Q3 2024 Luminar Technologies Inc Earnings Call - Q&A

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Speaker Change: You have joined the meeting as an attendee and will be muted throughout the meeting. Manager of Investor Relations, covering for Aileen Smith while she is on maternity leave. With me today are Austin Russell, Women's Responder and Chief Executive Officer, and Tom Fennimore, our Chief Financial Officer.

Speaker Change: As a quick reminder, this call is being recorded. You can find the press release and presentation that accompanies this call at investorsatluminotech.com. In a moment, you will hear brief remarks from Austin et al, followed by a Q&A. Our Q&A session will primarily consist of questions from the institutional analyst community.

Speaker Change: To ensure we are addressing as many as possible, we would ask the analysts to limit their questions to one with one follow-up.

Speaker Change: 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.

Speaker Change: Today's discussion also contains forward-looking statements based on the environment as we currently see it, and as such does include risks and uncertainties.

Speaker Change: Please refer to our press release and presentation for more information on the specific risk factors that could cause actual results to differ materially. And with that, I'd like to introduce Luminar's founder and CEO, Austin Russell.

Austin Russell: Hey guys, thanks everyone. Good afternoon and appreciate you joining us. So, wouldn't be able to jump straight in, but before that, I thought I'd be able to just give a quick sort of top five, you know, the most significant business updates to be able to illustrate our business momentum.

Austin Russell: So, first and foremost, you know, Volvo is successfully ramping up the EX90s.

Austin Russell: You know, we successfully delivered now to a four-figure number of vehicles that's going to five figures very soon Over the coming months and now we've begun the first global deliveries outside of the US You know with Volvo as they ramp up the EX90 in a host of different countries

Austin Russell: So, seeing our successful execution in the EX90 launch, as well as our ability to ramp, they have now made the decision to start rolling us out on additional vehicle models, and specifically, we're thrilled to announce that Volvo will be featuring Luminar as standard equipment on the next model in their lineup. We expect to be able to share more details on this in the coming months.

Austin Russell: So that's been an exciting one and great to be able to have the support from all of us. Thank you.

Austin Russell: Next up, you know, we're happy to announce that we've signed a new advanced development contract for the collaboration for Next Generation Assisted Driving System from a Japanese OEM, which includes the paid development for hardware, software, and vehicle integration into different car mods.

Austin Russell: On the technology front, we have a major update with regards to our next generation product, you know, Luminar Halo, which is at the center of our ecosystem.

Austin Russell: Whereas many thought it wouldn't be technically possible, we've now successfully generated the first point cloud, so to say, proving its substantially increased performance capabilities at a fraction of the cost and size compared to the Iris family. So in other words, it's a live moment.

Austin Russell: So whereas IRIS was designed to be able to show the world what was possible,

Austin Russell: This is the LIDAR that can be put in design for mass adoption and mass production across the rest of the industry.

Austin Russell: With Iris, we proved it out, and now Halo is there to take the baton and scale it up with a launch expected in 2026.

Austin Russell: So lastly, over the past six months, we've executed some aggressive cost down measures to be able to reduce our spend that doesn't contribute directly to our core business, while also driving greater operational efficiency through new technology and industrialization partnerships.

Austin Russell: So it's important to note that we've already largely made the required investments to build our technology infrastructure.

Austin Russell: And while these decisions that we've taken were not taken lightly, we're beginning to see the financial results of these actions.

Austin Russell: This quarter alone, we saw over $20 million of improvement in free cash flow, the largest ever in Luminar's history.

Austin Russell: This is largely as a result of the actions taken in Q2, and costs should continue to come down as we ride the wave of our previous investments and actions. This is a critical proof point for our thesis and path to profitability, and Tom can provide more context on this in his remarks.

Austin Russell: This is the start but not the end and you know we'll ultimately have more to be able to do over the coming 12 months.

Austin Russell: Now I'd like to be able to take us through this quarter with a little bit of a macro lens on automotive at large in our industry.

Austin Russell: So our momentum in this quarter demonstrates continued progress on our journey to commercialize LiDAR across the broader industry to enhance driver safety and to enable autonomous driving capabilities.

Austin Russell: In a broader environment that we all know all too well, that can only be described as challenging, we delivered strong sequential growth to our first series production program and aggregate delivering more LIDAR product this quarter to Volvo than the prior three quarters combined to all of our customers.

Austin Russell: This is the start and as we reach a scale that will hopefully help demonstrate the growing out of the quarter-to-quarter noise, you know, so to say, that we have today, and we expect this to ultimately be reflected in the financials as well.

Austin Russell: While this is anything but an easy launch, automakers have now begun taking notice of the significance of this launch and feeding that into their roadmaps, and we're very encouraged by what the future holds for us and our industry.

Austin Russell: At the same time, I've never felt more strongly about Luminar's leadership position in creating these next-generation technologies to enable vehicles to become safer and more autonomous.

Austin Russell: I mentioned in prior quarters the broader automotive industry is coming through a seismic shift as they embark on creating new vehicle platforms to support next-generation assisted and autonomous driving tech, including LiDAR, and represents one of the biggest upheavals in the industry for decades.

Austin Russell: Building and launching these new platforms is anything but easy, but automakers are all-in as they look to be able to replace their aging platforms.

Austin Russell: So this architecture shift is also accompanied by a growing penetration of software and advanced computing, which adds incredible complexity to the entire stack on these cars. You know, in fact, many now in the industry refer to these as software-defined vehicles as a way to describe these new platforms.

Austin Russell: And with this monumental undertaking, the complexity cannot be overstated. The result has been a significant disruption both up and down the value chain. And the majority of OEMs have also taken longer than some of their initial targets to launch these platforms, as we discussed last week.

Austin Russell: probably a couple of quarters, as they collaborate with a different kind of supply base across the board and develop more centralized vehicle software systems.

So, this is why today we stand at a crossroads.

Austin Russell: where the majority of major automakers now have LiDAR embedded into the roadmaps for release this decade and the long-term opportunity has never been stronger.

Austin Russell: But we're also powering through the near-term headwinds to ensure that we can realize the long-term success. And critically, we're executing well on the matters that are within our control, and taking action to mitigate headwinds faced by an initially slower ramp-up timeline than was planned years ago.

