Luminar Q2 2021 Business Update

Luminar Q2 2021 Business Update

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- Welcome everyone to Luminar's second quarter business update call. I'm Trey Campbell, Luminar's VP of Investor Relations. With me today are Austin Russell, founder and Chief Executive Officer, and Tom Fennimore, Chief Financial Officer.

As a quick reminder, this call is being recorded and you can find the earnings release in slides that accompany this call at In a moment, you'll hear a brief remarks followed by Q&A. Before we begin, let me remind everyone during the call, we may refer to gap and non-gap measures in our remarks. Today's discussion also contains forward-looking statements based on the environment as we currently see it. And as such, does include risks and uncertainties.

Please refer to our press release and business update presentation for more information on the specific risk factors that could cause actual results to differ materially. With that, I'd like to introduce Luminar founder and CEO, Austin Russell. - Thank you, Trey, and welcome everyone to our quarterly business update. I've been really looking forward to this one as our most incredible quarter yet. Since our last business update we've been meeting or beating each of our five key company level milestones and are going to be raising guidance on key metrics.

Over the past quarter, we've also solidified ourselves, not just as the standard in automotive lidar, but as a standard for next generation vehicle safety, starting with Volvo. And I also look forward to sharing a major update on our software, as well as the acquisition that we made and a little more color on that before handing it off to Tom for the update on our milestones as well as financials. So first let's talk through our recent Volvo standardization win and its implications for our business. Volvo's decision to make Luminar a standard safety feature starting with their next generation electric SUV is a watershed moment for the industry. We always thought that getting into series production for autonomy was the holy grail, but as after we've achieved that, this really takes it to a completely different level. As many of us know, Volvo built their reputation by being the first to introduce new safety features in vehicles that ultimately set safety standards across the industry and get standardized in a broader capacity.

Well, this is validating on multiple fronts. It also has huge implications across the board for Luminar specifically in five key ways. First is scale. Going from a high-end option to a standard feature on vehicles dramatically increases the expected volume and increases visibility as estimating take rates is no longer a factor.

As we discussed last quarter, we've been working closely with our key contract manufacturing partners to build scalable and repeatable processes as Iris industrialization progresses and are effectively preparing for the increased volumes. So second is safety. While there's a clear use case and strong demand for highway autonomy, there simultaneously exists and extremely compelling application of high-performance auto grade lidar and software for improving more basic safety capabilities on vehicles. This all is working towards the vision of making the uncrashable car, in terms of what we're looking to achieve. And we expect that our proactive safety capabilities will be the biggest near-term driver of realizing 150 billion market opportunity by 2030.

So three is economics. This deal with Volvo significantly strengthens and it gives us even greater conviction in our long-term financial outlook while also enabling us to achieve great economies of scale more quickly and efficiently, the benefits of which percolate to customers far beyond just Volvo. So number four is software. Global standardization plan involves not just Luminar hardware, but Luminar software as well.

And while the lidar serves as the foundation to deliver proactive safety, you have to do a lot more than just the lidar. You have to understand, interpret and act on that data. And that's where our software comes into play. Standardization is also expected to generate a huge and ever increasing data and software advantage for Luminar as greater volumes of vehicles collect data on public roads.

So number five, lastly, is market signaling and vehicle design. Volvo is expected to be heavily promoting into Luminar equipped vehicles to consumers as they become available as a standard feature, generating demand, not just from OEMs, but actually from the consumers directly. This gives Luminar an opportunity to be just as much a consumer brand, instead of say a white-labeled technology provider. And on a related note, the standardized lidar on Volvo vehicles will be even more prominent and aesthetically pleasing than the initial design they released in order to celebrate the technology. Hopefully that shed some light on how big of a deal standardization is to us.

And it's certainly by far the most significant commercial advancement we've had to date. With all of that said, I'd like to move on towards our quarterly progress report video, this time with a focus on software development. We continue to make huge strides on our software for consumer vehicles as well as trucks and remain on track to deliver an alpha version of the full stack sentinel solution by year end with prototypes of proactive safety and highway autonomy features. So let's take a closer look at the progress. Roll the video.

