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

Okay. Great. Thank you, folks, as we continue the Barclays Automotive Conference, day 1. And very pleased to have with us Luminar, a leader -- or the leader in LiDAR, I guess, you would call yourselves the leader.

Global leader.

Global leader.

Or the independent analysts to do it.

And we have both Austin Russell, the company's Founder and CEO; Tom Fennimore, CFO; Yarden Amsalem, who's also IR. So we'll go through a series of questions. Anyone who has questions in the room, please raise your hand. Or if you want to ask questions, if you're on the webcast, you can reach out to my colleagues, [ [email protected] ] or [email protected]. So with that, Austin, Tom, thank you. Welcome. I don't know if you have some opening remarks or do you want to give any update?

That's good. Great to be here. Thanks for hosting, and glad to know -- glad it all worked out, can stop by with all everything going on and meetings out here. So I'll be excited for kind of whole next phase of everything that we're working through, for everything across products and technology, working from the semiconductor level up through the rest of the LiDAR through software systems. And obviously, we had some good updates from a commercial standpoint, just recently from our Q3 business update, just recently in terms of both advancing the commercial side with a couple of key customers, including kind of major Japanese OEM and advancing to the next phase with a new advanced development contract to be able to have LiDAR on the vehicles and ultimately, as standard and progressing forward with Halo with that. At the same time, being able to advance the work with Volvo of being put on the next model in their platform. And as they've seen the success of what we've been able to execute with the EX90, which is officially now launched, available and shipping to dealerships around the world. I think Volvo has about over 2,000 dealerships globally. So it will be exciting to be actually to get out there, full speed ahead, really have that start ramping up and driving the business, which is that's the first major global production model to have our technology and frankly to have any LiDAR standard at this global scale. So that's good updates. And the other major one that we had recently was bringing Halo alive, so to say. That's the next-generation LiDAR that we had. I actually saw that we had a model here with the team. So handily just put it inside the pocket, which -- here you go. That is next-generation LiDAR and it's right inside the pocket.

Right inside your pocket. Perfect. That's the best prop we've seen today.

It's less than 1/3 of the size, substantially less than half the cost, maybe even more in terms of the improvement and 4x the performance of Iris, the Iris family of products. So that's something that we're really is that step function-type improvement in capabilities, so you can see it go from something that's more focused on showing the world what's possible, which is what Iris was and get an initial global series production launch model, which was EX90. And then, obviously, there's other -- host of other and plethora of other vehicles there as well. But Halo really is that next-generation product that's out there that is going to enable the industry to start having this standardized at global scale across not just initial pioneering leaders in the industry, but across all mainstream models that enable that capability. So that's a significant event.

So we just -- very helpful comment. If we just put a bow on like where you are in your journey? Fair to say that the last year, you've now started the path of scaled commercialization. And now the path forward or the key task ahead is ramping on that scale. Is that correct? Is that a fair assessment?

Yes. Yes. I think it's fair to say that we were able to establish ourselves and really be the first company that can show how you can go through the excruciating -- the intense technology development and industrialization process over a number of years to meet these global OEM standards and launch on the vehicle. And then subsequently, it's exactly that. It's now it's all about scale. And I would say there's different levels of scale that we're talking about here, like something, for example, with Volvo in terms of what we're launching on. We're about to have more cars with LiDAR at a global scale than all the other kinds like Western world efforts combined. You take a look at traditionally in the autonomous vehicle space in the world between what are normally like robotaxi-like players that have LiDAR deployed on vehicles like Waymo, Cruise what was Argo before, but Aurora, Zoox, Motional. We're talking on the order of a couple of thousand cars across the U.S. And that's something that is just a small fraction of -- a tiny fraction of what production for Volvo is. I mean, I think we said -- I mean, even the initial part of the ramp-up is already more than that. And this is a very, very tiny front end of that exponential curve. So it's going from 4 figures to 5 figures here shortly over the coming months in terms of shipments there. And that's going to allow for the first time for this kind of global network of vehicles that are collecting data, measuring the environment down to centimeter-level precision and feeding that into an AI model, which Volvo has actually built out one of the largest GPU data centers in Scandinavia to be able to process this data and work with it. It's just an unprecedented level of capability. And that ultimately translates into better safety on cars, more autonomous-like capabilities and other kinds of features as that develops and as they collect the data and that they can roll that out. So that's where it gets interesting. And let's say, you're talking about scale, that's still what we're talking about tens of thousands, hundreds of thousands of vehicles though, that's still quite -- while it's huge relative to what the rest of the industry has had in terms of initial vehicles that are being rolled out, that's still very, very small in comparison to the opportunity that we have when you start to go across a bunch of different vehicle models, start to be standardized on more vehicles. And if we're going to the mainstream model, that's when you're talking millions of vehicles and the huge order of magnitude jumps of where you can start to see those effects that folks like the Mobileyes and NVIDIAs of this world and other folks have capitalized on in their spaces, and that's been very successful way.

