Q3 2025 Luminar Technologies Inc Earnings Call

Speaker #1: Good day, and thank you for standing by. Welcome to the Luminar third quarter participants are in a listen-only conference is being recorded. After the speakers' presentation, there will be a question-and-answer session.

Speaker #1: To ask a 2025 earnings call. question, please press star mode. 11 on your telephone and wait for Please be advised that today's your name to be announced.

Speaker #1: To withdraw your question, please press star At this time, all 11 again. I would now like to hand the conference over to your speaker today, Yarden Amsalem.

Speaker #1: Head of Investor Relations.

Speaker #2: Thank you, Josh, and welcome everyone. With me today are Paul Ricci, Luminar's Chief Executive Officer, and Thomas Fennimore, our Chief Financial Officer. As a quick reminder, you can find the press release and presentation that the company this call at from Paul and Tom, followed by a investor.luminartech.com.

Speaker #2: In a moment, you will hear remarks forward-looking statements based on the environment as we see it today. And as such, it does not include risks and release and presentation for more information on the specific risk factors that could cause actual results to defer materially.

Speaker #2: Q&A session. Before we begin the prepared remarks and Q&A, let me remind everyone that during the call, you may refer to GAAP and non-GAAP financial measures.

Speaker #2: Please refer to our press

Speaker #2: With that, I'd like to introduce Luminar's CEO, Paul

Speaker #3: Good afternoon, everyone, and thank you for

Speaker #3: quarter for Luminar. Including the developments we disclosed in our AK a few weeks been a pivotal and challenging ago. We're now taking Ricci. deliberate action to reposition the company.

Speaker #3: quarter for Luminar. Including the developments we disclosed in our AK a few weeks been a pivotal and challenging

Speaker #3: And I want to begin by addressing a few items directly. First, on our capital structure, we've entered majority of our secured noteholders which run through November uncertainties.

Speaker #3: 24th. We

Speaker #3: continue to negotiate with our secured anticipate further extensions as we solution to our capital structure and liquidity needs. During this period, noteholders towards a longer-term our 2025 financial guidance remains suspended.

Speaker #3: We've also paused usage of our equity finance, credit, and preferred stock programs while we work toward a comprehensive solution. We may decide to resume use of these in forbearance agreements with the programs in the future, depending on developments.

Speaker #3: As previously disclosed, we've received multiple preliminary proposals and indications of interest to purchase, and we are evaluating the entire company as well as certain of its assets and business lines.

Speaker #3: We have added Patricia Ferrari and Elizabeth Abrams as independent directors to support our efforts. Together, Ms. Ferrari and Ms. Abrams bring extensive experience in banking, finance, and restructuring advisory work.

Speaker #3: In addition, this will be Tom Fennimore's final quarter with CFO. Tom has worked tirelessly with me over the past six months, and I’m appreciative of all the contributions he's made during his time here. I wish him the best in his next chapter.

Speaker #3: I also want to take a moment to welcome our new CFO, Tom Bowden. Tom brings more than four decades of financial and operational leadership across both public and private technology companies.

Speaker #3: Tom and I work side by side for many years in building nuance, and I'm delighted to be working again with him here at Luminar.

Speaker #3: On the LiDAR business. As business front, we are managing disclosed, a future course of our relationship with Volvo will depend on the outcome of ongoing processes.

Speaker #3: We've made a claim for damages and paused further production commitments of IRIS units pending continued challenges in our automotive remain in dialogue with Volvo and are hopeful resolution.

Speaker #3: that we can reach an agreement on a path forward. At the same time, We outlined last quarter. We're pursuing non-automotive markets more deliberately and elevating the role of our LSI photonics business, where we seek continued progress.

Speaker #3: To build across both Luminar and LSI, especially in aerospace and defense. Our technology addresses mission-critical sensing and national photonics needs. These development positions Luminar for the years ahead.

Speaker #3: I'll speak more to that progress in a moment. But first, let me turn to customer updates. Starting with Volvo, the uncertain status of that relationship will reduce or perhaps eliminate the expected volume and revenues from the EX90 and ES90 programs.

Speaker #3: But given the sales to Volvo at these depressed unfavorable economics of IRIS volume levels, this change also will help our cash flow and growth losses.

