chain software, all those other kinds of things that have to come into play.

Speaker Change: No. It's a great question around that and when it comes down to it I think it's all just about the automotive platform timings of this as we had said during the call I think it's well understood.

Speaker Change: Many of the companies that you know the timelines for the new platform launches, which are generally used to introduce these new kinds of technologies or pushed out on the order of about a year or two.

Speaker Change: Versus earlier in the 2000 Twenty's here.

Speaker Change: The sore throat, you said supply chain software all those other kinds of things would have to come into play. So I think in this case, it's actually less about the capabilities that are being deployed.

Unknown Executive: So I think in this case, it's actually less about the capabilities that are being deployed and rather more about how they can get to market as quickly as possible with these new platforms. So that growth curve is still very much intact, and arguably even greater than ever. And when it comes to the midterm and longer term, it's really just the near-term headwinds that we're talking about here that, as people

Speaker Change: And rather more about how they can get to market quickly possible with these new platform. So that growth curve is still very much intact, and arguably even greater than ever and when it comes to the determined Walker term, it's really just a near term headwind that we're talking about here then as people.

Speaker Change: And get these to S P.

Speaker Change: That makes it so that's the focus there of course from a customer standpoint.

Speaker Change: And overall order book.

Speaker Change: That's really where you start to see in.

Speaker Change: In the latter half of this decade.

Speaker Change: It really exponentially accelerate it didn't take off.

Speaker Change: Even with our existing customers.

Speaker Change: Tens of billions of dollars.

Speaker Change: <unk> opportunity for us to be able to achieve with them alone much less with new customers. So at this point, it's really all about execution and how we're able to do that how were able to successfully scale with that.

Speaker Change: And I would just say in from a product standpoint, Halo was really the product that is going to be able to enable that to be possible and that's where.

Speaker Change: We've received an incredible amount of excitement and interest from automakers with regards to next generation technology in particular in light of also some of the new safety and Adas regulations as well as just the overall notion of being able to have increased performance lower cost and even better integration across platforms.

Speaker Change: And John we're focusing on the things we can control.

John Babcock: The steps we took today with the balance sheet in terms of extending the maturities, bringing in more capital to gives us more time and more capital to kind of recognize that longer term growth, which is as strong as ever and then we're also looking to aggressively reduce our cost, but the fixed cost as well as our sensor economics to kind of.

Speaker Change: Get the profitability faster, even with less volume in the near term.

Speaker Change: Okay. Thank you I'll get back in queue.

Unknown Executive: Thanks, John. Our next question is going to come from Jesus Gonzalez Lopez at J.P. Morgan.

Speaker Change: Thanks, John Our next question is going to come from Haynesville comes off Lopez at Jpmorgan Hey.

Speaker Change: Hey, guys. Thanks for taking my question.

Speaker Change: She may have some several units this quarter just wanted to hear what the early feedback from Oems have been on this product and maybe what the per vehicle revenue opportunity for a second it looks like on a run rate basis.

Speaker Change: Yeah, I mean, the feedback has been incredibly positive all around there again and Thats, where obviously going into this there was a lot of skepticism.

Speaker Change: As women are going to be able to make it a series production are they going to be able to achieve these milestones are they going to be able to.

Speaker Change: Get their production facilities online or are they going to be developed.

Speaker Change: Global complex supply chain, and we were able to successfully make that happen and that from an execution standpoint, we've knocked it out of the park when it comes to those topics, but theres still a lot more work to do.

Speaker Change: And that's really where it comes to the operational efficiency in the past when it comes to scaling up production as well as being able to.

Speaker Change: Continued to advance the overall product roadmap that Macau beyond the initial wireless product. So that's the big focus now and the customer feedback continues to be that.

Speaker Change: Great technology, making.

Speaker Change: Making a huge difference in terms of what the take the opportunity gives them an autonomous driving opportunity is.

Speaker Change: They're happy to see us continue to hit those milestones and de risking. It overall I think in particular, the fact that we were able to hit series production and the S&P with Volvo setup.

