Luminar Technologies, Inc. (LAZRQ) Earnings Call Transcript & Summary

Good afternoon. I'm Samik Chatterjee. And for the last session today as part of our auto tech drag on the virtual forum here, we have the pleasure, of course, tech Luminar. And as you can -- most of you can see on your screens, we have the pleasure of hosting Austin, the CEO; and then Tom Fennimore, CFO of the company as well. I know Trey was somewhere there. Trey from Investor Relations was there somewhere, and he's probably now gone back to the booth. But thank you both for taking the time, and thank you for hosting this from your booth. I know these are definitely challenging environments to navigate. So thank you.

I guess Austin, Tom, let me start you off with the first one related to the announcement today. I saw your announcement with Volvo come through today. Maybe just if you can share more details about the announcement. It looks like you're essentially just going to start testing vehicles on the road in California this year. That was the kind of crux of the announcement, as I figured, but I'm sure you have more details around it. So over to you.

Yes. The punchline is at the end of the day, we're fully on track to be able to execute. We've been meeting all the key milestones with the program and are prepping for the full-scale launch come before the end of the next year for us for a series production. And for the big unveiling -- or I could say apologies at the end of this year now for series production and as well the big unveiling of the vehicle later this year. With that, we actually showed off here in person the concept recharge vehicle and sort of the manifesto for what all the future mobiles will look like, which has been integrated into them. And it's really cool to be able to see everything come together with these guys. So they're also the -- now I think the first company to be moving forward with the whole certification process for a production vehicle for autonomy when it comes to California, and it's already effectively certified for other areas around the U.S. So when it comes down to it, there's a lot of head with all of related groundbreaking [indiscernible] and will be unveiled later this year. So [indiscernible] and all those respects providing our [ stockholder ]. And we're starting to show up capabilities that these kinds of systems will have already [indiscernible] proactive safety, as we call it, a full [ tax ] solution for vehicle as part of our [ sector ] software speed. [indiscernible] a track where you can try to provide for [indiscernible]. But with assisted vehicles [indiscernible] software consistent safe stop, and that's the kind of thing that they're standardizing, that's that whole driver beyond the decision with them. And at the same time, why we're continuing to move full speed ahead, and we're fully on track to that specific [indiscernible].

Okay. So Austin, you -- I think because of the way the Bluetooth is working, you're breaking up a bit. And so I'll move ahead with the next question, but maybe just go slower with your -- just slow down a bit.

Yes, there's actually...

Operator, how do you hear it? I do definitely hear him breaking up a bit. Let's just continue, Austin, and maybe just speak slower. That should be -- hopefully, that...

I'll grab this -- hang on 1 second. [Technical Difficulty] Thanks, guys. Sorry. Ben was here at CES actually. Can you guys hear us okay?

Yes, that is much better. Sounds a lot better.

Okay. We're going to have -- one second. Do you guys want to position to move the camera?

If you have to do it off-camera, that's fine as well. Don't worry.

Well, we can just move closer to the camera.

Yes. That's great. Thank you. So Austin, let me move over to the next question, which is, I mean, clearly, you have deep association with Volvo, and you've made a lot of progress on the vehicle -- next-generation vehicle platform there. You are no longer like unknown entity in terms of being a lighter supplier to most OEMs, but Volvo is renowned as an OEM for automotive safety. So how has that enabled a lot of the -- like how has Volvo served like almost like a beachhead customer in translating a lot of the other customer wins for you? Are you able to hear me?

Yes. [indiscernible]

Yes. [Technical Difficulty] Yes. So essentially what I was getting to with the next question is, clearly, you've made a lot of progress with Volvo and other OEMs as well. But a key difference that I see with Volvo is Volvo's known in the OEM landscape as the automaker, as for safety, right? It's known as a leading safety, OEM for safety. How has that turned out to be like a good beachhead customer to help you translate other customer wins largely as you look at the landscape? I know you're no longer like an unknown quantity in the LiDAR space. But still, how has Volvo -- that partnership with Volvo helped you translate and convert a lot of the other wins?