Maybe you can help us characterize where the current advanced ADAS, L2+, L3, whatever you want to call it, where that environment is right now? What's the bidding activity? What are the -- can you talk about the programs that are out there? Are these high-quality, high-volume programs? Paint the picture where the environment is right now.

Yes. It's a great question on this. And I think there's a lot of nuance in all of these things and sometimes people try and bucket things into like bidding on X or whatever it may be. The reality is that different companies have different needs. I think they have different needs, different companies, different solutions around the products and capabilities. And ultimately, when we're in conversations with OEMs it's really more -- it starts with the question of what exactly are you trying to solve. The first thing I'd say is that even for just a base L2 case, there's the question of why pay for LiDAR for Level 2. And the answer is absolutely not. You don't need LiDAR for a basic level of assisted driving if you're constantly paying attention, hands on the wheel on the road, where folks like Tesla and Mobileye and other stuff have been doing this for quite some time. If you want to be able to advance that to substantially improve the safety of those systems, to actually start working on active safety, where it takes over control from the driver when it senses that you're going to get into an accident and/or ultimately can enable the higher levels of autonomy, Level 3 and above, in particular. That's where LiDAR fundamentally comes into play as an absolute necessity because you need that step function improvement in terms of performance and capability to be able to deliver those results. And I think ultimately, cars are getting smarter. That's a trend that isn't stopping. And that's, by the way, completely independent of the whole debate around like EVs and adoption rates of that and combustion engine vehicles, cars across the board are getting more capable. They're having more over-the-air type update capabilities. And at the same time, they're getting the kinds of processing power from companies like Mobileye, NVIDIA and Qualcomm that are needed to be able to process this next generation of data to make that happen. And I think that's where -- it's clear that this is going to be a fundamental value-add for any car in terms of more advanced L2 capabilities that are becoming standardized across the board. But ultimately, it's going to be a fundamental requirement for L3 and above. And others are going to start in higher-end vehicles and then ultimately roll its way out. Folks like Volvo are saying that, hey, not only is not going to happen, but we're also already going to be starting to put these on cars for the improved and advanced safety, and it's the same hardware that enables both. And I think that's a trend that we're going to continue to see throughout the broader industry, just as Volvo has led being the first global company to work with those 2 examples that I gave before, with like Mobileye and NVIDIA. I mean, heck, they were the inventor of the modern seatbelt even, 50 years ago, and they're continuing that trend -

Another question similarly as we're talking just a moment before about sort of EV adoption. And I think one of the ideas in the past is that while you're powertrain-agnostic, many ways ADAS has been sort of completed with EVs. And in many ways, we saw a lot of advanced ADAS uptake on EV. So with EVs going through the EV winter or whatever you want to call it, in U.S. now unclear what the path forward is on EVs or what the shape of the curve looks like. What extent has the sort of EV slowdown and the delays of some of these launches impacted the curve of ADAS uptake?