Speaker #3: We're continuing a dialogue with Volvo, and we'll provide updates when there's more to share. Regarding Mercedes, we do not anticipate further development activity under the current halo development contract.

Speaker #3: Although our technology remains under evaluation for future programs. Finally, our relationship with Nissan continues to advance as we remain focused on meeting their hardware and software program milestones and delivering the quality and performance they require.

Speaker #3: Taken together, the developments with Volvo and Mercedes reflect broader industry conditions including extended timelines for L3 ADAS program readiness and award decisions. These dynamics reinforce the direction we outlined last quarter to move more deliberately to pursue commercial markets outside of automotive, where engagement and near-term opportunities continue to grow and particularly so in aerospace and defense applications.

Speaker #3: Luminar now works with nearly all major developments in terrestrial, off-road autonomy, including Caterpillar, where we recently shipped the first design validation units as we progress towards the start of production.

Speaker #3: We're also expanding into defense and industrial use cases. For example, Forterra, a leading autonomous mission systems company, is currently using IRIS on its off-road autonomy platforms.

Speaker #3: Our 1550 nanometer approach supports operations in conditions where stealth, detail, and reliability are important. It captures a highly accurate 3D view of unstructured terrain, and allows safe navigation without GPS, which has increasingly important as GPS jamming becomes more common.

Speaker #3: Beyond ground systems, we're seeing similar interest in aerial and marine applications. Our work with Lake Fusion Technologies is in early example, where IRIS sensors are being used to help helicopter pilots identify power lines and other hazards.

Speaker #3: We're also supporting partners in marine autonomy for obstacle avoidance and precision positioning. Ultimately, these commercial, defense, and industrial markets represent growing, high-margin opportunities that validate the scalability of our technology.

Speaker #3: This connects directly to the progress we're seeing at LSI. As a reminder, LSI supplies photonics components, subsystems, and systems across aerospace, defense, industrial, and medical markets combining defense-grade reliability with chip scale innovation from concept to deployment.

Speaker #3: As a trusted US supplier and export-controlled domain such as missile defense, quantum sensing, directed energy, and optical communications, LSI is well-positioned to benefit from strong tailwinds driven by rising defense budgets, reshoring mandates, and national security priorities.

Speaker #3: Given that LSI currently represents about one-third of Luminar's annual revenue, we believe it is an under-recognized element of our business. Year to date, LSI has generated roughly $18 million in revenue and we see a path for strong growth from here.

Speaker #3: And unlike the automotive business, which has proven to be a more unpredictable business, LSI benefits from stronger revenue visibility with a significant portion of its backlog tied to multi-year customer orders.

Speaker #3: With strong secular tailwinds, we believe LSI stands to build on this momentum over the next several years. Before turning it over to Tom to discuss Q3 results, I'd like to discuss our organization briefly.

Speaker #3: We are taking steps to align our cost base with our long-term goals. As previously discussed, as part of our ongoing realignment, we will reduce roughly 25% of our workforce by year-end.

Speaker #3: This was a difficult but necessary step to get the company the stability it requires. We expect a meaningful reduction in operating expenses as a result of these actions, beginning in 2026.

Speaker #3: Regarding the supply chain, we are currently reviewing our arrangements with our contract manufacturing partners. This is consistent with our broader effort to right-size our cost structure and align our supply chain strategy with a lower volume environment in the near term.

Speaker #3: And with that, I'll hand it off to Tom to discuss Q3 results.

Speaker #2: Thank you, Paul. Revenue for the quarter came in at $18.7 million. Up about 20% sequentially in 21% year over year. The increase in revenue during the quarter was primarily driven by three factors.

Speaker #2: First, we shipped roughly 5,400 IRIS sensors in Q3 compared to 4,800 in Q2, with the vast majority of these shipments going to Volvo. Second, higher NRE revenue related to development work we are currently performing for our customers.

Speaker #2: And finally, a sequential increase in LSI revenue as we see continued growth in defense and aerospace-related spending. For the quarter, we reported a gross loss of negative $8.1 million on a gap basis and negative $7.3 million on a non-gap basis.

Speaker #2: Q3 gross loss improved sequentially driven by a higher mix of NRE revenue, lower inventory purchases following the previously discussed Volvo program pause, as well as a lower warranty expense.