Speaker Change: Setup shockwaves throughout the industry that was quite positive and when combined with the overall notion of as I mentioned some of them safety regulations and the other type of tailwind that are coming into play.

Speaker Change: Thats really helping drive some of the feedback that we're getting but it's also not just relevant for the ultimate autonomy use cases, but also the eat out and say hey use cases, they want to plan for.

Unknown Executive: The feedback that we're getting is that it's not just relevant for the ultimate autonomy use cases but also for ADAPT and safety. Jesus, I think the early reactions from the Sentinel kits we've been shipping as

Speaker Change: And so I think the early reactions from the central pit, we've been shipping has been positive as well too early to kind of quantify any potential economic impact of that.

Unknown Executive: Joshua, thank you so much. And then, if I can get one more question in, do you have any update on your insurance business or any of those other things you announced during investor day? Uh, we're making great progress there. I hope to talk about it more on our next call. But you know, our goal is to start writing insurance policies by the end of this year.

Speaker Change: Gotcha. Thank you so much and then one more do you have any update on <unk>.

Speaker Change: Our insurance business or any of those other things you announced during the Investor day.

Speaker Change: Making great progress there I hope to talk about it more on our next call, but our goal is to start writing insurance policies by the end of this year.

Unknown Executive: By the way, I realized, for the content value question, it's what we shared before. It's on the order of about $1,000, you know, for the United States. So, just at the US level. Perfect. Thank you so much.

Speaker Change: Awesome. Thanks, so much.

Speaker Change: By the way.

Speaker Change: For the content value question, it's what we shared before it's on the order of about $1.

Speaker Change: Okay.

Speaker Change: So just stay tuned we don't increase that overtime.

Speaker Change: Great. Thank you so much appreciate the time.

Speaker Change: Our next question will come from Richard Shannon at Craig Hallum.

Richard Shannon: Well, thanks, guys for taking my question here.

Richard Shannon: First one I wanted to touch on is the center economics.

Unknown Executive: I'll hit my video here.

Speaker Change: I'll hit my video here.

Speaker Change: Fair enough.

Speaker Change: On sensor economics here.

Speaker Change: Dressed this in the presentation I did come late into the call. So I'm not sure of your prepared remarks here, but wanted to get a sense of kind of the cost reductions you're hoping to take them up with year over what time period to what degree. This is renegotiated materials cost starts another design effects and then I assume this is on both Irish plus and.

Speaker Change: And hopefully to help out on that on the next Gen Halo product, but maybe you can give us some perspective on that that'd be great. Please yes.

Speaker Change: While there are some differences between Iris Iris plus a named low I think a lot of the success, we're having now on bringing the IRA sensor costs down.

Speaker Change: Those will.

Richard Shannon: A lot of those will translate to iris plus as well as that Halo. There is a lot of overlap in the product architecture as well as the supply base, but I would say Richard you know up until we reach Barbeau SVP a few months ago. We've been I would say the vast majority of our engineering and industrialization resources have been focused on actually getting there.

Richard Shannon: Now that we're there that resource focus is shifting from proving we can produce these things to producing them at scale, and then producing them and profitable scale.

Speaker Change: From a personal perspective, it's an area, where I'm spending a lot of my time, and so part of what we need to do to improve our sensor economics, it's just getting the scale and so.

Speaker Change: A lot of our contracts are volume based and so as volume comes up the calls so naturally come down the other way that we're doing now that we have a lot more credibility because we actually reached series production and you see the pipeline not only with our <unk>.

Speaker Change: Most to $4 billion order book, but the 20th vehicle lines that were launching over the next few years.

Speaker Change: We're going and having more I would say thoughtful and strategic conversations with our partners in terms of how we can be.

Speaker Change: More long term related and not bring the cost down sooner as a result.

Speaker Change: And so we're off to a very good start with that.

Speaker Change: And I hope to get more precise timing on when we expect to turn the corner and kind of get to that positive sensor economics and positive gross margin. It will be next year when precisely next year.

Speaker Change: I hope to provide more clarity on that here in the near term.