Yes. It's a good question around that. And I think it really is an independent conversation when it comes to EVs relative to the technology roadmap, so to say. I think that there may be even more intertwined initially just because there was so much of a focus around the EV models in part because I think a lot of automakers like all these are going to be the best-selling things that we want to be able to put forth and really put a lot of energy into it in terms of trying to get it to market as quickly as possible. But at the same time, I think that over any appreciable period of time that it's less relevant. And now they've been importing a lot of that same technology they've been developing initially with the EV models over back to the combustion engine modals. So I would say that the -- from a demand curve standpoint, the decision around whether you want a battery in your car or use a traditional combustion engine is really an independent one of the kinds of technology that people would want. And I would say that it's probably for the initial phases and part of what we've seen there's a little bit of a headwind around particularly getting these cars to be able to initially launch just because it's so much effort and work that goes into these new platforms, and that's kind of what happened with the EX90, why it was a year behind than what they were originally hoping to be able to deliver it on. But in terms of the end effects of what they're seeing, it's no different. And that's where it's really given, I mean in the case of Volvo, they've obviously been pretty successful with -- as they're ramping that up. But I think with other automakers, the EV side of it and the ADAS side of it are kind of being decoupled, where that will be rolled out across the rest of the model. And by the way, it's the same thing for the current ADAS systems. It's not like a combustion engine car fundamentally has dramatically less capability than an EV too, for that matter.

Maybe one last one on environment. And maybe you could give us a sense of your -- how you're splitting your sort of commercial development or your relationship building between core advanced ADAS, where it sounds like you're saying the need for LiDAR is still there versus L4 driver-out applications. Is there still any justification for your efforts on L4 full driver-out?

Here's what I would say. The LiDAR that we make will enable the ADAS system as well as autonomous system, whether that's like the L3 highway autonomy or an L5 robotaxi. For robotaxi, you're just going to put maybe 3 or 4 of them on a vehicle to get the full 360, but it's the fundamentally the same LiDAR. What I would say is in the current environment where we need to be more conscious of our resources, where I would say we are differentiating is when we are pursuing a program in the near term, we are assessing it commercial viability and its technology viability. And I would say we're more likely to prioritize the programs that are L0 to L3 because we view them as being viable and more likely to get to market in the near and medium term, whereas anything that is L4, L5, we -- it's still business we want, but it may be less of a priority because we -- through the experience we've had, this stuff is tough. And to get the L4 and L5 to market and to get it in scale in the near and medium term, we place lower odds of that happening.

Great. I want to go back to some of the comments you made earlier on more ramp of Volvo. How is this informing the potential for you to be -- have greater take rates on the future sort of EX90? And then maybe we can dovetail that with, you mentioned there is another model that was announced, and you're going to be standard fit on that. Maybe we could compare-contrast sort of specs or timing or what we should expect on this next model?

Well, the most important first point around is that the take rate is 100% for the EX90. And this is something that's a deliberate decision by Volvo. And I mean, I think ultimately also reflective of customers wanting these more advanced technology systems. And when it comes to a safety standpoint, which is part of the belief of where -- that consumers could almost have more of a fundamental right to safety rather than it being optional on a vehicle, is something that's reflected not just in the initial model there, but that's why there's always a question of, hey, is that just like a one-off that would happen? Or is this something that can be able to continue? And yes, they've announced the same now on the next model that's coming. So I think it's fair to say that this is something that can make a massive difference when it comes to an ADAS standpoint. And this isn't just us saying this. This is across the industry, not just automakers, but also even some of the independent providers like in the insurance industry, one of the largest reinsurers in the world is Swiss Re, who did an independent study around the safety rates and accident rates and the opportunity for improvement with the LiDAR technology that we have and determined that there is up to a 40% improvement by reduction in accidents and severity of those accidents. When you have the LiDAR on the vehicle where it can see these different kinds of scenarios and situations and be able to save countless lives, reduce massive costs associated with that insurance and just be able to provide dramatically better performance and visibility than any kind of existing camera, radar systems and even the best ones out on the market today. So -- and those aren't just your average ones. Those are even compared to the best-performing and the safest vehicles in the planet today. So it makes a big difference. And I think Volvo has historically led the charge in this respect when it comes to these kinds of innovations, and that's not stopping and just as with, I think, the trends for L3 and above, which will continue, this is something that I think has an opportunity for even faster adoption than just the higher levels of autonomy as well.

Can you talk about where you are with the Polestar production launch? You're on 3 and 4, correct?

Yes, absolutely. So we are on -- yes, in reference to the launch.

