Q4 2024 Luminar Technologies Inc Earnings Call
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Or even today, new technologies like Gpus in vehicles.
And unlike the electronics industry with quick paced roll ins and outs of products. The automotive industry is one of those very high barrier to entry, but also very high bird exit industries zinc are substantially more conservative indecisive approach to integrating <unk> and rolling out new technologies.
Time and time again is generally a 10 to 20 year adoption cycle to win the first new technologies are introduced to when they start to become standardized or even eventually mandated on vehicles, we witnessed it with everything from mobilized vision technologies to what's happening with even the recent compute integrations to say for example, automatic emergency braking capabilities.
So the automotive industry is not like that in defense that say your next generation phone a tablet or VR headset is introduced in consumers' hands. You're after years. These technologies take years to be able to be developed muscle as to automotive grade qualifications tested validated and integrated the platforms and especially when there.
Technologies, our safety critical bike wider this is a highly complex process and People's lives are at stake in the industry. So it moves at a very deliberate pace.
Naturally believe that just like those other technologies introduced the automotive the described before light on every vehicle inevitable. It's just a matter of development progress and time.
And this sentiment has been echoed by industry leaders.
Servicing both privately.
To us as well as publicly on a number of occasions and where there are recent example, being for example, Nissan just on their most recent earnings call. We specifically spoke around revolutionizing autonomous driving technologies and next generation collision avoidance features utilizing a lidar for widespread standardization.
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First with them and then the broader industry.
And Ah frequently asked so the comparison is made up of what's the differentiation specifically for aluminum and alumina ours technology in Lidar.
And you know it starts off with I would say what we see in the industry is a little bit of a bifurcation to what you would call a kind of a premium segments of the market and then a more lower cost commodity segments of the market that particularly we can gain some traction notably in China.
And as a reminder, one of the things that makes it lumina ours Lidar unique is the fact that we built our own technology from the chip level up at a different kind of wavelength of light versus using more commodity off the shelf.
Proponents at 905 nanometers, we use them at 15 50 nanometers that allows us to output orders of magnitude more pulse energy into the environment that 905 nanometers, while maintaining eye safety, whereas 95 nanometers is substantially limited.
That allows us to detect even some of the hardest to see objects and distances past 250 meters and all kinds of lighting conditions and stands in Stark contrast to our competitors technologies, which can generally only see those kinds of difficult to see objects at a fraction of the distances.
Limiting the ton of speeds the vehicles can operate as well as not maximizing the safety capabilities that can be achieved.
And while some of those sort of perception distances can be helpful for lower speed autonomous driving applications. They are insufficient to ultimately safely maneuver and higher speeds.
And that's the fundamental difference that our lidar enables and what is required to ultimately unlock level three autonomy going beyond just the basis of society capabilities of course, it's still significantly and further enhances with the excellent performance of the capabilities you can expect from a safety standpoint.
For level two and beyond.
Now what's happening right now in the market is that automakers until these platform providers. Other companies are more so initial using lidar for these assisted driving capabilities, while they develop those autonomous level three capabilities to ultimately be able to unable driver's safer hands off is off and you.
Use your phone and work on their laptop water will be taken out whatever it may be in your vehicle.
And we're starting to see some of those and global markets as well as the China market.
In particular.
Excited to see that you know of.
There are some significant adoption there as are others Oems really very quickly.
But that said on one hand, the low performance Lidar is okay for now for some of those vehicles, particularly in China that can support level. Two applications. You know when drivers remain actively engaged in the cost is fairly well, but would not be sufficient to ultimately unlock a higher level of performance the capabilities higher levels of safety and higher speeds and Thats really where alumina comes into play.
Right.
We're ultimately building wide ours that you can have those capabilities to be fully realized and you know this is where we get to see significant adoption from the western World Oems, representing you know on the order of 90% of the global volume too.
To establish these kinds of cases and something we're very excited about.
So of course.
I think it's important to say that as software for level, three and hydro capabilities of Salt War and light our full value is continue to be realized.
We believe that that premium thing around lidar will ultimately be.
A critical part of the ecosystem and the winter here and.
And that's further supported our I'd say by a.
Beyond just the performance capabilities substantial cost reductions with them. What we have won with limit our halo to be able to unable even broader widespread adoption that are ultimately surpass the other segment.
Now at Loopnet are firmly positioned as a leader within this high performance category with our 15 15 nanometer technology and I believe that it's really the only viable solution for.
Looking ahead, what the requirements are for level, three and beyond and at the same time, the only tuition is going to maximize the safety capabilities to the deal.