Austin Russell: Some of those near-term headwinds have been prominent in our competitive landscape, which actually has aided some of our efforts in thinning of the herbs, so to say.

Austin Russell: And at one point, a handful of years back, we had as many as 200 different competitors. But today, I can count on one hand the number of companies that are alive and theoretically capable of building product to global automotive standards.

Austin Russell: This is no longer a high tide lifting all boats, and this has worked in our favor.

Austin Russell: So in light of the various factors as well as the capital markets, we rapidly matured to a focus not just on technology leadership and long-term value, but also being pragmatic stewards of the business in the near term with a focus on economic and operational efficiency.

Austin Russell: And as I've highlighted before, we're in a position of luxury from our prior investments.

Austin Russell: We invested nearly $2 billion to date to create, industrialize, and launch this technology platform from the chip level up.

Austin Russell: and are able to take cost-cutting decisions without materially affecting these near-term deliverables or overall deliverables, allowing us to adapt to the current environment.

Austin Russell: We're also setting internal record in terms of manufacturing productivity and quality rates, and we couldn't be happier about our ability to effectively meet our customers' needs in series production, starting with Volvo and, of course, the other customers we support as well.

Austin Russell: So further to that point, Volvo has spent some amount of time talking about Illuminar LiDAR on their most recent earnings call. As they now begin to ship cars from their factory to dealerships across the globe, they shared their plans to collect data from our sensors around the world and train AI models with it to be able to enable the next generation assisted and autonomous driving systems.

Austin Russell: And as of this quarter, they announced that they've now successfully built out one of the largest AI data centers in Scandinavia to be able to host and process this data from, you know, LiDAR and other sensors on the vehicle.

Austin Russell: So Volvo is about to have more cars on the road in the U.S. collecting data than all other LiDAR-equipped data collection vehicles from effectively every other company combined. And this is not to be understated in terms of its significance.

Austin Russell: So with LiDAR, this is true 3D ground truth data as well. It's not just 2D data.

Austin Russell: and the importance of this is that it allows you to create.

Austin Russell: that ground truth understanding of the world around you with incredible amount of precision and accuracy down to the centimeter level.

Austin Russell: So, on top of this, Volvo is the first global automaker to make LiDAR standard on vehicles, viewing improved safety as something that should ultimately be fundamental to all drivers.

Austin Russell: And this is similar to them being the first to introduce everything from the modern three points he felt all the way up to the mobile eye camera systems before they became standard throughout the industry.

Austin Russell: And this is the first of many committed programs with Luminar.

Austin Russell: And it doesn't take a whole lot to actually start making a big difference. For example, even with this whole EV revolution, even today, Tesla is just on the order of 2% of vehicle deliveries globally, but makes a massively disproportionate impact.

Austin Russell: And importantly, though, we don't make vehicles overall, we make the technology and we have the ability to work with everyone in the industry. And as a result, we expect to be able to drive market penetration globally at a rate that will deliver us into the double digit percentage market penetration over the next decade.

Austin Russell: So to that end, seeing our successful execution on the X90, Volvo has decided to expand their business with us and feature Lubinar as standard equipment on the next vehicle model in their lineup as well.

Austin Russell: A huge step for us, a huge endorsement for us, and really speaks to their commitment for safety, our leadership in LIDAR, as well as our ability to execute and industrialize at scale.

Austin Russell: I mentioned as well that we have expanded and signed a new advanced development contract with a major Japanese automaker, and that includes the continued collaboration on the next generation system using the LiDAR and transitioning to our next generation LiDAR.

Austin Russell: as well as paying us for software, a new software development for this specific automaker.

Austin Russell: So we're really excited about the next phase of the relationship there, and as it demonstrates our leadership in everything from semiconductors to LiDAR to software, and we expect to be able to share additional information on this in the first half of 2025.

Austin Russell: And I'd like to be able to take a step back and give a little bit of a reminder of what we're building at Luminar, why we know the future is bright for us, and the overall Luminar thesis, kind of going back to basics.

Austin Russell: So forgive me if this is something that some of you guys may know all too well, but for those that are new to the Luminar journey, I think this is really important.

Austin Russell: So, Luminar's thesis and corresponding products and technology have always been focused around enhancing drivers rather than replacing drivers altogether through autonomous and safety features on existing production vehicles.

Austin Russell: And as a reminder, LiDAR, which is our core technology, is able to uniquely measure the exact distance to objects in 3D using laser pulses between the sensor and objects on the road.

Austin Russell: And through the use of our fully integrated stack, you know, which, as I mentioned, ranges from chips to LIDAR systems to software systems on top of it, we're able to do this millions of times.

and do so every second.

Austin Russell: And knowing these exact distances to objects is what makes LiDAR so special, as compared to camera-based technologies, which effectively have to guess where the objects are in 3D by extrapolating information from 2D images.

Austin Russell: And sometimes the cameras are right and the software and sometimes it's wrong. And this is the hard part is that when it comes to a safety critical application, it's all about that last 1%.

Austin Russell: You know, we heard the notion, you know, from one of our customers that, you know, you can't run over one of every hundred people or so, for example. It's all about that last 1% when it comes to autonomous driving.

because otherwise...

Austin Russell: you're limited to a level two autonomous system. And what that means is that the driver has to be always paying attention, ready to take over the wheel at any given moment.

Austin Russell: So, if you want to be able to get to level 3, level 4, and above, then that means not just hands-off, but eyes-off, and being able to have the system responsible for all these different kinds of edge case scenarios that last 1%.

Austin Russell: On top of that, from an active safety standpoint, it's also part of the reason why even with these camera systems today, and radar systems, we still lose over a million lives every year to vehicle accidents.

Austin Russell: and this is where LiDAR can have a very meaningful impact.

Austin Russell: So the enhancements of LiDAR are also not just relevant at day, but very relevant at night. So whereas camera-based technologies experience significant performance degradation at night and in other kinds of incremental weather conditions, this is not the case for high-performance LiDAR, which sees effectively just as well in pitch black as it does with bright sunlight shining into it in our case.

Austin Russell: and as the world begins to shift to adopting more autonomous driving solutions and higher-level autonomous driving solutions.