Polestar is [ going to be ] Polestar 4 and 5. But 5 is not being produced yet. So yes, but wait, there's more.

To be added as an option, and I think you're going to be able to have cars with that -- with the LiDAR being produced next year.

Yes. So I think Polestar actually just recently announced they officially have their SOP for the Polestar 3. So that's something that from a launch timing perspective because it was a similar timing to EX90 basically engineers had to work on EX90 first. And then there are some of the same resources because Polestar previously was a part of Volvo and get that integrated into the Polestar vehicle. So we're really excited to be able to do that, yes, come the first half of this coming year. I mean, we're on track for start of production with them. And we'll be launching that vehicle shortly. So it's -- some of these models are happening in rapid succession, same thing with the new one that we talked about, announced. That's not something that's like years away, like this stuff is coming right around the corner and you can even count it in months, as these additional vehicle models launch with Luminar technology.

Is there potential for expansion within the broader Geely family?

Yes. Ready to share with you when our customers are ready to share on that topic. But I think we originally as part of Volvo. We're now at Polestar, we have a strategic partnership with ECARX, which is the technology arm of Geely. And so that is something that we're confident is going to continue to bear fruit with the broader brands within the Geely brand.

Can you talk about your geographic presence. And specifically, what are the demands of your product from a cost or performance standpoint in the West versus in China? And maybe sort of what are the uptake trends? I mean, obviously, it's still very early. I don't recall offhand if EX90 is being made in China. But what are the differences in your product in the West versus in China?

So first, yes, the EX90 is being made in China. There's 2 plants where they're making them, the South Carolina plant where they're currently producing them. And then the Chengdu plant in China, which is they're going to start producing them in scale at some point here in the near future. The reality of the situation is there's no difference. The same product we have is the same, whether we're producing it in Mexico or in our launch probably sometime within the next 12 to 18 months plant in China with TPK who will be our manufacturing partner over there. So it's the same product. The applications may be different depending upon the geography in terms of what the OEM is going to use to deploy it. But for us, it's the same product.

And I think that standardization of the products and the technology and other stuff is super significant around the globe. And we actually -- we announced just recently that we have also our first shipments to Volvo in China as well for that matter. So that's something that for the start of production that they have out there. So we are a truly global company in that respect. Obviously, China is kind of a world of its own, between the local players that are there. But when it comes to -- I mean, half the volume in China is actually global OEMs shipping into China. So -- which is -- I mean, if the global OEMs are 80% of the rest of the market, then it becomes 90% if you count those vehicles that ultimately ship into China. But yes, I think that standardization is important. You see the same thing as well between the advancements that we've had for Halo, the next-generation chips are all going into this from leveraging the core technologies and innovations and the $2 billion we've invested over the years to be able to get the technology that can truly meet all of those very challenging requirements and industrialized accordingly to be able to be in a standardized global automobile. And I think we even announced previously that we would, at the same time, also even be sharing more components like, for example, with Iris+ and Mercedes as we ultimately transition to next phase and kind of new contract with them where they are a simplified product that will -- that cost things down by leveraging more components even from Iris as well. And all of those things are ultimately reflected now that we made the investments to be able to cost down a lot of aspects of the organization. And you can start to see some of the effects of that also. I didn't mention at the beginning, but even the results that we had, we were able to improve our free cash flow quarter-over-quarter by just over $20 million, for example. And all that's from a lot of these standardization synergies that we've been implementing.

I think you've touched on a number of points on Halo, but if we could just -- what is the early customer feedback when you've had discussions with customers on Halo? And maybe you could just remind us of the magnitude of sort of cost benefits versus Iris or performance benefits? And in 2026, you cited at timing, what types of programs do you anticipate adopting Halo?