I would say that at the end of the day, I think it's -- the impact is less in not necessarily us winning or not with a program. That's one in every major opportunity that you explain when it comes to the ad landscape specific thing. But what I would say it only solidifies everything about the business, the business level. They definitely have to be able to success in it. And the reason why is because, number one, they are the first to really introduce that technology proving out working day in and day out with us as kind of, as you say, beachhead customer that really shows what's possible. And it's not only standardized, now it's actually the volume that's necessary to be able to successfully get the economy of scale, the economy of what's needed. So there's a lot that's going into that, and that ultimately benefits the broader entity as well. The reality is that right now when it comes to autonomous vehicles, they're really autonomous [indiscernible]. The largest fleet out there today is [ Waymo ] and [ fiber vehicles ]. And then that's not nearly not to build any type of economy of scale on things like $10,000 roof racks. So the whole point is that if you have to be able to expand into this high volume of opportunity to make all this work. And it's not hundreds of [ us ], but hundreds of thousand. Today, that's exactly what we're going to pull. So that's already the year important. Everything else is a strategic icing on the cake on top of it over the next few years. But of course, what [ rallied ] earlier today with Volvo was 100-year vision for the company. And with that 100-year vision, part the objective is to ultimately to step by step, Volvo see this massive impact [ to be able to save up ] as well as 100 million lives and 100 trillion of time over the next 100 years. But as I said, it doesn't have to be that long [indiscernible]. Most major automakers are already starting to standardize technology by the [indiscernible], and that's something that's historical early adopters like Volvos of this world and that [indiscernible] adopters over time as people [indiscernible]. This is [indiscernible]. It's not a question of if but a question of when.

Clear. Moving to the next big partnership that you have, that's on the NVIDIA Drive Hyperion platform. Can you -- I think that was a more recent announcement around your earnings call. Can you talk about the magnitude of the opportunity? Any details about how the sensor suite looks on that platform? What hardware/software opportunity do you see for Luminar on that platform?

Yes. When it comes to NVIDIA Hyperion platform, it's something that we're excited to be working closely with them on. They selected us as part of the team [ LiDAR ] provider for the [ OLED ] platform and they try to see what we're doing. So this is something that I see that partnering with them relative ecosystem player is going to be really important. Obviously, you can look at folks like them and Mobileye, we really part with the 2 key players that are driving forward the [ safe ] ecosystem level push into the broader industry. But it hasn't gone as well working directly with the OEMs. But at the end of the day, it's one of those -- I think we went to sales, we want to scenarios if NVIDIA, Mobileye, some wins that [indiscernible].

Yes. So let me just follow up to that. And I mean, clearly, you have a partnership with Mobileye. There's the NVIDIA partnership. I know Qualcomm is now trying to position itself as the compute platform on autonomous vehicles as well. When you think about the opportunity in driving that partnership to a solution for an OEM, how do you think about the opportunity there versus going directly to the OEM? Do you see a different set of OEM customers willing to engage directly with you versus ones that are looking to engage with you through NVIDIA or through Mobileye?

It started certainly year 2. So I think Hyundai has had a rating of how they started, but [indiscernible]

Yes. So essentially, the way I see it is there are a set of OEMs that are willing to engage with you directly, and then there is the partnership that you have with NVIDIA and the partnership with Mobileye, which sets up for a platform kind of solution to the OEMs. When you think about the OEMs that are willing to engage directly versus go across and engage with you through NVIDIA or Mobileye, how do you see around -- think about in that opportunity set? Or which are necessarily the -- is it a different customer set looking at the 2 different business models?