Unknown Executive: Fair enough. My follow-on question here is about the contract renegotiation here. Again, I must make prepared remarks; I didn't see anything in the presentation but wondered, characterizing who this might be. I guess I just want to make sure this wasn't someone who was an announced serial production type of wind. No, it's a non-series production customer, non-automotive customer. It's one of our larger customers. And, you know, basically, what's happening there is that we got this contract with SAIS a couple of years ago, you know, assuming that we would be at a certain level of, you know, I would say, scale.

Speaker Change: Okay Fair enough my follow on question here is about the contract renegotiation here again.

Speaker Change: Prepared remarks, I didn't see anything in the presentation, but I'm wondering.

Speaker Change: Characterizing this might be I guess I just wanted to make sure. This wasn't someone who was announced.

Tycho: Sorry introduction, Tycho and it's a non series production customer non automotive customer, it's one of our larger customers.

Speaker Change: And basically what's happening there is this contract with size a couple of years ago, assuming that we would be at a certain level.

Unknown Executive: And as things are taking a little bit longer to get there, you know, we kind of, you know, need to kind of recalibrate it in the near term. So I would say it's just more of a recalibration than a renegotiation. But it could provide some revenue headwinds here of the Okay, thanks for that clarification. That's all from you guys. Thank you.

Speaker Change: I would say.

Kale: Kale and that things are taking a little bit longer to get there, we kind of need to kind of recalibrate. It in the near term. So I would say, it's just more of a recalibration of renegotiation, but it could provide some revenue headwinds here over the next few quarters.

Speaker Change: Okay. Thanks for that clarification Thats all from me guys. Thank you.

Austin Russell: I'd also mention, just generally, when it comes to the broader supply base, you know, and going back to the original point, the reality is that up until a few months ago, we didn't have a whole lot of credibility. You know, a lot of these suppliers, small companies, big companies, have heard the story about people wanting to get into series production; people want to do this for years on end without really having a successful global launch.

Speaker Change: And I'd also mentioned just generally when it comes to the broader supply base going.

Speaker Change: Going back to the original point is it up until a few months ago. The reality is we didn't have a whole lot of credibility.

Speaker Change: A lot of the supplier of small companies big companies have heard the story about people wanting to get the series production people wanting to do this for years on end without really any successful global launch and that's why I think it's showing that we could actually successfully do that that we can meet the Volvo deliverables and be able to scale accordingly, as build a lot more credibility with us it enables us to get the right.

Austin Russell: And that's why I think showing that we can actually successfully do that, that we can meet the Volvo deliverables and be able to scale accordingly, has built a lot more credibility with us that enables us to get the right kinds of top-down, long-term contracts that support, you know, not just these current products but also things going on.

Speaker Change: Kind of talk down long term contracts.

Speaker Change: Support not just these current products, but also things going into the future.

Speaker Change: The core cost of what actually goes into the semiconductor components of what we deliver between the laser chip the photo detector.

Speaker Change: Approximately eight six that we have.

Speaker Change: He is under $100.

Speaker Change: Really the question.

Speaker Change: How would you can actually now that we've gotten done or technology cost down how we can actually get the rest of the more commodity component.

Speaker Change: Chemicals, and other kinds of things to that lower cost structure and that's exactly.

Speaker Change: One of the major things that we're focused on.

Unknown Executive: Okay, I appreciate that perspective, Austin. Thank you, that's all for me.

Speaker Change: Okay I appreciate that perspective awesome. Thank you that's all for me.

Speaker Change: Thanks, Richard Thanks, I'm sorry, our next question will come from Mark Delaney Goldman Sachs.

Mark: Hey, Mark.

Mark Delaney: Thank you for taking my question good afternoon.

Speaker Change: The order book I believe was over $3 8 billion at the end of last year I'm, hoping to better understand where you think that might be tracking to over the course of 'twenty 'twenty. Four we think that's on the opportunities you articulated like the new automatic emergency braking regulations that I believe is generating some incremental interest from potential new customers, but also perhaps some of the headwinds you spoken about today such as the car.

Speaker Change: Being renegotiated thank you.