So this leadership position that we have in the industry is underscored by the traction we continue to see with our automaker partners and particularly with our next generation Lidar Luminaire Halo.
Our Iris product was there to be able to show what was possible as we developed it and successfully launched it with Volvo and now alumina, our Halo is poised to lead the industry in performance size and cost.
Its performance has multiple better than those of our previous generation of products and size approximately rub. It's a multiple of the efficiency is all in a highly efficient package for seamless integration.
And in working with our numerous automaker partners over the past several years, we've not only learn and develop the performance specifications and requirements for the products and lidar or more generally we've also gained an incredible amount of design and manufacturing know, how and IP and have learned the distinct advantages disadvantages of every single iteration of that at the component level up from.
The five different generations of wider products that we've gone through.
So again ultimately luminaire Halo is can be the key enabler for what we believe to be a widespread mass adoption of lidar and certainly in the western World.
And we're making solid progress with our OEM partners. So we've demonstrated in alumina our CLO performance now several Oems and are actively engaged in coordinated development efforts.
And this is something that we highlighted in the presentation and now we actually are fully integrated samples of Illumina, our halo on to be able to showcase you know with.
More mature point clouds that we're continuing to develop.
And today, we're also beginning to see green shoots in the industry. We've seen our first ship to the left by an automaker asking to pull forward the lidar rollout relative to their wider relative to their prior lidar plant.
With an earlier vehicle platform and we've been working with this automaker for several years and are excited about what the patent.
So the thing is what makes it possible is all around the accelerated development timeline for alumina, our halo as well as our decision to simplify our overall product portfolio.
Historically, we develop.
For a different lidar related product simultaneously between the Iris family of products as well as what we have been working on in the background with Halo.
With Iris initially there to be able to primarily serve Volvo and their requirements there before.
It forked off to dozens of other companies that were able to provide a sale and then subsequently also iris plus you know with our lead OEM customer in that respect.
So I would say that is that from a development standpoint, now with the work on Iris largely complete.
And Iris plus.
As a as I mentioned before from an announcement and as we're talking about here.
Is transitioning to be Halo from our lead customer with Iris plus we now have a unified platform together that is a super set of all the different OEM requirement for what's needed in the lineup and that allows us to have a singular product as opposed to a bunch of different variations of the same kinds of.
Our product to be able to simplify our development effort significantly saving on cost enhancing efficiency enhancing speed among other things there.
This also gives us an opportunity to transition customers with iris into serious production to limit our halo on mid cycle refresh us.
So.
As a result of all of those factors were.
Really all in on Halo and excited to be moving full speed ahead.
Okay.
So what I would say this is it from a broader perspective.
You know we had historically built luminaire to be it will have the capability to develop multiple products simultaneously around the lidar side.
We know as of last year from some of the different restructuring actions that we take to streamline the organization.
Implemented as they've been largely affected.
And you don't have a materially affected the.
The overall development timeline from what we've had in <unk>.
Factors actually streamlining spending up in many respects and what it comes down to this year as we shift towards from developing all these different kinds of lidar products that one unified white our platform, we think theres going to be some opportunities for dramatic efficiency improvements.
We're gonna get to realize this year.
And again, what why make this move now in terms of a broader strategic shift in our business model.
It's all because we're able to get our customers and our key customers onboard with the Halo platform moving full speed ahead in the same direction with shared requirements and that's something that we've been working for frankly, many years on to be able to do and align those requirements and expectations.
So we're gonna be talking a little bit more about that and I'll have more to share over the coming weeks and months.
About you know how.
How we will reinvent women are more radically as an organization under this new kind of business model less around custom development for Oems and more without sharing unified platform.
And really just become possible because we had invested nearly $2 billion over the past decade to be able to create industrialized and launched an entire technology platform and ecosystem and coming from the semiconductor all the way up to the Lidar the software levels and now from the best engineering or technical talent in the industry.
As well as technology on the shelf because of those investments.
So we're now on the other side of that investment curve, which allows us to be able to realign the business without materially affecting near term deliverables revenues et cetera.
So in concert with our board of directors were in the throes of developing that new strategic plan preliminary under this new business model of that unified platform and look forward to sharing more.
Lastly, before I turn it over to Tom I wanted to take a moment to review some of our key achievements for our business milestone standpoint, and highlight some of the impressive work with Illumina our team in 2024.
At the beginning of last year, we outlined four business milestones to achieve by year end.
Number one was passing the final run rate production audit to achieve a global startup production with Volvo and ramp accordingly.
Second was launching the TDK facility for additional capacity and improved cost number three was to unveil. Our next generation Lidar later, unbilled is halo and deliver samples to customers.