Yes, it's a great question. And I think at the end of the day, we're going to end up working with the OEM in a significant capacity in any scenario. It really is a question of what level of capability do they have. And that's where from a software standpoint, this is what we've been developing as well as to be able to really provide that end-to-end full stack solution. So it's really much whose stating the lead altogether, but [indiscernible] with the OEM for all of those different provider equipment. So effectively, we have these other system-level companies that are pushing the same products that we're pushing at the end of the day in LiDAR standpoint. And then from a software standpoint, that's an opportunity to be able to get additional value on the vehicle. And really, what we have today and what we're showing about at CES right now is what everyone else is playing deal they want to do, even with ourselves. So we actually have the solution that works very well. But there's not a lot left to do from the standpoint. We'll have -- I think we're pretty proud of how far we've gotten. And our OEMs, they see, have been pretty along they way by what they're seeing so far here, bring various CEOs of different OEMs through the track and seeing what's happened, people [indiscernible] of what's actually possible. And not to mention, by the way, sometimes even surprised by the lack of performance of what their existing cars are and their existing systems. I think it's something people that realize really how low the [indiscernible].

Yes. Got it. Let me move over to another aspect here, which is your recent announcements of wins with Embark and Kodiak Robotics. Just kind of if you can talk about what do you think -- how are you thinking about the magnitude of those opportunities and the most importantly, the timing? Is there a shorter is there a difference between the lead time to get to revenue versus a light vehicle customer when you think about those wins? And the other follow-up to that, I think you did not account for it as a commercial win because of certain ways that you want to account for commercial wins, and if I got it right, based on the earnings call that you had. So maybe if you can clarify that? Is it part of your commercial wins for the year. If not, why?

Yes. So the Embark and Kodiak are 2 customers that we're very excited about to work with, and it really reinforces our leadership position in the commercial trucking landscape, particularly with the Daimler truck announcement we made in 2020. What we've done here early is we set the bar high of what we call a major commercial win. And Embark and Kodiak, those are 2 customers and relationships, that confidence over time can develop into a major commercial wins. We would just like to get a little bit more visibility into what the revenue opportunities would be over time. We try to think with them as not only the major commercial wins, but in our overbuilding order book calculation. And so we set the target initially at the beginning of last year about wins. We upped in 6. Actually middle of last year, we hit that target with the NVIDIA announcement that we announced in November. And in our forward-looking order book, we got major wins. And Kodiak and Embark, great relationship with us, very profitable customers over the longer term, and we're confident at some point in the future that the magnitude of revenue opportunity gets to scale where it kind of meets our definition of major wins.

Yes. You can call it what it's like. In the case for example, diode trucks. It's there, for example, on a major commercial in a large producer and commercial trucks in the world. [indiscernible] companies, the biggest rate, but there also trucks of the world. I think NVIDIA, it's all about the safety [indiscernible]. I think you see as it's just getting [indiscernible ]. I think it goes -- companies are also going to partner with some to be able to drive solutions at the end of the day. So that's certainly one of the things from a trucking standpoint, I think is really interesting and this is something even overlooked a little bit is what we did just announced with the platform called [ late ]. So they were called last year. We actually have studio day, the design vision for the future of what economists more like 10 years in the year. Well, we celebrate all that work today and be able to work that product. But for truck, we put a design duration that we think will provide this [indiscernible] as part of a holistic reference solution and this is something that we think is only going to accelerate trying to adopt type market, for our trucking partner and customers as well. As part of this integration, again, [indiscernible] getting through more production like integration. We've got a picture and also with the concept car in our exhibit. [indiscernible]

Yes. Okay. Got it. Moving to the industrialization update that you provided that you're on track on that front and in developing the C samples at this point. In most companies, I'm talking to are still doing B samples. So obviously, it looks like you're also ahead and on target in terms of your plans to industrialize the product here. But maybe talk about what do you need to do further from here on to get that product finally into the final shape that you wanted to be. Now that you're in C sample, what's remaining? What are the milestones for us to track?

So when it comes to this, I think the big next side [indiscernible], and it's our production. I mean that's the goal. And we have some samples of [indiscernible] and also basis [indiscernible]. When we update on that, the big one is getting to the stage where you go to SOP. And ultimately, that's important to be buying customer. So it's not taking control, but that's something that we're certainly looking forward to launch here. And to make that not only through our partner, we also need to make sure that the software is running production as well. And so we achieved more or less what we said how do last year in 2021. The goal this year is to be ready to go by the end of the year for the software.