Speaker Change: Yes, Mark we update our order book at the end of the each year. So no update on that we remain confident that as we continue to execute and launch. These 20 vehicle programs over there we will recognize what we had at the end of the year.

Speaker Change: As well as continue to grow it with new business.

Speaker Change: Both from new customers as well as exist.

Speaker Change: <unk> customers I think the exact timing.

Speaker Change: That growth and when the automakers make definitive decisions.

Speaker Change: That's a little bit outside of our control. So I don't want to speculate on when its going to grow but we are confident that it is going to grow.

Unknown Executive: And for what it's worth, for that specific, you know, renegotiation topic, that was something that we already had heavily discounted in our order book.

Speaker Change: And for what it's worth for that specific renegotiation topic that was something that we already had heavily discounted in our order book so it shouldn't materially.

Unknown Executive: Okay, that's very helpful. The second question was trying to better contextualize the change in timing from when you expect to reach quarterly revenue of that mid-30 million level. You spoke about a couple of different factors, the slower production ramp-ups, as well as this non-series production award and how you're shipping for that in the near to intermediate term. Can you help us to mention those? What are some of the bigger factors as we think about that? Yeah,

Speaker Change: Okay.

Speaker Change: Very helpful. Second question I was trying to better contextualize the change in timing from when you expect to reach quarterly revenue in that mid $30 million level. You spoke about a couple of different factors the slower production ramp ups as well as this.

Speaker Change: Not serious production award and how you're shipping for that in the near to intermediate term can you help us dimension what are some of the bigger factors that you're thinking about that yet.

Unknown Executive: The primary driver is kind of when Volvo kind of gets to that targeted production level for the X90. They expect to get there with their South Carolina plant, what they said on their call, end of this year, maybe early next year, and then bring up the Chinese facility along that same time period. So when those things are accomplished, that's when we will get there. That's why we kind of took the guidance from, hey, look, we don't want to rule out it's not going to happen this year, but given those factors outside of our control, it's probably going to be next year. And so that's going to be the biggest driver.

Speaker Change: The primary driver is kind of a win.

Speaker Change: Volvo kind of get to that.

Speaker Change: Targeted production level for the next 90, they expect to get there with our South Carolina plant.

Speaker Change: What they said on their call.

Speaker Change: End of this year, maybe early next year, and then bringing up the China facility along that same time period. So when those things are accomplished that's when we would get there. That's why we kind of taken the guidance from Hey look we don't want to rule out it's not going to happen this year, but given those factors outside of our control.

Speaker Change: It's probably going to be next year, and so that's going to be the biggest driver of it.

Speaker Change: Thank you.

Speaker Change: Great. Our next question is going to come from Kevin Garrigan at West Park capital.

Speaker Change: Kevin.

Unknown Executive: Yeah, thanks, Aileen. Hey, Austin, how's it going? Thanks for letting me ask a couple questions. So I guess just first, you know, regarding the Volvo run rate delay, does this delay push out your timeline for overall company profitability at all?

Kevin: Yeah. Thanks Elliot.

Kevin: I was going.

Kevin: Excellent.

Speaker Change: Questions. So I guess, just first regarding the Dibaba run rate the way, it's just the way it pushed out your timeline for overall company profitability at all.

Unknown Executive: It's not good for revenue. But where we are on sensor economics today actually helps our net cash spend, as well as our growth loss. So, the more important thing is kind of Volvo getting to those ultimate levels, which they're confident and we're confident they will.

Speaker Change: No it doesn't in fact.

Speaker Change: While in the near term not a good deferred revenue it actually kind of where we are on sensor economic today actually helped.

Speaker Change: Our net cash spend as well as our growth work. So the more important thing is kind of volatile getting to those ultimate levels, which they're confident and we're confident they will.

Unknown Executive: Yep, got it, got it. Okay, that makes sense. It has a follow-up.

Speaker Change: Got it got it okay that makes sense.

Speaker Change: As a follow up.

Austin Russell: So I know you guys noted Volvo's expanding into China later this year. Are you guys anticipating any risk given the U.S.-China tensions or any kind of retaliation from China with the U.S. looking to ban Chinese self-driving software? I'd just love to get your thoughts on how you view the Chinese market.