For was to expand the ecosystem around our lidar and I'm happy to say that we've delivered across all four of these key business milestones at a company level.
We achieved a startup production for ball, though with <unk> 90. This past year and were also awarded the Volvo E. S 90, which is the.
Sedan, so to say our equivalent of the E X 90, which will go into production this year.
We also launched an expanded industrialization partnership with TDK and our trends into an asset light model for industrialization we.
We hosted a very successful luminaire day, where we unveiled its next generation lidar limit our halo and generated the first point clouded upper limit our halo since while demonstrating our capabilities to customers and feedback has been tremendously positive.
We did all of this while aggressively working to restructure our cost you know as part of the business and of course, while not without its challenges I'm immensely proud of Illumina. Our team for all that we've achieved last year under the kind of broader macro circumstances.
I have the utmost confidence in our ability to execute for 2025 and today, we're gonna be outlining a few of those key milestones to achieve by the end of the year.
So you can be able to take a look the first and foremost is to be able to.
Continue to ramp the production and delivery of the Iris related sensor for series production customers.
And achieve those economies of scale.
With over 200% growth associated with our.
Our deliveries into the market.
Second one was meeting the key requirements for Halo.
For our customer contract execution and number three was to be able to streamline the business.
With the new business and operating model that we described as we have a unified product portfolio going from Gabelli.
Developing.
Five different variance.
Our products at the same time to one with limit our halo.
And that's going to help accelerate our efficiency as a business and path to profitability as well.
So we remain very confident in our strategy and execution, our technology leadership remains unparalleled in the high performance Lidar space, our customer relationships are progressing well and we're while we're pragmatic about the near term industry challenges, we're very optimistic about the market long term expansion.
As the industry continues to shift towards safer vehicles and towards level three autonomous driving capabilities. We firmly we aluminum is exceptionally well positioned to capitalize on this enormous opportunity.
And with that I'll turn it over Tom discussed financials. Thank you.
Great.
Tom: Thank you Austin, let's start by reviewing Q4 financial results revenue for the quarter came in better than expected at $22 5 million up 45% quarter over quarter and 2% year over year.
Tom: The primary driver of this revenue growth with higher sensor sales to Volvo and non series production or adjacent market customers.
Tom: During Q4, our sensor sales to adjacent market customers increased substantially mainly due to a large order from one of our customers. While we expect this customer will continue to generate significant revenue in the longer term, we expect the shipments during the most recent quarter satiated their near term demand.
Tom: During Q4, we shipped over 4000, IRA sensors to our customers and over 9000 for the calendar year. The vast majority of these sensors were shipped to Bobo move.
Tom: Moving on the gross margin.
For the quarter, we reported positive gross profit of $12 $5 million on a GAAP basis and $14 million on a non-GAAP basis.
Tom: Three factors drove our positive gross margin.
Tom: First we reversed $10 million of battery contract, while it is accrued in prior quarters related to our Iris plus development work as often mentioned in Q4, we transitioned our lead Iris plus customer two luminary Halo development, allowing us to terminate this iris plus development work and reversed that contract loss accrual.
Tom: The second factor that drove a positive gross margin was planned production downtime at our Mexico facility to align our production with our customers' demand. This allowed us to ship sensors from inventory that were already marked down the AOSP levels. We estimate this was an approximately $4 million benefit to gross profit during the quarter.
Tom: The third factor was the previously mentioned large sensor shipment to an adjacent market customer, which was done at significantly higher asps than what we sell for them having series production. We estimate that this was about another $4 million benefit.
Tom: Some of these factors like production downtime will not repeat going forward and others like sensor sales to non series production cuts.
Tom: Customers will repeat but will be choppy on a quarter to quarter basis. However, we are encouraged that we generated a positive gross profit during the quarter.
Tom: While reaching gross profit positive is an important milestone for us we are guiding to be modest gross margin negative for each quarter in 2025, and I'll discuss more of that later.
Tom: Now to discuss and give an update on our cost object actions as well as our Opex last.
Tom: Last year, we announced two major restructurings one in April and one in September that allowed us to significantly improve our cost structure the.
Tom: The April actions, we're expected to achieve $80 million in total cost savings about half in cash have been stopped by the end of 2024.
Tom: In the September actions, we're expected to achieve an 88, an additional $80 million almost entirely in cash by the end of 2025 when fully implemented.
Tom: These actions have started to yield demonstrable results in our financial performance relative to Q1 before our cost actions were implemented our non-GAAP opex a good proxy to measure these cash savings declined by $72 million on an annualized basis, our quarterly stock based compensation.