Austin Russell: The technology that enables this must be flawless. It can't work some of the time and stop working simply because it's dark outside.

Austin Russell: So, in support of this, it's now widely understood by virtually all automakers that LiDAR, and not just cameras, is a fundamental requirement for operating autonomously.

Austin Russell: Because the car is in full control, there's no room for error, and consequently, it's the same for industry experts. Nearly all of them agree that there will be a one-to-one correlation between level three and above equipped vehicles, as well as liner shipments.

Austin Russell: And while LiDAR can very much have a positive impact, you know, for more fundamental and basic assisted driving systems.

Austin Russell: It's not a requirement, but it can still dramatically enhance the safety of that, which, you know, we can see even with examples today, like what Volvo is doing.

Austin Russell: So our customers in the broader industry generally agree when it comes to autonomy that the real boom will come to the level three and above systems, though, as they're able to perform high-speed highway driving without requiring humans to constantly intervene.

Austin Russell: And ultimately, these level three and above systems, you know, by 2030, we expect to be widely available as an optional system by nearly all automakers, with the ultimate goal being that level three will be standardized, you know, as a feature on just a few years later.

Austin Russell: It's nevertheless important to know that the option cycles in the automotive industry take time. You know, there's a high barrier to entry and also a high barrier to exit.

Austin Russell: Generally speaking, it takes up to 20 years from when a technology is first introduced on vehicles to when it becomes standardized throughout the industry. You know, you have classic examples of everything from, you know, seat belts, to airbags, to anti-lock brakes, to even that mobile eye system.

Austin Russell: And for EVs, as a platform, actually, it may take even longer than that 20-year cycle for EVs to ultimately become standardized throughout the broader industry and combustion engines to fade.

Austin Russell: So, LiDAR is arguably actually on a much quicker pace of adoption than almost any other automotive technology in history, but suffice to say, it's very important. This industry does require patience.

Austin Russell: So to us, it's very clear that LiDAR adoption is no longer a matter of if, but rather about when. And within that envelope, I think it's also important to be able to talk about, you know, what is it about our technology that we think makes us so special in the first place?

Austin Russell: And while there are many differentiators, including the fact that we have a uniquely vertically integrated strategy, you know, starting from the semiconductors, you know, making our own lasers, receivers, processing electronics, among other things for our chips, all the way through the LIDAR and software, we can talk about one thing that makes the LIDAR very unique.

Austin Russell: and kind of distill it down to it of one aspect. So as we've talked about in the past, the technology starts with a special wavelength of light that we use at 1550 nanometers versus the current industry prominence which is 905 nanometers.

Austin Russell: One of the most fundamental limitations of lasers is related to eye safety, which serves to limit how much power can be put out instantaneously from a lidar's laser. And correspondingly, this limit on power also affects the system's performance capabilities.

Austin Russell: In contrast to the rest of the industry, we operate in a much longer wavelength of light than others, which enables us to put 17 times the amount of pulse energy into the environment, and more energy equals better performance.

Austin Russell: You know, more peak power is better results, better ranging, which translates into better safety and the ability to meet these stringent global OEM performance standards and also with fewer proponents.

Austin Russell: Because we use this 1550 nanometer wavelength that's safe for the human eye, the increased pulse energy delivered translates directly into dramatically better performance at longer range for the 3D images point clouds that we generate.

Austin Russell: This is required for cars to be able to operate safely at higher speed, you know, and for Level 3 autonomous modes, as well as enable reliable high-speed active safety features.

Austin Russell: Specifically, and because of our technology stack, we're able to see and detect even some of the hardest-to-see objects at distances past 250 meters in all kinds of ambient light conditions. This stands in stark contrast to competitive technologies, which generally can only see objects required for safe driving at distances of maybe up to 100 meters.

Austin Russell: While these shorter perception distances are suitable for lower speed driving, it's insufficient to be able to safely maneuver at high speeds. And the performance can also directly translate into lives saved. And the thing is, is the vast majority of vehicle accidents or fatalities actually occur at higher speeds in the first place, making it all the more important.

Austin Russell: Getting to this stage in our technological advantage is anything but easy, but nevertheless, begs the question of why hasn't everyone followed in these same footsteps?

Austin Russell: The reality is that the performance advantages of using this wavelength and of building the technology is well understood. The simple answer is that doing anything at 1550 nanometer is very, very hard to do. 905 nanometer components have generally been widely available at low cost, and much of the landscape LIDAR historically followed the path of least resistance and lowest initial R&D investment or development systems.

However, that limit has a ceiling associated with it.

Austin Russell: and with Luminar there is no ceiling attached to that. We've uniquely developed our 1550 nanometer technology from the chip level up and we've had to create multiple fundamental innovations to make 1550 possible from both a technical supply chain and economic perspective.

Austin Russell: You know, we have this integrated stack that encompasses a chip-level design, as well as system-level software.

Austin Russell: So our chip capabilities are unrivaled, you know, as part of a broader luminar semiconductor ink entity that we've consolidated there, creating laser chips, receiver chips, and processing electronics chips.

Austin Russell: to create a significant moat around our ability to be able to deliver these technologies, while on top of that, our software facilitates the integration of our devices into our OEMs and creates a very nice lock-in effect as well.

Austin Russell: So, wrapping up, the bottom line is this, we feel great about the backers that are within our control.

Austin Russell: our technology, our leadership position, and our ability to be able to adjust our business to the current times and the broader macro environment.

Austin Russell: The factors that are outside of our control, you know, can be challenging, but we're more than up for them and believe that when the industry begins to ramp production of vehicles, to have LiDAR specced in, you know, as with the programs that we've won to date and additional programs that we will, we'll be in a position to be able to capitalize on the vast opportunities that lie ahead of us.

So.

Austin Russell: Taking a step back, one last point I want to mention is that on the technology front, you know, the Luminar Halo development is rapidly progressing, and the Luminar Halo is going to be the key enabler to this mass global adoption of long-range LiDAR technology.

Austin Russell: And in fact, as part of these remarks, you know, I mentioned at the start.