Speaker Change: I know you guys noted volvos expanding into China. Later. This year are you guys anticipating any risk kind of given the U S. China tension or any kind of retaliation from China with the U S. Looking a ban Chinese self driving software just wanted to get your thoughts on how you view the China market.

Austin Russell: Yeah, based upon everything we know about today, we don't anticipate any issues with, you know, continuing to meet our commitments to Volvo on the EX-90. You know, longer term, this is a dynamic that we're monitoring, largely outside of our control, but, you know, there are both pros and cons of that because, you know, it could hinder our ability in China, but it also hinders some of the Chinese LIDAR's ability to compete in the U.S. and other markets.

Speaker Change: Based upon everything we know about today, we don't anticipate any issues with.

Speaker Change: Continuing to deliver to Volvo Arkham and then some <unk> 90 longer term. This is the <unk> dynamic that we're monitoring.

Speaker Change: Largely outside of our control, but you know.

Speaker Change: There's both pros and cons of that because it could hinder our ability in China, but it also hindered some of the Chinese lidar.

Speaker Change: The ability to compete in the U S and other markets and so.

Austin Russell: And so, you know, look, we're going to do what we can to serve our customers, both in the near and longer term. You know, we're monitoring these embeds. We're thinking about alternatives to make sure that we can be a longer-term competitor in all important markets to us, including China, you know, and that's where we are today. One other thing to add to that, too, is that not only are we the personal

Speaker Change: Look we're going to do what we can do to serve our customers both in the near and longer term. We're monitoring. These in beds, we're thinking about alternatives to make sure that we can be a longer term competitor in all important markets to us including China.

Kevin: And that's where we are today.

Austin Russell: One other thing to add to that, too, is that not only are we the first and only company to have this kind of long-range LIDAR and global production vehicle, but we're also the only company in the industry that is able to build up both Western and Eastern world supply chains. And that's something that we've really done, you know, first starting off in North America in partnership with Celestica in Monterrey, Mexico, but also in partnership with TPK in China.

Speaker Change: One other thing to add on that too is that not only are we the person only company to have this kind of long range lidar on the global production vehicle.

Speaker Change: Standard, but also we're the only company in the industry that is able to build up both western and eastern we'll supply chains, and that's something that we've really done it.

Kevin: First starting off in North America in partnership with Celestica in Monterrey, Mexico, but also in partnership with <unk> in China, and that's where you can ultimately see over the longer term as that happens the products that we produce in China for China, and then you have the rest of world coming from for example, Mexico.

Austin Russell: And that's where you can ultimately see that over the longer term, as that stuff happens, the products that we produce in China will really be for China. And then you have the rest of the world coming from, for example, Mexico or, you know, elsewhere as we expand. So that's something that really we were unique in being able to have these kinds of global scale wins, and in particular, wins in China to be able to deliver against. And that's despite, by the way, you know, obviously, there's kind of that inherent bias, but particularly around, you know, domestic Chinese OEMs.

Speaker Change: Or elsewhere as we expand.

Speaker Change: So that's something that really we were unique in being able to have these kinds of global scale wins and.

Speaker Change: In particular also in China to be able to deliver against and.

Kevin: That's despite by the way you know obviously there is this kind of that inherent bias, but particularly around domestic Chinese Oems.

Unknown Speaker: Unknown Speaker, The UK's Next Topics Podcast.

Kevin: But half the volume even within China is actually from global Oems.

Speaker Change: We saw the clear opportunity to be able to deliver against that and that's exactly what we're doing.

Unknown Speaker: , , , , , , , , , , , , ,

Speaker Change: <unk>.

Kevin: An earlier question for our previous analysts there that's something that actually should help rapidly accelerate the volumes.

Speaker Change: Ultimately on route profitability as well.

Unknown Executive: Yep, got it. Got it. Okay, perfect. Thanks. Thanks, Kevin. Our final question is going to come from Kevin Cassidy at Rosenblatt. Hi, yeah, thanks for taking my question.