Tom: Approximately the stock savings declined by about $80 million on an annual basis over that same time period.
Tom: Moving on to cash in our balance sheet, we ended the year with $233 million in cash and liquidity, which includes a $183 million in cash and Marta boat marketable securities and $50 million.
Tom: The Undrawn line of credit.
Tom: This year end.
Tom: Actual numbers were in line with our guidance, including the 209 available on our equity Finance program, which reflects a $75 million of upsides, we're going to do shortly after earnings this amounts to total access to liquidity of $442 million.
Tom: Our change in cash during the quarter was $16 million, one <unk> well below the $52 million from Q3. This improvement was primarily driven by proceeds from our equity financing program, which amounted to $48 million to the quarter.
Tom: And was partially a function of timing as we only did $6 million in Q3.
Tom: The proceeds generated under this program during the quarter continued to demonstrate our access to the capital markets and will remain an avenue, we can pursue to bolster our liquidity if and when needed.
Tom: Free cash flow for the quarter was <unk>.
Tom: $62 million slightly higher than a negative 58 in Q3, the increase was almost.
Tom: Almost entirely driven by $8 million of higher cash interest during the quarter from our August that transaction, we expect to file an amended S three and prospective supplement.
Tom: So stated with the extension of our equity finance program and start to be granted to one of our strategic suppliers over the next few days.
Tom: I wanted to touch base on our order book in the past, we disclosed forward looking order book as an alternative financial metric that we updated annually as a means by which the investment community can measure our commercial progress and opportunity now that we havent team C series production, we're no longer going to update this on an annual basis and instead replace it by disclosing.
Tom: Our sensor shipped which.
Tom: Which we believe is a better metric to measure our progress. This is consistent with what other liner companies that have reached series production stage have done for full disclosure on forward looking at your order book as of 2024 would be lower relative to 2023. However, we believe this is a temporary phenomenon due to the halo transition with our key customers from.
Tom: The Iris family.
Tom: As a reminder, we establish a very high order book from what was included in the order book and not specifically only series production.
Tom: Awards are equivalent were included and we exclude customer contracts are only in the development stage, while reception preliminary Halo has been significant the product still remains in the development phase with a number of series production award opportunities pending completion of certain technical milestones to be absolutely clear we continue to.
Work with all of our customers from last year have not lost any customers and we expect the decline in the order book in 2024 to be temporary as we complete the outlined development milestones for alumina, our halo and hopefully with anticipated better economics or commercial opportunity for Halo remained strong we have entered into luminary Halo development Contra.
Tom: With two major automakers since our last earning calls and have secured a series production equivalent contract with a major construction and I'll play off highway machinery manufacturer more details to come here shortly on those.
Tom: Moving onto 2025 guidance.
Tom: For 2025, we expect a full year or full year revenue growth to be in the range of 10% to 20%.
Tom: This growth will be almost entirely driven by a greater than three times forecasted increase in our centers from approximately 9000 in 2024 two range that were currently forecasting of call. It 30 to 33000 this year.
Tom: This growth in sensor shipped will be offset by the lower revenue from the non automotive customer we discussed on our Q3 call and basically the full year impact of that renegotiated contract.
Tom: We are being conservative in our revenue guidance and are basing our 2025 censorship that a rather significant call. It about a 50% haircut to the latest IHS latest forecast, we want to you know where we want to be conservative until we see.
Tom: A more proof points of our sustained ramp in our customers' production volumes.
Tom: For the first quarter, we expect revenue will decline quarter over quarter and be close to Q3 dollars 24 in Q4 levels. This is driven by basically the lower.
Tom: Sequential center sales to that non series production customer we discussed earlier.
Tom: In the past, we talked about reaching a mid $30 million revenue run rate on a quarterly basis, given the recalibrated contracts as well as lower assumed.
Tom: Assumed volume for series productions.
Tom: We don't think that that is going to happen this year we.
Tom: We expect to generate a negative non-GAAP gross margin on a quarterly basis throughout this year driven by the lower sensor sales to non series production customers as well as the resumption of our series production facility in Mexico, and some modest tariff headwinds more specifically, we expect negative quarterly gross loss to average.
Tom: About $5 million to $10 million per quarter.
Tom: While we made progress on improving our sensor economics in Cogs overhead through various cost reduction efforts. The unfortunate reality is that the lower than expected production volume remains a major hurdle hurdle for us in achieving the necessary economies of scales to achieve sustainable positive gross margin, we may generate positive.