Austin Russell: You know, in Q3, we actually generated our first point cloud with Illumina Halo, being able to demonstrate this industry-leading long-range LiDAR data fidelity to dramatically improve the safety of these vehicles, as well as enable those autonomous capabilities, and in a fraction of the cost and form factor.

And as a reminder for everyone on call.

Austin Russell: Whereas Iris was designed to be able to kick off a new era of safety and autonomy, Luminar Halo is designed to be able to accelerate it to mass adoption with those improved cost, size, and performance factors.

Austin Russell: Furthermore, we're applying learnings from industrializing our first product, Iris, to Halo.

Austin Russell: leveraging the factory capabilities, leveraging all that infrastructure investment, leveraging the technology platform.

Austin Russell: And this gives us a confidence as we look towards the launch of Halo in 2026, which is at an even significantly faster pace than what we've done for previous product developments.

Austin Russell: and with that I'd like to be able to turn things over to Tom to be able to talk through our annual business milestones and be able to provide a little bit of commentary on quarterly financials as well as our outlook for growth.

Thank you.

Tom Fennimore: Thank you, Austin. Let me start by reviewing the progress to our four 2024 business milestones. We have already achieved our first business milestone earlier this year with the successful launch of the Volvo SOP.

Tom Fennimore: We have also achieved our second milestone already, which was to launch the TPK facility for additional capacity and improved cost, which we did in Q2 with our expanded arrangement with them.

Tom Fennimore: Our third milestone was to unveil our next-gen LiDAR and deliver samples to key select customers. We unveiled Luminar Halo in April and remain on track, as Austin said, for sample deliveries to select customers by the end of this year.

Tom Fennimore: Our final milestone was to continue to expand and invest in the ecosystem around our LiDAR. We discussed in prior quarters the progress we made on our semiconductor and software businesses, and this quarter I'd like to give an update on our insurance business.

We continue to make progress on industrializing our insurance product.

Tom Fennimore: As we recently finalized a partnership with our primary insurance partner, and we've also finalized the design of the customer experience within our soon to be launched insurance app. We should be in a position to start writing our initial insurance policies early next year.

Tom Fennimore: ultimately remain on track to meet all of our business milestones this year and now let's move on to our Q3 financial results.

Tom Fennimore: Revenue for the quarter was $15.5 million, down 7% quarter over quarter, and 9% year over year. This was below the guidance we gave during our letter starting call that Q3 revenue would be in line to modestly higher.

the primary reason for this decision.

Tom Fennimore: for this decline was the renegotiation of a large non-automotive, non-series production contract we mentioned during the last quarter.

Tom Fennimore: excluding this renegotiated contract, revenue would actually have been up meaningfully quarter over quarter. In particular, we saw strong growth in our sensor sales during Q3 as we continue to meet Volvo's weekly shipment requests while improving our manufacturing yield and quality rates.

Tom Fennimore: Let's move on now to gross loss. For the quarter, we reported gross loss of negative 14 million on a gap basis and a loss of 11.7 million on a non-gap basis.

Tom Fennimore: This is in line with the guidance we gave during the last quarter that our gross loss on a non-GAAP basis would increase relative to Q2 levels excluding the contract loss.

Tom Fennimore: On a non-gap basis, Q3 gross loss was negatively impacted by roughly $8 million relating to the slower series production ramp. About half of this charge was from supply chain charges due to the lower volume, and about the other half was from inventory write-downs due to higher inventory levels at quarter end.

Tom Fennimore: This was partially offset by early returns from our efforts to reduce COGS, the process improvements I mentioned earlier, and higher sales to non-automotive markets, which typically command higher ASPs and margins.

Let's move on now to IPAC's restructuring catchment.

In September, we announced additional steps

Tom Fennimore: to increase the size of our restructuring plan that are incremental to the actions we took in May.

Tom Fennimore: We expect these actions, we announced in September and started to implement in September to generate approximately 80 million dollars in annual cash savings on a run rate basis once they are fully implemented by the end of next year.

Tom Fennimore: Since the beginning of the year, we made the tough decisions to reduce our workforce by approximately 30 percent.

Tom Fennimore: Among other actions taken to streamline our cost structure, such as contractor reduction, reduced travel, and a reduction in our real estate footprint. In total, since beginning of the year, we have undertaken cost actions which we target to generate up to $145 million in annual run rate savings once they're fully implemented by the end of next year.

Tom Fennimore: In Q3, we started to see the early results of these cost reduction efforts. Specifically, there was a $10 million improvement in Q3 non-GAAP OPEX relative to Q2 and a $20 million reduction in our free cash flow loss.

Tom Fennimore: Importantly, the impacts of the actions we started to take in September are not reflected in our Q3 results and they will start showing up in Q4.

Tom Fennimore: We are also actively continuing to look at our cost structure and what actions we can take to reduce our cost, particularly as we continue to make execution progress on IRIS.

Tom Fennimore: was $52 million during Q3, an improvement from the $57 million change we saw in Q2. We ended the quarter with roughly $249 million in cash and liquidity, including marketable securities and our $50 million undrawn line of credit.

Tom Fennimore: As of September 30th, we had $182 million dollars remaining on our Equity Finance Program with Virtue. During Q3, we raised $6 million dollars through this Equity Program.

Tom Fennimore: This was below the $19 million we raised in Q2, and I would expect this number to be higher in Q4.

Tom Fennimore: When you look at what's available under Equity Finance Program and combine it with our existing liquidity of $249 million, that gives us access to $431 million in capital, which we expect to provide us ample runway to reach at least the end of 2026.

Tom Fennimore: From a liquidity standpoint, we discussed last quarter we would need approximately $100 million of additional capital to reach profitability.

Tom Fennimore: I'm increasingly optimistic that our September cost-cutting actions could reduce this $100 million capital need, but likely won't completely eliminate it.

Tom Fennimore: This brings me to the final part of my section, which is to provide guidance for Q4.

Tom Fennimore: I would like to remind everyone that our guidance is meant to be more directional versus specific in nature, as we are still in the early days of scaling series production, and as a result, our series production revenue remains very fluid and heavily dependent on the pace of our customers' production ramps.

Tom Fennimore: The slower series production ramp in Q3 resulted in higher levels of sensor inventory.