Yes. Okay. Yes. Yes. Makes sense. So I think you were already talking about releasing or launching the Alpha version of [ Sentinel ] software, [ FCS ]. What's -- maybe talk a bit further about what's your vision for the full stack solution in terms of abilities that you want to develop further on Sentinel at this point? And how you're thinking about the timing of getting to a full stack solution? How much more improvement needs to be done on the Alpha version to get to where you envision that software as a full stack solution?

Yes. So it's a good question with all that stuff and I think what comes down to it from a full stack perspective, it's going to be absolutely critical to how we are able to successfully see the widespread adoption of this technology across the broad range of spectrum. [indiscernible] vast majority of companies don't have a solution. There's a full stack of solution [indiscernible]. As a result, even if you have the perfect LIDAR, you're only going to get so much traction to adoption to execute in the broader things. But I would say that [indiscernible] is to enable to expand the value of [indiscernible] and enabling the super vehicle app that is produced with all of these systems. So with that, we're still keeping the software as an incredibly important focus. Again, we're showing about the capabilities. It's not some future [ promissory ] end-to-end. We're showing off what we can do today and consistently and reliable, and that's what makes all the difference. So it's a very cool system here. And for everyone here at CES, I would encourage you guys to be able to check it out live. Again, it will roll out on [indiscernible]. Actually, it's live examples [indiscernible] to confidence we have in it. So with that said, that's for the [ proactive ] stuff with also the high [indiscernible] economy aspects, which we think we have a much more expanded focus for the vast majority of others on the cable companies that afford the global tax we don't make. Again, our role is not trying to price the driver together. We've been migrating cable. It's strength is the driver has [ superprime ] type capability with any load, and that only saves time with high autonomy and trade high on the environment specifically. So that's what we're enabling, is really good for the side to be able to [indiscernible]

Got it. Okay. Okay. So on that front, obviously, you will have the hardware capabilities, which are differentiated. You're developing the software to increasingly look like a full stack solution. When we think about what the nature of the automaker wins look like with most technologies that automakers adopt, they would long want to do a dual sourcing or a multi-sourcing of the hardware. So when you think about the longer-term trajectory here, do you see -- I understand most automakers are today looking at sole-sourcing LiDAR suppliers. They're not willing to take the risk of dual-sourcing or multi-sourcing at this point. But at some point, do you envision a standardization of the hardware to enable dual sourcing and then the value to more treat to the software?

Yes. And some of that there, too, but I think it's probably tools or single-store focus. The reality is that you really have to be able to work with the given systems and all the stack with the integration and everything else that's involved. I haven't heard of any one that is able to or planning on even finding to dual source something now or in the future as it evolve. It's really already hard to try to do something once with all of this. But with this standpoint, I think we're still in the old system that people used, the performance requirement, taking on requirement, scalability requirements to be able to stack to test a level of capability in the same way. So I think that's what we really rely ourselves on. I know the other companies that have built up great models. Mobileye has a great model to [indiscernible] still on themselves. They've really been moving in their respective spaces, and that's what we've been doing here when it comes to LiDAR, software or production [indiscernible],

Okay. Let me end with a couple of questions for Tom. Tom, not looking for a 2022 guidance as such, but you did have an order book growth of 60% in 2021 if I have that number right. And given where Luminar is in terms of progress on customer traction, one would expect that you're kind of closer to an inflection in terms of wins at this point. Is that the right way of thinking about it? When we start thinking about 2022, is -- should we be expecting an inflection in terms of customer traction and award wins and such that the order book looks much stronger compared to the progress that you've already made in 2021?