Tom: Gross margin from time to time like we did this most recent quarter, but this will be highly dependent on censorship to non series production customers, which remain lumpy.
I briefly want to address the current tariff environment.
Tom: Geopolitical tensions are creating significant uncertainty certainty for companies with global supply chains like luminary at this point in time, we have determined that our lidar sensors, we ship from Mexico to the U S are likely subject to the most to the recently implemented tariffs that said, even if we take no.
Tom: Actions to mitigate this exposure we expect the impact on our gross profit to remain relatively modest. However, it is important to note that we remain one of the only light our suppliers with a global footprint across North America, and Asia, and we are actively exploring alternatives to modify our production footprint accordingly.
Tom: For 2025, we expect non-GAAP Opex will decline from the mid $50 million range in Q1 to the mid to high 30 <unk> million range in by the end of the year as we continued to make progress on our cost reduction efforts.
Tom: We expect to end the fiscal year, 'twenty, five with greater than $150 million of cash and liquidity, which includes cash and marketable securities and our $50 million line of credit.
We expect to issue on average about $30 million per quarter will be little bit higher a little bit lower depending upon the quarter.
Tom: Under our equity financing program for fiscal year 'twenty five we expect our free cash flow to improve driven by our cost reduction efforts.
Tom: This brings me to my final topic of our capital structure and cash runway I'll start with an update on our debt profile in August of last year, we executed an exchange transaction, which reduced our convertible debt by nearly $150 million, while also raising $100 million of new debt capital since August are convertible.
Tom: <unk> declined by $38 million through early conversions of our 2030 convertible bonds, leaving about $237 million outstanding on our convertible debt that matures in 2013.
Tom: In total our debt now stands at approximately $540 million versus $625 million a year ago, we plan to start chipping away in a discipline manner at the remaining $203 million of convertible debt maturing in 2026 and doing in a way that we don't think it's going to materially impact our cash flow liquidity profile.
Tom: We believe our current cash and liquidity position in equity financing program provides us with sufficient runway through at least 2026 I mentioned in the past that we may require.
Tom: Approximately an additional $100 million of additional capital to reach profitability beyond that we continue to execute aggressively and our cost reduction plan to lower that potential funding requirement.
Tom: While we're in no rush to execute a transaction in the near term. We are also evaluating our options for raising additional capital and we'll continue to actively monitor the markets that concludes our prepared remarks I'd once again like to thank the entire alumina our team for a great 2024, and continued execution progress with that I'll hand, it back over to Amy.
Speaker Change: Lean to start our Q&A session.
Amy: Thanks, Tom we're not going to get into our Q&A with our analyst community. Our first question is going to come from Josh Potline at J P. Morgan.
Thank you and thank you for taking my questions awesome, great to see you at the G. D C.
Josh Potline: In that vein I'm wondering if there's any news regarding the reference architecture for and videos Hyperion platform and if alumina or is expected to continue as the reference lidar sensor as it was earlier and video platform.
Amy: I've a follow up.
Amy: Absolutely.
Amy: And I think as we mentioned earlier is that you were in progress right now of shifting the broader customer base that we've had across the board, which as you know what like over a dozen different partners from the Iris family of products over to limit our Halo and so I think we certainly expect to be able to.
Amy: Being the lead to be driving this when it comes to you know a hyperion platform or other kinds of partners that we've been working with accordingly for the Halo transition as well ultimately halo is going to be driving significantly better economics.
Amy: Economics and.
Amy: Opportunity for I would say more widespread and mainstream adoption, whereas Ireland was really sort of proving out what was possible but.
Amy: He uses it.
Amy: These are some theoretical efforts there two of them are very excited to be showcasing some of these capabilities already as it stands today and if any of you guys are at GTC. We encourage you guys to come by and see alive with often Nvidia a route there.
Amy: Great.
Amy: Very helpful.
Speaker Change: Just as a follow up historically, we've heard from luminaire and some of your industry peers about a metaphorical battery or preventing Chinese suppliers from securing global OEM contract due to escalating geopolitical tension.
Speaker Change: However, our recent success by one of your Chinese counterparts suggests that the competitive landscape might be more complex than we would have previously anticipated.
Speaker Change: Curious if you could just discuss the competitive dynamics, but it can only regarding you know which competitor you encounter most frequently during the sourcing processes and it would also be helpful. If you could highlight areas spend luminaire excels in bedroom mix shifts out of just compared to the competition. Thank you.
Speaker Change: Yeah, absolutely and.
Speaker Change: As it relates to the China market in particular, I think that was to the credit of our China. There has been significant and rapid development.