Tom Fennimore: and we believe we currently have sufficient inventory on hand to fully serve most, if not all, of our expected Q4 demand.

Tom Fennimore: As a result, we decided to take the necessary actions to adjust our manufacturing rate for several weeks to better align with our customers' production rate.

Tom Fennimore: As a result of these actions, we expect Q4 non-gap gross loss to improve relative to Q3.

Tom Fennimore: In addition, we expect the OPEX and change in cash to continue to improve in Q4, in Q4 reflecting the benefits of our recent cost reduction actions, though this will be offset somewhat by the higher interest expense from our recent convertible debt transaction.

Tom Fennimore: In terms of revenue, we expect Q4 to grow modestly versus Q3, reflecting continued growth in sensor sales.

Tom Fennimore: In addition, we are adjusting our year-end cash and liquidity target slightly lower from $240 million to a range of $230 to $240 million.

Tom Fennimore: Where we end up is ultimately going to be dependent upon the higher cash restructuring expenses we incur as well as what we ultimately draw down on our equity line of credit.

Tom Fennimore: On October 30th, our shareholders also passed an authorization allowing our Board of Directors to enact a reverse stock split at their discretion.

Tom Fennimore: We're planning to share more information on a potential reverse split and its terms in the near term after our board decides what they're going to do.

Tom Fennimore: As of November 8th, roughly $23 million of our Series 1, 23 convertible bonds have been converted to equity.

Tom Fennimore: with approximately 59 remaining. We continue to have approximately 203 million on our unsecured convertible debt maturing in 2026, as well as 192 million on our Series 2 2030 convertible debt.

Tom Fennimore: The cooling off period from our August transaction has now expired, and we are actively looking at ways to continue to reduce the $200 million or so of balance on our 2026 unsecured convertible bonds.

Tom Fennimore: Finally, given the accounting complexity of the convertible debt transaction we completed in August, we will likely need a couple days plus or minus extension to file R10-Q this quarter.

Tom Fennimore: There are some additional reviews that we're doing around the final accounting for the convertible transaction. We are confident that we'll be able to file the 10-Q within this five-day extension period.

Speaker Change: This concludes my prepared remarks. I'd like to thank the Luminar team again for another strong quarter and I would like to hand it back over to Yarden for Q&A.

Speaker Change: Great, thank you Tom. We are now going to hand it over to our analyst community. Our first question is going to come from Winnie Dong at Deutsche Bank.

Hey, Manny.

Hi, thanks so much for taking my questions.

Speaker Change: I'm just curious, you know, post-election, any vocations do you think you would have on Lumina on a go-forward basis, you know, specifically as it pertains to, you know, ED policies?

Speaker Change: And then my second question is on cause induction. I'm curious if there's any further low-hanging fruit that you know you can potentially take action on, or if the recent actions you've already taken off pretty much is close to what you can do for now. Thank you.

Speaker Change: Yeah, I'll start with the second part first. I think we've plucked most of the low-hanging fruit, but we're continuing to look at our call structure, the progress we're making on executing.

Speaker Change: and continue to look at ways to continue to cut our costs. I would say a lot of the easy actions I've already been taking, but we're constantly looking at stuff to do. With regards to the election, look, I think it's too early for us to tell, we continually monitor the geopolitical events and how that can impact our business. At the end of the day, what we're really focused on is executing on our business plan and developing and producing the best LIDAR in the industry.

Speaker Change: We do that, we're going to be fine no matter what happens in the geopolitical realm.

Speaker Change: I'll also say that, you know, when it comes to safety and saving lives and improving, you know, roads on the US, that's probably one of the maybe few bipartisan, you know, issues that people are very supportive of. Nobody likes,

Speaker Change: people being injured or losing their lives out on roads. And this is a problem that we're solving at global scale and great to be able to have that support. And of course, yeah, great, great to be able to have some tailwinds along with it.

Thank you guys so much.

Okay, we'll move on to the next analyst.

Speaker Change: Our next question is going to come from John Babcock at Bank of America.

Hey, John.

Hey guys, how are you doing?

Doing great, how about you?

Speaker Change: Good. I guess one of my questions, you talked about this new advanced development contract with an OEM partner. I was just curious, is that an existing partner that you had or is this one that you've announced in the past?

Speaker Change: I think as we said in there, this is like the next phase of this development contract. So it's a customer that we've talked about in the past and it's taking that next step there and getting us ultimately closer to the series production phase.

Speaker Change: Okay that's helpful. And then as it pertains to the new Volvo car that you're going to become standard on, any sense in terms of timeline on when that might launch? And also if you can just talk about whether that vehicle is going to use Halo or if it's going to be using the existing IRS technology?

Speaker Change: We'll say, you know, when it comes to the previous contract we're talking about, that's where we're doing the design integration studies that I mentioned for Halo and some of that planning, but as it relates to with Volvo, you know, currently it's with the generation, the Iris family.

Speaker Change: And then, you know, ultimately, as you figure, a lot of automakers are very excited to be able to, you know, adopt and transition to Halo. This is because it can enable so that mass scale and adoption, whereas Iris.

Speaker Change: you know, is great for kind of starting off, you know, with these different platforms, getting the data out there, as we mentioned with Volvo. But, yeah, I think we mentioned there will be more to share. Ultimately, this is in, you know, OEM's hands to share in the first half of 2025.

Okay.

Speaker Change: Have you have you talked about you know any sort of timeline on when you might be able to commercialize the Halo LiDAR?

Speaker Change: yes so you include that as part of the investor day

Speaker Change: or technology. Yeah, it's coming up in automotive years. It's right around the corner, you know, which is in 2026.

Speaker Change: So that's our that's our launch timeline for it and we're excited to already get some great positive feedback from customers. We mentioned you know as part of our one of our business milestones that we'd be

showcasing it already.

and getting in the hands of some customers initially.

Speaker Change: And, you know, people are very excited to see the results of the Point Cloud and showing what's possible with such a simplified bill of materials, the next generation semiconductors that we have, our integrated software, and of course, the cost and form factor that we're able to deliver with HALOP.

Speaker Change: And then just last question before I turn it over, if you could just...