Sure. So let me just kind of reiterate that at the end of 2020, December 31, 2020, we had a forward-looking order upsize of $13 billion. And so that is for our major performers. And remember, we've already talked about this. We try to set the bar in what we call feature commercial wins. These are wins where the customer buys LiDAR on a bench layer tested. These are wins where the customer made a conscious decision to select our technology [indiscernible] player to put on series production or [ covalent ] vehicles. And so when -- what we do then is for those mature commercial wins, we look at the volumes for those wins over the life of the platform. We will look at a third party like IHS. Or if IHS has the data available, we'll take what our customers tell us in a lot of time about that, more realistic outcome and the price that we reached with customers and some that up over the last platform. Assuming no renewal, that's the forward-looking order book. So we have to have one business there. This is a high profitability stuff. This stuff we think we're going to win. This is like business [ demand ] positivity, a bunch of stuff to come. This is just what we've won project cost. That was $1.3 billion. We said we initially expected that to grow 40%. In 2021, that increased to 60%. If you kind of inferred the guidance, we are in the process of selling it off. We'll -- we do our year-end update on the where we kind of came out precisely on that, and then we're going to set the guidance for 2022 in terms of what we expect major wins [indiscernible]. Needless to say, we said the business outlook has been the best it's ever been in the history of Luminar. We're not done with this. We're not a position today to kind of give guidance for 2022. We'll be [indiscernible]. But as I said, the business movement is very strong.

Okay. Okay. And Tom, maybe as a last question here, can you talk about the balance sheet strength, which obviously is critical for a lot of LiDAR companies to continue to kind of drive towards wins while maintaining liquidity here? So how important is that as a differentiator for Luminar compared to smaller LiDAR suppliers? And obviously, as part of that, we can talk about the recent, I think, transaction that you announced as well.

Sure. So we -- when we went public in 2020, we raised capital plus for us to execute on our strategic plan. We saw an opportunity to raise money opportunistically a few weeks ago right before the end of the year, where we did a $625 million after agreement was exercised. We cashed the money to fund our share repurchase plan. And that, plus buying cost spread over late by the premium 200%, the share repurchase will effectively offset the dilution if we're able to double our stock price, so basically take it from $15 to $30 over the next 5 years. We're very confident as a management team and Board that we execute on our plan that we can double our stock price. And so if we do that, what would effectively then happen because we do the share repurchase, plus the [ convert ], that neutralizes the dilution and then be effectively ended up racing cost spread related to the share repurchase, about $225 million of net proceeds and we're paying about 140% interest rate on that. And so we view that as an attractive financing. Now the key to it is you have to be confident in doubling your stock price for the next 5 years. And the kind of the non-intuitive thing is you're more confident in being able to do that when your stock is trading up when you [indiscernible]. And so we view this as an opportunistic financing, so we will do trigger on it and extend [indiscernible]. We said we're going to hear it somewhere around $0.5 billion of cash for this transaction. And then after the share repurchase and cost [indiscernible], we're going to add up a little over $200 million of that balance. And so not only does that gave us the capital to fund our strategic plan, it gives us more capital to deploy it on very high future growth initiatives that we've identified. We talked about some of those where because we went bolus standardization last year, our customers are telling us to be [ care ] to produce more units in 2023, then we'll visit our initial plans. We're going to have to accelerate some of our capacity expansion plans. We're expanding or accelerating our expansion for certain geographies. We're seeing some very attractive opportunities for us on the software side. We see these proactive safety development. That was all developed in a little software [indiscernible]. And then we've also talked in the past about the insurance initiative. We're starting to get some customer traction at that point, and we're going to be accelerating its element in there. And I think so we have a great value team here. We made it better with this opportunistic financing last year that we did. We've also been I would say our targeted on some really small and bite-sized M&A opportunities. We did the rate last year in vertical integration icons or supply chain. I think there's a number of other opportunities out there that could present themselves in the future. And then we also find fixed this as a strategic, I would say, very small but important strategic investment in [ motor ] research at the end of last year as well, which is going to be a great partner for us on the government side as well as the selective various on the commercial trucking side. So and so we have a great balance sheet, and we're playing to set to continue to grow in our business and invest in very attractive growth opportunities for us.

And we take a clarity with the capital that we had before the extra [indiscernible] the big double [ dent ] on our sell repurchase. We had 2 profitability business. We want to access with that. So this extra capital on additional firepower, additional investments in and other key areas to accelerate our growth. We're working [indiscernible].

Got it. Correct. Great. That's -- we've run out of time here. So thank you all for taking the time to do this.

Thank you very much.

Thank you. See you tomorrow.