Speaker Change: In that market for Lidar adoption.
Speaker Change: You know what Theres now.
Millions of vehicles being shipped okay.
Speaker Change: Accordingly, even with some of the more lower performance Lidar technologies that are equipped on those and I think that's a little bit of a foreshadow for what happens in the western World.
Speaker Change: But I would say more broadly I think.
Speaker Change: The western and eastern ecosystems around it have different kinds of product requirements. When it comes to an OEM standpoint, there are all kinds of performance requirements different kinds of safety requirements and different kinds of capabilities. They ultimately wanted to be able to deploy I also think that.
Speaker Change: You don't really visited the eastern World has been moving more quickly.
Speaker Change: For the initial adoption in the western world, whereas the Western World is going to be the thing that ultimately delivers most of the volume being responsible for on the order of 90% of the global volume.
Speaker Change: Our goal is to sort of position ourselves as the western World leader and we see is there is sort of a dividing ecosystem. There I think over the last three years, it's actually become probably significantly more divided and isolated and I think this is largely what Oems are preparing for an a divided world.
Speaker Change: There's a lot of conversation around Hey, we don't want anything with a single line of you know Chinese code in it you know for example, where they are saying that it could be at risk of.
Speaker Change: Well the entire vehicle platform, if they start doing other private development and engineering work in China.
Speaker Change: With that said.
Speaker Change: I think that there is obviously.
Speaker Change: Some kind of speculation or if there really havent historically been any.
Speaker Change: Production wins for companies within China.
Speaker Change: Outside of that in a material capacity.
Speaker Change: There arent today.
Speaker Change: As far as we're aware.
Speaker Change: But with that maybe.
Speaker Change: <unk> heard a lot of different things don't always believe everything that you read, but but that said when it comes down to it I think to the credit.
Speaker Change: The Chinese ecosystem there it starts to show what is possible.
Speaker Change: Are going to continue to position ourselves as the premium player in the market and I think that's going to really continue to resonate from.
Speaker Change: The greatest level of safety application and the biggest level of widespread adoption for the western World and that's what we're doubling down on.
Austin: I understood that that's great color. Thanks, Thanks, Austin and good luck. Thank.
Speaker Change: Thank you.
Speaker Change: Thanks, Josh our next question is going to come from Winnie Dong Ajay at Deutsche Bank.
Speaker Change: Hey, Wendy.
Winnie Dong: Hi, Thanks for taking my question.
Speaker Change: One question. The first one is on the.
Speaker Change: The alumina now, let's go and think Youre looking for next year I was wondering if you can elaborate on maybe some sort of when you might be looking for is there and it's perfect member contracts are you making.
Speaker Change: Hoping to get one for Pete.
Speaker Change: Yes.
Speaker Change: Yeah, and I would say between all of our key OEM customers in everything from.
Speaker Change: <unk> Nissan to Mercedes to beyond.
Speaker Change: You know all the other ones that we've talked about in the $10 customers. They're generally more detailed milestones from a product standpoint that are included in those in terms of what's needed.
Speaker Change: So ultimately successfully launched with them.
Speaker Change: And the key is of what we've been doing is basically now with a lot of the work being done from the Iris family of products.
Speaker Change: <unk> seen that over to Halo and establishing those milestones. So we already have those.
Speaker Change: For some of those key Oems and contracts in place today, and that's where we're getting the rest of them over that.
Speaker Change: That really I would say the focus right now is around maturing the different component level sub assemblies and report some of which we already have reduction in sub assemblies. Other ones, we're still developing to be able to get to that stage. So.
Speaker Change: We also ultimately will want to have.
Speaker Change: Our product samples in the hands of our very key customers by.
Speaker Change: By year end.
Speaker Change: Yeah, just maybe to follow to that as you.
Speaker Change: Looking to streamline their operations and just curious how that is going to impact your current production with bono across my.
Speaker Change: Just curious how that changes.
Speaker Change: Yes.
Speaker Change: We're doing this in a way where it shouldn't have any material impact on this.
Speaker Change: You rewind to where we were three years ago, we were developing three products at once Iris Iris plus halo.
Speaker Change: Most of the work on Iris it substantially done by the end of the year I wouldn't say, it's going to be 100% done, but I would say.
Speaker Change: There's going to be I would take more maintenance level type of work on that Irish plus as we talked about we're no longer working on that we transition our lead customer there directly to halo. So as we kind of get towards the end of this year, there's going to be one product that the team is going to be working on which is halo and so that is going to allow us to free up.
Speaker Change: I would say.