Speaker Change: I don't know if it's possible to maybe provide some early expectations on 25 at least like how we should think about

you know, volumes generally, you know, I mean,

Speaker Change: I don't know if you might be able to kind of talk about which.

Speaker Change: which are how many vehicle models you'll be in next year. I mean, I think you have the Polestar. You also have the X90. If there are any that I'm leaving out there, that would be helpful. And also, I don't know if there's any sort of volume or cost expectations or additional detail you can provide. Anything on that front would be useful.

Speaker Change: John, I look forward to sharing that with you in a few months when we do our year-end call.

Okay, fair enough. Thanks.

Speaker Change: Thank you, John. Our next question is going to come from Josh Patois at J.P. Morgan.

Speaker Change: Hey Josh. Hi, thanks for taking my question and congratulations on the two wins and encouraging to see the rapid progress on Halo development.

Speaker Change: I wanted to start with a high-level question around the market share capital window.

Speaker Change: What innings of the market share capture window do you see the industry in today? And how soon can we expect the slew of next-gen platform announcements and contract wins being announced? Curious if it's early 2025, second half of 25 or 26, when...

We see those additional winds flowing through.

Speaker Change: And relatedly, could you also just touch on the nature of your relationship with platform partners like Mobileye and NVIDIA?

Speaker Change: How are these relationships structured today? What are the key focus points for them when evaluating LiDAR partners? Whether you expect these relationships to evolve into exclusive partnerships over time? Thanks and have a follow-up.

Speaker Change: No, that's great. I think when it comes to the LIDAR adoption cycle, you know, things have definitely been, you know, taking off. I think we need to make sure, again, to put it into perspective, though, you know, overall. Obviously, you know, like some of the OEM timelines for their new platforms, you know, specifically have, you know, we mentioned this is no surprise.

Speaker Change: like widely publicized for, you know, past year or two or whatever that

Speaker Change: you know a year or two later. So that's that's kind of the near-term stuff to deal with but in terms of the broader kind of

Speaker Change: Zumiya macro adoption cycle, you know, we mentioned that for traditional kinds of technologies as long as 20 years from the first introduction to standardization across the industry. And I think.

Speaker Change: and we're seeing a much more compressed cycle. We're going to continue to see a lot of acceleration over the course of the next few years. I don't know if there's any specific month or quarter or anything that's magical that's necessarily happening. But I'll say this, is that in addition to

Speaker Change: advancing with the development with this kind of slew of additional automakers a big focus is making sure that we can successfully execute on the automakers that and the partners that we have there today and you know the reality is is that there's tens of billions of dollars of business you know even with just the OEMs that we're working with today as you start to get more and more penetration across their lineups and fleets.

Speaker Change: So, you know, there's already opportunities to substantially multiply the value. The key is, is that we have to show that successful execution.

Speaker Change: And that's really where, you know, when folks like Volvo start to see, hey, you can launch with the X90, okay, you know, give the green lights for more vehicles, you know, hey, when certain other automakers see, hey, we're meeting the milestones here, then you can keep progressing with the platform and then, you know, eventually transition to Halo and do all of those things there too.

Speaker Change: So, um, so I think I think that's that's definitely happening. And, um,

at a rapid pace there.

Speaker Change: you know, and obviously over the course of the next 24 months, you know.

Speaker Change: I'm sure will be excited to share more, and I'm sure it's also public that different OEMs, I would say, for the next major platform have different launch timings, but a lot of them are kind of converging around that.

Speaker Change: Yeah, I would say 2027, 2028, 2029, you know, time frame as it ramps up. Obviously, we have some much earlier wins that will allow us to ride that revenue curve earlier. But, you know, they're just taking off now, getting off the ground.

Speaker Change: Understood, that's super helpful. Just as a follow-up, the additional win with Volvo surely, you know, showcases that Volvo and its consumers are appreciating the value-add provided by the Luminar's LiDAR sensors.

Speaker Change: Curious if you have any early feedback from consumers as it relates to the LiDAR technology and, more specifically, any insights from a safety standpoint that you might be seeing in the data?

Speaker Change: Also, just wondering if you could share any color around the insurance business with regard to the go-to-market strategy, the ramp-up trajectory, and any implications from a profitability or cash flow standpoint.

Yep.

Speaker Change: Maybe I can do the first time and you can do the second.

Speaker Change: Yeah, I'd say that when it comes to Volvo more broadly, there's definitely that conviction. The consumer interest is extremely significant, and I think this is one of the driving factors behind the marketing of the EX90. I mean, the campaign is just starting in terms of as they're kicking it off. As Volvo is able to ramp up their production capacity, I think we'll see a lot of that marketing, you know, drastically increase.

Speaker Change: They have over 2,000 dealerships globally that are going to be supporting and making the case for Luminar around the world, and that's something that is, I think, really special and unique for us to be able to

be a critical part of that journey and story.

Speaker Change: but what was known historically as being kind of the introductory, you know, path for new kinds of technologies, you know, to the broader industry. So, as it gets more and more awareness there from a consumer standpoint, I think that's where you'll start to see more and more demand push from a consumer side, not just from an OEM standpoint, which it's basically been all OEM driven, you know, up to this point.

Speaker Change: I think ultimately, beyond the consumer side, you know, there will also be a regulatory push, you know, as the safety standards and requirements increase significantly, we see the new twenty twenty nine mandate for regulations there that.

Speaker Change: The only system that we've seen demonstrated to meet those capabilities, you know, has been, you know, with our LIDAR and software and this is kind of what we what we publish and what our insurance partners with three, you know, has published as well.

Speaker Change: with an up to 40% improvement in terms of, you know, production and accidents and accident severity. So those are, those are huge steps and obviously one that Volvo's very excited about, but have big implications for savings around the ecosystem created by the product, which, you know, insurance is one example of that.

Speaker Change: Yeah, so on the insurance side, we're planning to register in the top 10 states in the U.S., which comprise about half the vehicle sales in the U.S. We're targeting, you know, I would say annual insurance savings for the X90 and other vehicles with our ladder of about 20% given the safety improvements. We believe that that's...