(whooshing sound) - We think that there is a lot of value, undiscovered value in providing real safety, real world safety, safety that makes the car uncrashable. A first step to it is to mitigate collisions. But again, that's not enough. We wanna go all the way and want to prevent collisions. We see a lot of accidents happening, we see fatalities happening, it's still way too many. Legacy technologies like radar and video claim they can handle some of those situations.

It's focuses on mitigating collisions rather than really avoiding them. We need to solve this. That's why we are laser focused on achieving what we believe will be a step function in active safety. Not just mitigating crashes, but actually preventing them before they even happen.

Building the uncrashable car, proactive safety based on lidar will prevent as many collisions as possible. (whooshing sound) The software team at Luminar got established in 2016. It was essential to our strategy to bring up our own internal software team to really fully leverage the potential of our sensor.

Luminar's approach to software was always to tightly integrate hardware and software to really fully leverage the hardware and software together. Beginning of 2020, we actually doubled down on our efforts and accelerated progress even more by establishing the team in Munich, bringing on additional engineers. The team has made tremendous progress toward centenary, semantic segmentation, object detection, lidar odometry, lane-marking detection as well as horizon detection and horizon control, which allows the sensor to really focus on the interesting parts of the road. By leveraging what we developed for Hydra migrating it to Iris and improving it based on that, we've made significant progress towards proactive safety and to really preventing collisions, even in very complex environments and situations.

We're really excited to share today with you the progress that we've made in order to achieve that vision. Welcome to a test track here in the Munich area. This is the test track here in Munich.

It's one of the test tracks that we use to test, develop and perfect our proactive safety functionality. Today the car that we used is equipped with a Hydra system. Hydra is our development sensor, the one that we use to develop and perfect the technology. We will move to Iris in the next few weeks and then poured all the features and technology that we develop here on Hydra towards Iris. We've been testing here since a few months. The team came on a weekly basis to improve the features that we have to develop the capabilities of the system and really focus on NCAP capabilities.

One example of an NCAP test case is pedestrian in your lane, you need to come to a stop in time. There's the other test case that basically is a little bit more difficult where you have the pedestrian walk into the lane to detect the velocity and then figure out that the pedestrian is in your lane and to come to a stop. Now that test case is the stop vehicle in lane. The test requires us to stop for it at a certain velocity. We were able to show off most of the functionality on the test track.

Next upcoming weeks, we'll show most of that functionality on the road, and then we'll be progressing and accelerating towards the end of the year to really perfect that alpha release of Sentinel towards the end of the year. (man laughing) The team has been working tirelessly on bringing all the different pieces together to make sure that we don't just build a sensor, but actually build a holistic system that is enabling us to provide proactive safety to all of our customers. (soft upbeat music) Luminar's approach truly unlocks safe, ubiquitous autonomy across all the different verticals.

We work with consumer car manufacturers, truck manufacturers, robotaxi manufacturers, and everyone ultimately tries to solve the same problem. They tried to build autonomous vehicles, but in a very safe manner, and that's what we unlock. (whooshing sound) - All right, exciting stuff.

And this was just two weeks ago in Munich, is our first public demonstration of Luminar's proactive safety and action. This proves out that it isn't just theoretical anymore. There's direct, tangible benefit to be had from our lidar and proactive safety software. We're able to have an unmatched level of reliability, precision and confidence, even with some of the most challenging edge cases in driving conditions. It's all about integrated hardware and software developed together to create a solution and we're delivering. Next up, it'd be great to briefly touch on another important recent event relating to our chip level innovation and integration.

We successfully have now closed the acquisition of Optogration or exclusive InGaAs chip design and manufacturing partner that we've been working with for the past five years. This transaction is highly strategic for us as it accelerates our lidar chip lead, keeps costs low and secure supply for the foreseeable future. For further background, in 2017 we acquired a highly specialized chip design company called Black Forest Engineering out of Colorado Springs.

The team was, and still is arguably the best in the world at this kind of specialized lidar signal processing chip design. And combining this with the InGaAs photodetector chips that we have from Optogration is a match made in heaven. I'd like to take a moment and show you what I mean. So if you take a look what, five, six plus years ago, these were the kinds of chips that we had to have in our prototype lidar system. And it wasn't nearly enough to get to where we needed to go, to be able to process the signal and to be able to get the kind of performance that was needed to meet these very stringent OEM requirements.