Yes. So I would say, again, really where the Iris family was meant for more very high-end vehicle models as an initial showcase of what's possible that you can launch on a global production vehicle and that LiDAR isn't just for a robotaxi prototype, but actually can go into the hands of consumers, and you can meet the level of standards and economics that are needed. I mean, previously, the sort of mentioned LiDARs were like $100,000 a piece in that very low performance. We kind of shook up the industry, the market by bringing that cost down to $1,000 below and at the same time -- from a pricing standpoint, at the same time, being able to dramatically increase the performance of the capabilities of the technology. And that was reflected in the Iris family. And we're doing the same thing all over again when it comes to Halo. And that applies from -- like I mentioned, like a 4x performance increase, less than half the cost. It's really driving the innovation cycle forward and allowing this to be like equipped on more mainstream vehicle models. So I'd say for the majority of major OEMs, I mean we're in a conversation around Halo for integrating it into their road maps. And I mean I'd say this is that as of today now, the majority of the large automakers actually already have a plan to be able to have long-range LiDAR into their road maps and product plans this decade. So we're going through the exercises to align those and make sure that we can have a really solid positioning by getting great content value into those vehicles throughout the course of this decade. And the important part is, though, I don't want to understate this of just how critical it was to have Iris out there because if we didn't have that, I mean, just to be frank, I don't think any of these OEMs would even be engaging in this kind of dialogue to be able to advance this because it really was -- it was a challenge. 95% of the automotive LiDAR programs and whatnot ultimately didn't work and weren't successful. And I think that's generally a continued trend in the industry in terms of what we have come to expect, but that's where we're going to show that, hey, we say what we do and we do what we say, albeit, of course, acknowledging that they had bumps along. But in terms of the core result, it's there and showing that, that's possible. That's what's allowed us to have all these dialogues then with Halo as well and giving people the confidence that we can deliver.

Okay. Before I move on, I wonder if there's questions from folks in the room. Okay. Maybe we can pivot to sort of the operations and the financials. And maybe we just start here, we can branch down, but walk us through conceptually the steps that you need to take to reach breakeven.

So I think there's 3 main levers we can pull. The first is because we custom designed a lot of the critical components in our LiDAR, the receiver, the chip, the ASIC, the laser, there's a lot of it that we don't have the benefit of scale today. And as a result, once we reach series production with Volvo, our price, we're selling them in a step function decrease upon region series production, whereas our unit costs are going to ramp down more as production ramps up. So currently, step one is getting to gross profit positive, and we're going to get there by as production volume ramps up and our costs ramp down. We expect that to happen some time, call it, between now and the end of next year. The exact timing of that will be dictated by the volume ramp with the EX90 production, which is largely outside of our control. Step 2 then is to get our fixed cost and continue to identify efficiencies and to remove those costs. We did a round of restructuring in May. We did another restructuring in September. You're seeing early benefits of that. Our quarter-over-quarter decline in Q3 and OpEx was $10 million. And we think that there's another $20 million on a quarterly basis that can come out of that between, call it, now and the end of next year as we continue to identify improvements there. And then step 3 is to ramp up our sensor production to a certain volume point where we get to profitability. So get the positive unit economics and do what we can to optimize that, reduce our fixed cost and get -- then get production volumes to reach that breakeven point.

And how should we think about unit economics. Again, conceptually today and when we go down to Halo?

Yes, like, look, I think when you kind of look at some of the things that we've said in the past, we expect to be somewhere around $1,000 ASP and $650 per Iris. I don't know if we'll exactly get to those numbers, but I think we're still targeting somewhere around $300 to $350 positive unit economics per sensor we produce, whether or not when we get there with Iris versus getting there with Halo, time will tell. And then it's getting enough sensor production to offset what our ultimate fixed cost is going to be.

How does the manufacturing agreements that you struck help set the path to breakeven?

The manufacturing agreements that we initially placed, we're continuing to revisit those, right? 3 years ago, we were kind of still viewed as a start-up. We're now in series production. And I would say, as our maturity improves, I think the ability for us to get better deals from our contract manufacturing partners as well as other suppliers goes up with time. And so those are something that we continue to improve. We made good progress this year. And as production ramps up, I think we're going to continue to go to our partners and get the terms that we think we deserve.