Speaker Change: you know, a meaningful discount to give to the consumer to hopefully attract adoption while at the same time making sure that we still get decent profitability on the insurance side. We're partnering with a couple of people in the insurance space that, quite frankly, are smarter than insurance than we are to make sure that we're doing this in a responsible way. You know, look, the ultimate adoption rate, you know, I think is a little still TBD at this moment. We're going to be targeting people who buy the EX90 in a variety of ways.

Speaker Change: We're hoping that the savings is, you know, meaningful enough, you know, it could be a few hundred dollars of a premium per year, which, in my opinion, is very meaningful given how much insurance costs have been increasing, but time will tell. I don't expect it to be a material contributor to our P&L over the next few quarters, but I hope after that, if it's successful, you know, that will change.

Got it. Thanks for taking my questions and good luck.

Thank you, Josh.

Speaker Change: Our next question is going to come from Mark Delaney at Goldman Sachs. Hey, Mark.

Hey.

Speaker Change: Good afternoon. Thank you very much for taking my questions. First, I was hoping for an update on IRIS Plus development, and in particular, with the news from the last update call that you were going to make more use of the IRIS platform, maybe you could help us better understand how that is going and when we should expect to see IRIS Plus shipping for vehicles in series production.

Speaker Change: Yep, I think it's way just to remind everyone what we talked about what we did last quarter is we were borrowing more of the iris architecture, which we successfully Industrialized and reach SOP with Volvo. We're borrowing more of that architecture to iris plus for our lead customer there We recently prepared the first set of samples

Speaker Change: and they're going through the testing process. And so we hope to have, you know, an update on exactly what that timeline is going to be here in the near term. But, you know, I think we're off to testing and, you know, I think the initial results are encouraging from that.

Speaker Change: Got it. My other question was around Volvo and recognizing that you are going to say specifics on the vehicle, that's up to them, but maybe you can just help us from a Luminar perspective, is the wind that you've secured, is that, how does that compare relative to the EX-90 and can you give us a better sense as to when this new model wind would be in series production?

Speaker Change: It's going to be smaller than the X90, and we're hoping that it is going to launch here over the next several quarters.

Thank you, I'll turn it over.

Great. Thank you, Mark.

Speaker Change: Ultimately, our goal is, is that as we prove the successful launch and ramp capabilities with each model, then, you know, the goal is obviously to expand, you know, across the vehicle mix, you know, with a given OEM, you know, Volvo delivers a better part of a million vehicles per year, you know, so, you know, ultimately, that's the goal of where we can do the math of what we want to get to. And if we can prove that out, I think

There's a path that will go on for a term.

Great. Thank you, Mark.

Speaker Change: And our next question is going to come from Kevin Cassidy at Rosenblatt.

Speaker Change: Yeah, thanks for taking my question and congratulations on the progress, but I just want to understand a little better of the roadmap of how you go from IRIS and then crossover to Halo. Is IRIS going to ship in the EX90 forever, or does that?

Speaker Change: get an upgrade to Halo or, you know, just kind of how to get that pipeline. It took a while to get Iris into production, but then Halo, to me, in two years, it seems very fast.

Speaker Change: Yes, and it is a much more accelerated pace of development because it took the better part of a decade to be able to build out that core technology platform, to be able to develop the different semiconductor technologies, to be able to really pioneer all these different aspects of the platform. And now we get to ride that investment curve to be able to have a much more rapid pace of adoption and acceleration. And I think for even what's beyond Halo, you'll ultimately see the same kind of rapid pace there as that comes into play. And the same thing when it comes to costs, you know, like the factory build outs that we're doing for.

Speaker Change: you know, scaling beyond what we have from Mexico, you know, a fraction of the cost. Same with the product cost, same with the bill of materials, same with the supply chain, same with the engineering that goes into it. Now, significantly, we are building Halo to actually be backwards compatible, you know, with Iris.

Speaker Change: So, this gives us an opportunity to be able to, you know, should we want to and OEM desire to, which I think is ultimately in line, to be able to slot that in accordingly.

Speaker Change: and this is something that it's important from a data standpoint to be able to have that compatibility, because, you know, you have automakers investing, you know,

Speaker Change: billions of dollars into these technology platforms and data collection platforms and getting out there with these vehicles.

Speaker Change: to be able to do that. And you wanna make sure that continues to carry forward. So that's something that I think is super meaningful and part of the stickiness as well. And that's something that, you know, we're excited to be able to do with Halo to be able to give them a smooth transition. And these are the kinds of conversations that we're having today with automakers across the industry.

Speaker Change: Okay and you touched on something that was going to be my follow-up question was the fraction of the cost.

Speaker Change: So that leaves a lot of open discussion, but I would imagine volumes go up.

Speaker Change: More than the cost comes down, would be one way to think of it, but is it, you know, are you saying 50% lower costs or 25%, you know?

Speaker Change: Can you give us some ballpark of what the cost might be the difference?

Speaker Change: We expect better than 50%. You know, it's always a little hard to give a exact percentage, you know, to this point, but we're able to deliver greater performance, you know, in the in the point cloud in the sensor at about a third of the size.

and yeah, we expect it to be.

less than half the cost.

Speaker Change: Now, of course, part of the cost problem is also solved for with scale, you know, for example, the stuff that we have to do today is a lot more expensive when it's

Speaker Change: Matt, you know, the initial front end of the ramp curve versus, you know, when you start [inaudible]

Speaker Change: more substantive run rate volumes, for example, with the EX 90. And that's something that you have to be able to have. Of course, when you're talking 2026, we're already well into the ramp curves of even the initial programs, much less the additional programs that we want to be launching with.

Speaker Change: So that's something where it allows us to be able to leverage the economies of scale with simplified materials, and we're talking, you know,

Speaker Change: In addition to cost and down components, it just also has significantly less components.

Simplified design

Speaker Change: in the first place. And part of this is because we're also designing this hand-in-hand.

Speaker Change: with some of our industrialization partners as well, including CBK that we described as part of our new partnership efforts to be able to save on cost, both on OPEX as well as on a product standpoint individually.

Speaker Change: So, this is all kind of coming to a head and allowing us to be able to be.

Speaker Change: in a position of where automakers have a very clear business case to put this across all of the cars.

Speaker Change: Okay, and if I can get one more question in. You had mentioned about Volvo building a data center because of all the data they can collect with a LiDAR, you know, compared to camera, I imagine there's, but you had an initiative for a while of mapping. Is that still active?