In fact, it's so tough that off the shelf chips wouldn't even come close on that we were integrating. You would need 128 of these to be able to get the level of performance that was needed. It was great to prove the concept, but now we needed to make something custom to make it happen.

And that's what you see here. This is our fifth generation of lidar chip. So what you can actually see in the breakdown here, this chip it's about the size of a Q-tip. And again, we've taken 128 of these and put it all into this little chip.

It's taken a huge amount of work, a ton of resources, a ton of just time to be able to iterate on this to get to a point of where we can solve this problem. And on top of that, in addition to this chip from BFE, Black Forest Engineering, we also have there's a little fleck you can probably barely see it, of InGaAs, indium gallium arsenide, that the chip that we have produced from Optogration. And this is something that we're able to cost-effectively combine as part of the core of the brains of our lidar, is able to see some of the faintest signals out in the distance.

It's there's a level of sensitivity with this and the dynamic range of this is almost unheard of in terms of the kinds of capabilities. It's never been done before. And that's what took us so long and so much time and investment and effort to be able to make this happen. It's here, it works and it's already in Iris today.

It's proven out and the IP value and the moat that's with this is invaluable. Lastly, design remains a key differentiator for us. Iris was specifically designed in a form factor that can be seamlessly integrated into the roof line of a vehicle.

And the whole Frankenstein-like roof racks are becoming a thing of the past, you know, for our Iris OEM customers, and the reality is that vehicle design is a huge factor for consumer vehicles. In Q2 we held an event called Studio Day in New York and unveiled Blade, a long-term design vision for the future of cars, trucks, and robotaxis. We also kicked off a global customer road show to show off Iris and it's seamless integration into a passenger vehicle roof line. We're hearing out loud and clear from our OEM partners that design matters and Iris delivers.

So in conclusion, these business highlights from the quarter underscore momentum, which just keeps getting stronger. In Luminar, I think we'd all be blown away if we heard a year ago what we'd accomplished to date and specifically some of the advances from the last quarter, not to mention among other things, you know, we were also just awarded our a 100th patent, you know, something to be super proud of and a larger than most of the other players combined in the industry. So in terms of focus, it's really all about execution and what we have ahead of us. So excited to share some pretty significant updates here with Tom, our CFO. - Thank you, Austin.

Thanks to the great work of the entire Luminar team. We are on track, we're ahead of schedule to meet or beat each of our five 2021 milestones we highlighted at the beginning of the year. Let's review the progress on each. Our first milestone relates to the Iris industrialization plan.

We have now secured over 85% of our series production supply chain and tooling, which is key to advancing Iris into the C phase. We've also completed the most challenging testing for Iris, including thermal, shock, vibration and electrical. And I'm pleased to report that Iris has passed these stringent tests, which are necessary to be qualified as automotive grade. We are preparing to enter the C phase by the year end, as we locked down the remaining elements of the supply chain and tooling and complete our testing for Iris.

It's worth noting then acquiring Optogration also secured a key element of our supply chain for series production for the foreseeable future, which is very important admit the global chip shortage. The next milestone is delivering an alpha release of Sentinel, our full-stack software product Before the end of the year. Today we're are already successfully showcasing proactive safety functionality on the test track, a key milestone towards our end of the year alpha release of Sentinel. An important point I'd like to highlight is that significantly higher series production volumes from standardization will feed an ever increasing data lake, a critical advantage for our software business.

The third milestone is to achieve three major commercial wins this year. We've been winning and converting more major programs and originally anticipated as many of our customers wanna accelerate their go-to market strategy. We've already exceeded this milestone by announcing Volvo standardization as our fourth publicly announced major win this year.

As a result, we're now doubling our 2021 guidance to six major commercial wins this year. Our fourth targeted milestone is to grow our forward-looking order book by 40% this year, given the increased major commercial win target and the watershed announcement from Volvo regarding standardization, we are now increasing our forward-looking order book growth target to at least 60% this year. Our final milestone relates to maintaining a strong liquidity profile and cash position, with the target to end this year with a higher cash balance than we started the year. We remain on track to meet this objective and end the second quarter with 580 million in cash, and the first half net cash spend rate of $61 million. Our accelerated commercial momentum is also driving a higher revenue outlook for the year.