And I think that part can't be understated enough is that exact point 3 years ago, I mean the reality is people -- I mean, people knew about LiDAR, but people didn't -- they didn't take us super, super seriously in terms of the opportunity and the volumes and the deliveries in terms of what like if you're a supplier, you have to make bets on the customer and the partner. And that's exactly, in terms of what we're doing today, we have the proof and the evidence of, "Hey, there are these programs. There are these volumes." Yes, 95% of these other LiDAR competitors and other stuff that we're making the pictures of, they don't exist, but that's part of the whole point is that we were able to show the technology path that does work, that is able to deliver. And now we're partnering with Luminar and the perfect example of that is with TBK, in particular. That's someone that we've had a great partnership with to be able to further advance the relationship. It's been one of the key factors that enables us to cost down our organization and these are driving towards that profitability. And at the same time, just getting that level of interest from our partners now that we're in production, that's something where we're seeing a step change in that. And that will continue as Volvo ramps up their volumes as they now -- as they work through their own supply chain topics and those stuff in terms of getting that ramped up as part of a virtuous cycle for us. And it's the same thing with the economics around the product.

And you talk to your capital and liquidity positions. I think you were at $430 million roughly of capital, $200 million cash facilities. What's the plan going forward? And how much incremental?

Yes. So we -- you're right, that number where we ended the most recent quarter, including the ATM line that we have, that gives us enough cash and liquidity, we believe, as we kind of model any reasonable scenario, gets us to at least the end of 2026. Whether it's enough to get us to profitability will depend upon how quickly Volvo ramps up. We ramped on our sensor cost, we ramped down our fixed costs, et cetera. I said in the past, we'll probably need about $100 million of incremental capital to get there. I think the actions we took in September will reduce that $100 million, probably doesn't reduce it all the way to 0, what that number is. I think we need to see a little bit more, once again, how quickly we ramp up volume, how quickly we ramp down our sensor costs and how quickly we ramp down our fixed costs. We'll probably have better visibility into that now sometime next year.

Great. I'll wrap with one more. CES, you've typically had a presence at CES. Anything we should expect this coming January?

Less spend on CES.

Historically, we've done demos at CES. We're now in series production. So our products are on cars on the real road. So I think there's less of a need for us to have a demos at CES and have a large presence at CES. Our customers with now, consumers can go out and buy vehicles at the Volvo dealerships. And with us being more cost-conscious, we just feel we need less of a presence at CES because we've done our point of cross by getting our products on real cars on the road.

The best advertisement is unquestionably being on cars out there. And yes, instead of -- you can go to the Volvo dealership in Las Vegas and be able to take a ride. Or here, just go to Volvo dealership here. And I think it's absolutely right. But by the way, all this stuff adds up, it's not magic in terms of like some of the cost activities that we added, obviously. The reality is we're being smart about the level of investments we make. And it's very different when you're spending like, in a sense, that if you're like a $5 billion or $10 billion company and like trying to prove how you can be like a $50 billion company versus, say, like proving that this is going to be a $5 billion company from $500 million or whatever it is. It's a very, very different kind of scale. And that's where we fully recognize the environment. We recognize the capital markets environment as well and are drastically evolving how we do management around costing for some of the non-critical topics. Now that's not to say -- by the way, we'll have some certainly exciting stuff in store that we'll have at CES. But I think the point is that there's random examples of things of where it adds up. And I think this is why for some of these recent cost actions that we've taken, important part is that's the start. That's not the endpoint. There's a lot more efficiencies to be able to be had given we've already made the big investments from a technology standpoint. So I think there's obviously a lot of upside to it. But what we will see is that now from a marketing perspective, in particular, I mean you can imagine OEMs have like a really like literally not exaggerating like 100 to 1,000x the marketing budget that we would have associated with something. And that's where like you'll probably already start to be seeing ads on Luminar and like EX90 and other kinds of things out on the roads that are from our customers as it stands. So it will be cool to see that, and you can start to see some of the different marketing campaigns that are being launched. We've had hundreds of millions of impressions for Luminar being featured in customer marketing and advertising already from even just the EX90 launch and other kinds of features there. So it's starting. And I think that's where once people start seeing it out on the roads in the real world, that's going to be, I think, kind of the biggest game-changer for a lot of the industry, where it just goes from, hey, this is some theoretical technology to this is tangible. And when people ask, "Hey, what's that on the roof line?" And how this is part of like their safe-space technology. That's the thing that makes all the difference, and that's something you simply cannot buy.

Great. We'll leave it there. Austin, Tom, thank you so much.

Thank you.