Speaker Change: Even more resources streamline the operations more really narrow our focus and it shouldn't really impact any of the execution or any of the production on iris.
Speaker Change: Thank you.
Speaker Change: And then in terms of the Opex and the call conduction think O'brien.
Speaker Change: Uh huh.
Speaker Change: Can you give us a bit more detail in terms of you know the incremental actions that will be done this year to drive that backlog.
Speaker Change: Yes.
Speaker Change: Yeah, and if you go back to what we announced in April that is substantially complete when you look at what we did in September.
Speaker Change: I would say we're about halfway done there.
Speaker Change: And I would say that the remaining half will be.
Youll see that kind of ramp up in terms of the savings and ramped down in the add backs through the rest of the year and then because we had been able to stop the work on divers plus that's going to kind of be the next catalyst to kind of streamline the organization. Even further for continued and even more cost savings than what we've talked about historically.
Eric Lee: Eric Lee.
Eric Lee: Got it very helpful. Thank you so much.
Federico Marandi: Our next question is going to come from Federico Marandi on for John Babcock from Bank J P. Morgan from Bank of America.
Eric Lee: Good afternoon everybody.
Eric Lee: So from the press release I gather that your free cash.
Eric Lee: Cash burn might be around $200 million.
Eric Lee: 2025.
Eric Lee: So that leaves you roughly a $100 million at the end of the year.
Eric Lee: Excluding the credit I'm.
Eric Lee: I'm sorry.
Eric Lee: But if so.
Eric Lee: And Tom I think you said that.
Eric Lee: You will need hard for additional $1 million to reach profitability.
Eric Lee: Does that mean that you will reach profitability, sometimes saying at the end of 2026.
Eric Lee: Yeah.
Speaker Change: First of all I think your math is generally.
Speaker Change: Accurate and in line with the guidance that we'd given I think 26 in terms of reaching profitability may be a little bit too soon I think we'd really need to get a halo to the market given the better than expected sensor economics. So I think it shouldn't be too long after 26 for us to get to that level that $100 million. We're doing what we can to kind of continue to too.
Speaker Change: Chip away at our cost structure to reduce that amount as we said historically I don't think were going to be able to get it all the way to zero, but we're making good progress there to really minimize our additional capital needs to get the profitability.
Speaker Change: Understood and.
Speaker Change: You mentioned that.
Speaker Change: Commencing operations with TDK.
Speaker Change: From my understanding is in China.
And we've always said that.
Speaker Change: We haven't necessarily said China.
Speaker Change: Thank you you did the 10-K, you mentioned that the operation in China, We purposely set and in our press release now Asia and weaker Okay got it okay.
Speaker Change: We're constantly evaluating.
Speaker Change: Our manufacturing footprint and supply chain and we'll give updates on what that looks like at some point later this year.
Speaker Change: So, but just clarify.
Speaker Change: Yes.
Speaker Change: I know that.
Speaker Change: I think from what I remember in your 10-K, you mentioned that.
Speaker Change: It was in China, but so my question was so how are you going to mask the pattern for ensco potential ban from pouring technology in the United States.
Speaker Change: Yes, so the ladder that in terms of the ban of technology in the United States that is something that were.
Speaker Change: That is I would say a material impact or material risk at this time for us.
Speaker Change: Harris and like looked at tariff landscape seems to be changing on a daily basis. So that's something we're looking at historically not the geek out too much from a terrorist side or the product we made in Mexico.
Speaker Change: It has a Mexican country of origin.
Speaker Change: We're looking at ways to kind of mitigate that tariff impact in the near term here, if we're unable to mitigate it.
Speaker Change: It's gonna have a modest impact on our gross profit not an immaterial one modest not based upon where everything today is today is significant but we're constantly looking at our lunch menu or manufacturing footprint and how we define our product and minimize that tariff impact both in the near and longer term.
Speaker Change: You very much guys.
Speaker Change: Also mentioned, 60% of our product content coming from Thailand.
Speaker Change: As opposed to Mexico. So that's just one other factor there too that as we kind of think about the broader landscape, we'd want to make any harsh reaction of things keep changing every week.
Speaker Change: Whoa.
Speaker Change: I think as Tom mentioned earlier, we're really the only company from Aligner standpoint, It has a truly global footprint ultimately stop in China. We believe will be produced for China, something outside of that in Asia, or Mexico or consideration of all the rubber will go to different parts in the western World. So I think that that's going to be an important part.
Speaker Change: Have the flexibility to sort of go with the ebbs and flows of the global trade ecosystem to be able to shift. According to this crazy web of.
Speaker Change: Geopolitics and tariffs that we have to.