Speaker Change: Yes, actually. And, you know, we've been we've been working on, you know, the mapping side for for some time. I think that the meaningful part now is it's all about data and scaling up. We've actually had some development contracts.

Speaker Change: and including one with a major automaker on the mapping side to be able to cover some of the cost of development and build some specific features there. But where you start to see just the insane value building up is when you get this mass level of data and scale.

Speaker Change: You know, you look at other autonomous vehicle test companies today, you know, like even the Waymos of this world, you know, they spend on the order of a billion a year to be able to collect data from 500 cars, you know, out driving around the US, you know, measuring what's going on.

Speaker Change: You know, we're about to have tens of thousands of EX90s going around collecting data, you know, with our LiDAR, ultimately, you know, hundreds of thousands, you know, shortly thereafter here.

you know, over the coming quarters.

Speaker Change: And, and that's something where, you know, just unprecedented scale, you know, across the globe. And, you know, the level of detail that and understanding we're going to have around the world is really second to none when you have this level of precision. So that's something that, you know, a lot of the

Speaker Change: seeds that we planted and vets that we made years ago, you know, sometimes it's hard to see, but we're, you know, we're trying to think years ahead, you know, as this intersects our ultimate roadmap. And, and that's something that I think is a perfect example of that, of building

Speaker Change: and capturing the ecosystem value that's created around the LiDAR. The LiDAR is just...

Speaker Change: ultimately going to be a small fraction of the total value created that we capture out of this.

Speaker Change: and that's where a perfect example of the rest of the ecosystem even if you know between things like mapping and insurance and everything these are not huge costs I mean it's

Speaker Change: you know what maybe each of them is like on the order of 1% of Luminar spend so you know, it's it's very very high leverage

Great. Okay. Thank you.

Speaker Change: Thank you, Kevin. Our next and final question is going to come from Tristan Guerra at Byrne.

Speaker Change: Hi guys, progress given the challenging environment. At what point do we get to a model where software is actually the primary contributor of revenue and margin and where it subsidizes or maybe even that becomes the revenue contributor and then the actual LIDAR becomes

Speaker Change: part of the whole software offering, you know, and obviously with the implications on gross margin. Is there an outlook for that and how many years away is that?

Speaker Change: I would say more broadly from a software standpoint, in terms of the value add from a software perspective, there's already a lot of that that's happened in state, some of it's us, some of it's.

Speaker Change: I realize I didn't totally answer the platform partner question, you know, earlier with folks like NVIDIA and Mobileye, as well as the automaker that are creating these AI systems, you know, and in some cases in conjunction with us.

Speaker Change: that are going to be extremely powerful and are already a significant part of that.

um

Speaker Change: that revenue mix. I would say, and if you take a look today, funnily enough, because we're still in the early phases of the ramp, the majority of our even small revenue today is from things outside of a series production line, semiconductor software, AI systems.

and obviously some adjacent market sales.

Speaker Change: But I think the software side is definitely going to be a huge part of the story when it comes to

Speaker Change: you know, the later on in the second half of this decade, I'd say it's about like three years behind, you know, where we are on the LIDAR front, you know, and more and more automakers have also realized just how meaningful it can be to have the right software partners at play.

Speaker Change: The reality is that the majority of automakers don't have a software solution today to be able to scale with, and as they're planning to be able to launch the next generation platforms,

Speaker Change: that's going to be something that's needed. And I think it's clear that Luminar has a hand to play, including from this announcement that we just had today.

Thanks and then for my follow-up question

Speaker Change: If the shift from EVs to hybrids is still ongoing next year, does that impact your worldview pipeline or design wind pipeline at all?

Speaker Change: Is there, you know, do you see, over the next couple of years, do you see a higher touch rate with EVs versus hybrid? And then finally, if you could remind us of some of the...

Speaker Change: engagements that you had with some other OEMs outside of Volvo. I think you had mentioned Nissan a few years ago, and also some traction in China. Have those been delayed? But do you still have ongoing relationship? Are those still opportunities?

Speaker Change: I would say shift going on in the industry about how much more we wanted to vote to EVs versus hybrids versus traditional gas engines. We're agnostic to that. We work on any platform. We just need the automakers to make a decision on which direction they're going to go.

Speaker Change: and then we're going to be ready there to serve them and put our LIDAR on that vehicle. But, I would say there's been an industry-wide pause, and that's in almost every major region that you just mentioned.

Speaker Change: in, you know, LIDAR decision-making because they need to decide which direction they're going to go. And then as soon as they decide, then they'll, you know, come back and decide how they're going to deploy LIDAR in that vehicles and what quantity. We don't think there's ultimately in a longer term going to be a difference in our business based upon which direction they're going to go. There may be some near-term headwinds because I would say we're overweighted.

Speaker Change: to EBs in the near term because of decisions the industry made a few years ago to invest in EBs. But ultimately, we're agnostic. The longer-term potential for LIDAR is there, and as soon as these decisions are made, we think it's going to unlock these next rounds of LIDAR RFQs.

Speaker Change: I've been public for some time as we've talked about some of the automakers there, and I think it's actually very much the right decision for the next generation platform. Some of them are going all EVs and only EVs.

Speaker Change: And we don't think that's right, because ultimately, that won't be helpful to us in the longer term either. And I know that it's funny, a lot of people think of Luminar as just like an EV company, which is kind of weird, since actually the majority of our wins are not on, you know, not just EV.

Speaker Change: only platforms. It's also including combustion engine and hybrid. But of course, from a planning standpoint, as Tom mentioned, it just happens to be the things like the EX90 or EVs that are just the nearer term ones. These are decided earlier on.

Speaker Change: I think as this scales up, the reality is that for some of the larger OEMs that are there, there's going to be a nice mix of multiple different kinds of power trains.

and ones that were integrated into.

Speaker Change: That said, folks like Volvo, they're having their strides in success when it comes to EVs. I think they can do that as a smaller OEM as well pretty successfully. But when it comes to some of the big mainstream ones that we're starting to work with, I think that's where it's going to be leading more towards.

Combustion and hybrid.

Thank you very much.