Speaker #2: This was partially offset by higher shipments of series production sensors and unfavorable economics. OPEX came in at $66.6 million on a gap basis and $43 million on a non-gap basis.

Speaker #2: Non-gap OPEX declined roughly 9% and $4 million relative to the prior quarter in 29% or $18 million relative to Q3 of last year. This decrease was driven primarily by lower R&D spend and continued progress on our cost actions.

Speaker #2: We ended the quarter with $74 million in cash and marketable securities in line with the preliminary results shared a few weeks ago. As Paul noted, we have paused usage of our equity financing and preferred stock programs while we work towards a longer-term solution for our capital structure and liquidity needs.

Speaker #2: We made decide to resume use of these programs in the future depending upon developments. We are also actively evaluating multiple non-binding preliminary proposals and indications of interest to purchase parts of or the entirety of the company.

Speaker #2: We will share updates on this when appropriate. Our change in Q3 was a negative $34 million, below the $31 million level from Q1. This was driven by lower proceeds from our equity financing program.

Speaker #2: Free cash flow for the quarter was roughly negative $48.5 million, lower than the $53.8 million in Q2 and significantly below the $58.4 million from a year ago.

Speaker #2: I'll now turn it back to Paul for closing remarks.

Speaker #3: Well, this is undoubtedly a challenging period. We're approaching it with discipline, transparency, and focus. We're deeply grateful to our employees, customers, and partners for their continued commitment and trust as we navigate this transition.

Speaker #3: And we'll now take your questions.

Speaker #2: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again.

Speaker #2: One moment for questions. Our first question comes from Winnie Dong with Deutsche Bank. You may

Speaker #2: proceed. Hi.

Speaker #4: Thank you for taking a question. I was wondering if you can provide maybe a preliminary update on the direction of the strategic actions going forward in the prepared MRE was at that you're evaluating potential sale or partial sale of the company.

Speaker #4: Just wondering if there is any preliminary indication of interest and what you guys might be leaning forward. Thank you.

Speaker #3: Yes. As I commented a moment ago, we have had interest in asset business lines and, in fact, the entire company.

Speaker #3: And we're in the process of evaluating those as well as other financing interests in the

Speaker #3: company.

Speaker #4: Okay.

Speaker #4: That's helpful. And then maybe in the meantime, in terms of your next-gen product development, is that put on hold or is that still behind the scenes still progressing?

Speaker #3: No, it has not been put on hold. We've maintained critical engineering and related resources necessary to pursue the Halo architecture which we've talked about in some detail in previous quarters.

Speaker #3: And that work continues unabated.

Speaker #4: Okay. Got it. Thank

Speaker #4: you. Thank you.

Speaker #2: And as a reminder, to ask a question, please press star 11 on your telephone. Our next question comes from Josh Patwa with JPMorgan Chase.

Speaker #2: You may

Speaker #2: proceed. Hi.

Speaker #5: Good evening. And thanks for taking my questions. I wanted to start with LSI, could you maybe give us a sense of the size of the business, the intellectual property portfolio, and the current momentum you're seeing with customers?

Speaker #5: I understand that LSI is the result of a series of acquisitions over the years. So I'd appreciate your perspective on how you think about the intrinsic value of that segment.

Speaker #5: Thanks in advance.

Speaker #3: Well, I earlier in my comments gave a little bit of indication of revenues year to date in LSI. Other than that, I can't comment terribly on the size, too much on the size.

Speaker #3: It is a growing business. It has deep technologies in various areas of photonics that I mentioned in my comments. Those range from medical applications to industrial applications to military and defense applications.

Speaker #3: As I've indicated previously and again today, we think it's an under-recognized asset in business line in our company. And we're doing the things necessary to accelerate growth in that business.

Speaker #3: And there has been as I've mentioned strategic interest in that business as well.

Speaker #5: Appreciate it. As a follow-up, while we appreciate all the detail on your auto makeup partnerships, I was hoping you could also share any updates on your relationships with platform partners like NVIDIA.

Speaker #5: Is there continued engagement on that front, especially in light of several major auto makers recently announcing their L4 platforms in collaboration with these platform players?

Speaker #5: Thank you.

Speaker #3: The company does continue to work with platform players. I don't have any updates on partnerships in that area today.

Speaker #5: All right. Thank you. And good though. luck.