Speaker Change: Deal with and everyone has to deal with.
Speaker Change: Thank you.
Federico Marandi: Thanks Federico.
Speaker Change: Our next question is Dan come from Marine long on for Mark Delaney from Goldman Sachs.
Speaker Change: Hey, Morgan.
Speaker Change: Hey, guys. Thanks, so much for taking the questions. So well understood on the comments around order book disclosure, but can you try to help us better understand the implications on the backlog from the change from going from Iris plus to now doing that the halo of platform and how that change changes like the quoting process with customers.
Speaker Change: At all.
Speaker Change: It really doesn't change a lot the quoting process here what happens here, it's because halos in an earlier stage of our product development.
Speaker Change: And we have I would say a more strict than others in the industry definition of what we included in the order book. We only include something in the order book If it's an official series production award or equivalent Halo has the guy who meet certain development milestones that are defined in our development contracts with our customers and.
Speaker Change: When hopefully when we meet those then that's when they kind of.
Re convert back into this series production award category, So by our technical definition, because halo it Hasnt gone through the development process you have to get the series production more it wouldn't be our order book, but as we continue to do that it shouldnt be replenished. The other thing I would highlight there is halo is.
Speaker Change: We're going to have better unit, economics, and hydrous or Iris plus so as of replenish it totally replenish it at better longer term economics for the home team.
Speaker Change: Okay very helpful. And then I just wanted to double check that theres been no change to the timeline for Halo is that still expected end of 2026, yes generally in that timeframe and so I think it's you know it's I would say end of 2006 for targeted 2020.
Good to be able to lines at <unk> in 2027 got.
Speaker Change: Got it thank you very much.
Speaker Change: Thanks Morgan our last question is going to come from Tyler Anderson on for Richard Shannon at Craig Hallum.
Speaker Change: Everyone. Thanks for taking my questions Hey, Tyler.
Speaker Change: I just got here, a little bit late but for the ramping development going on for these new logo win how should we think about the timeline for that.
Speaker Change: Are you are you referring to the to the S 90, yes.
Speaker Change: Yes, so what I would say is.
Speaker Change: <unk> has a.
Speaker Change: In our opinion, a pretty aggressive volume ramp for the for the Es 90.
Speaker Change: In the guidance, we've given if you look overall, we've assumed about a 50% haircut the IHS.
Speaker Change: Don't get me wrong, I Hope IHS is right and we're wrong, but we want to be more conservative until we see a more sustainable ramp and so I would say whats embedded in our 2025 guidance I would say is it's not a significant ramp in any S. 90, we are prepared to do it when we see the customer demand we have the capacity in place, but we're not.
Speaker Change: Casting a significant one like IHS is in that.
Speaker Change: For the Es 90, and I would say the <unk> 90, we.
Speaker Change: That's what started production in April of last year.
Speaker Change: We have seen.
Speaker Change: A ramp up there during Q4 and in the early parts of 25, there is the potential for an even more higher production by them once the new China facility comes in but we've been more conservative on what that ramp would look like as well.
Speaker Change: Awesome. Thank you I appreciate it.
Speaker Change: Absolutely.
Speaker Change: I think.
Speaker Change: We're also trying to be.
Speaker Change: Super Conservative more generally we've also we've sort of learned from previous years that you know, we'd rather under promise and over deliver when it comes down to it. So that's why the haircut to volumes I mean, obviously, it's still pretty significant growth with over 200%.
Speaker Change: More than that that we would expect.
Speaker Change: Guiding too from a serious production center delivery standpoint, there that would be driving the revenue obviously the overall corporate revenue growth was.
Speaker Change: A more moderated because of that other kind of onetime renegotiation of non series contract that he talked about from the that's no news from you know six months ago or whatever.
Speaker Change: When it comes to the growth there IHS would be what the equivalent of like 500% growth compared to the 200% growth that we're guiding to so I think it's all upside from here as we launch with E. S 90, and we're counting down the.
Speaker Change: A handful of months here and then Pollstar in Korea as well among other vehicles. So this is kind of the.
Speaker Change: <unk> hundred 90 was division and the start of the wave and.
Speaker Change: Now, it's coming in and scaling up so excited to make it happen.
Speaker Change: Awesome, great to hear it thank you guys.
Tyler: Thanks Tyler.
Speaker Change: That marks the end of our Q&A session I'd like everyone I'd like to thank everyone for sticking around and participating in the call and for the analyst that asked the questions and investors and other folks who've joined US we look forward to talking to you guys next quarter.
Tyler: Thank you.
Tyler: Good.