Speaker Change: Got it got it okay perfect. Thanks, guys.

Unknown Executive: Thanks, Kevin. Our final question is going to come from Kevin Cassidy at Rosenblatt. Hey, Kevin.

Kevin: Thanks, Kevin Our final question is going to come from Kevin Cassidy at Rosenblatt, Hey, Kevin.

Kevin Cassidy: Hi, yes, thanks for taking my question.

Kevin Cassidy: You know what I'm interested in the Halo product. It just seems like a real game changer for me.

Kevin Cassidy: And.

Kevin Cassidy: You mentioned your sampling it can you give us any details how many samples and what level would you call. It is it a beta product because of the alpha product.

Speaker Change: We're gonna be election.

Austin Russell: Yeah, I would say so as it stands right now, we have some initial proof of concepts around showing the performance capabilities and showing the system architecture. What we're doing now is we're getting sort of the form factor equivalent samples to package it into, you know, that kind of final dimensional package, which is obviously one of the benefits of what we're getting in terms of that integration and integrability improvements from a lower. So yeah, it's moving along incredibly well.

Speaker Change: I would say so as it stands right now we have some initial I would say.

Speaker Change: Concepts around showing the performance capability each showing the.

Speaker Change: Our <unk> system architecture.

Speaker Change: What we're doing now is were getting sort of up more factor equivalent samples.

Speaker Change: Into.

Speaker Change: That kind of.

Speaker Change: Final dimensional package, which is obviously one of the benefits of what we're getting in terms of that.

Speaker Change: Integration and integrate ability improvements from a lower as.

Speaker Change: Smaller size.

Speaker Change: No.

Speaker Change: So, yes, moving along incredibly well, we're also able to develop it.

Austin Russell: We're also able to develop it a heck of a lot more efficiently because of the big technology platform investments that we made in the past that we're able to ride on the coattails of now. So that's also going to help really drive down development costs and other kinds of overhead. But everything's going as well as we could hope for in that dimension. And I think that's really where for the second half of the decade, or at least the latter half of the decade, a ton of the automotive industry is going to be.

Speaker Change: Heck of a lot.

Speaker Change: More efficiently because of the big technology platform investments that we made in the past that we're able to ride on the coattails up now so.

Speaker Change: So that's also going to help really drive down development costs.

Speaker Change: O'brien.

Speaker Change: But.

O'brien: Everything is going as well as we could hope for in that dimension.

O'brien: I think that that's really where.

Speaker Change: More.

Speaker Change: Second half or at least the latter.

Speaker Change: That's where autonomy automotive interfaces.

Speaker Change: Getting that because that's the kind of products that are truly an equal the scale that we want to achieve and no accounts payable and accrued interest.

Austin Russell: Kevin, if you're ever down in Orlando, you're welcome to stop by and say hello.

Speaker Change: Kevin if you ever down in Orlando Youre welcome to stop by and we can kind of swing by.

Speaker Change: The lab and kind of take a look at it and you can touch and feel and kind of see real time, what the team's been able to achieve which is amazing.

Kevin: No that sounds great.

Speaker Change: <unk> got a good reason to go to Orlando.

Kevin: Yeah. Thanks.

Kevin: Yeah.

Unknown Executive: Okay, thanks, Kevin. I think that closes it out.

Speaker Change: Okay. Thanks, Kevin I think that closes it out with that with that I'd like to thank everyone for joining our business update and to the analysts who participated on this call at this point I'd normally give my closing statement of we look forward to seeing everyone next quarter. However, I will be going on maternity leave next month. So you won't see me so the <unk>.

Aileen Smith: With that, I'd like to thank everyone for joining our business update and to the analysts who participated in this call. At this point, I'd normally give my closing statement, saying we look forward to seeing everyone next quarter. However, I will be going on maternity leave next month, so you won't see me. So the team looks forward to updating you next quarter, and I very much look forward to seeing everyone again in the new year. Thanks for joining us today.

Speaker Change: Look forward to updating you next quarter and I very much look forward to seeing everyone again in the new year. Thanks for joining us today.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Goodbye.