As a result, we are increasing our revenue guidance to 30 to $33 million for the year. Well above our guidance at the beginning of the year of 25 to 30 million and the 26 million we publicly forecasted a year ago as we were going public. The primary driver of this increased revenue outlook is higher program revenue as we start development work on several new major commercial wins in the second half of this year. Our Optogration acquisition was primarily for strategic purposes and is not expected to be material to this year's revenue nor the guidance increased.

Before we move to Q&A, I'd like to share a few updates with regards to our Q2 financials. While our quarterly financials pre-series production are not a good indicator of our longer-term profitability, we've nevertheless continued to execute accordingly and have some solid updates. Revenue for the quarter was $6.3 million, up 84% year over year in 19% from the prior quarter.

Our non-gap gross loss for Q2 was $400,000, narrowing from a loss of $2.2 million in Q1, even as we incur more costs for series production startup revenue. Of the $6.7 million of non-gap cogs in Q2, $3.7 million was associated with non-recurring engineering expenses for series production programs, and nearly $2 million was fixed manufacturing costs associated with our advanced manufacturing line here in Orlando.

We continue to record very healthy lidar sensor and software contribution margins. In closing, I'd like to thank once again, the entire Luminar team for another great quarter. Trey, let's move on to Q&A.

- Our first question is from Sam Peterman with Craig-Hallam. - Hi guys, thanks for taking my question. I guess, first on the order of what increase here, is there any way you could characterize the breakdown of how much of that growth is coming, or that increase is coming from your (indistinct) in your Pony deal and then this Volvo standardization is? - Yeah, sure. You know, we're not gonna get into the level of detail in terms of what each of our customers is contributing to the order book contribution.

I think it's fair to say that each of them are major contributors. And so, you know, the order book is growing, is the important part. For clarity here, we're only including expected revenue from our major commercial wins, period. It's only for those specific programs where we have wins. So if you take Volvo, we announced earlier this year, the standardization on DEV successor to the XE90, that's the only thing that's in our order book. Now, we're pretty confident that over time we're gonna continue to grow with Volvo as a customer like we did this year.

And as we grow to get a more programs, our order book would grow as a result. So we're very conservative in terms of what's included in there. It's only the major commercial wins that we have so far.

And so, you know, that's gonna be continued to how we judge ourselves in terms of that forward-looking guidance with regards to that order book. - Gotcha. Okay, thanks for the clarity there.

One quick second one, when I think I heard you say that not only was Volvo gonna be standard on the new Volvo vehicles, but software is gonna be standard as well. Is that right or is that take rate with the software just says, you know, do consumers have an option to upgrade with that software and purchase that after they purchase a vehicle? Or is that, are you gonna be seeing software revenue for each vehicle like you're gonna be seeing hardware? - Yeah, I mean, I think when it comes to software, this is absolutely a key part of the strategy. And yes, that is part of the Volvo's plan to be able to standardize as well. We also have some software with SAIC among others that we've been able to really be a part of the overall series production plans. So when when it comes down to it, absolutely is going to be a significant contributor to the long-term revenue that we have.

You know, we already have a deals in place as part of, you know, the program revenue for series production that's increasing exponentially. And that's part of the rationale for raising the guidance as well in terms of what we can expect for this year. But when it comes down to it, I wouldn't be surprised at all if software revenue comprises of the majority of our holistic revenue by the second half of this decade. - Okay, great.

That's it for me, thanks guys. - Our next question is from Itay Michseli with Citi. - Great, hi everyone. Just a couple of questions, first, maybe on proactive safety and in the work you're doing there. I was hoping to talk more about how that differentiates from traditional active safety and the types of safety improvements you expect with your solution.

And are we talking generally about just emergency braking? Is there an invasive steering component left to kinda understand kinda incremental safety benefits you're working on relative to traditional ADAS. - Yep, yep. So when it comes to proactive safety, I think the key distinction here is the proactive nature of it. You know what I mean, really most active safety day probably should be called reactive safety, but I don't think that would be a good branding. So, you know, that's, but the reality is is that, you know, the systems are almost surprisingly ineffective, and even some of the most basic scenarios, as you can see from some of the stuff in the video that we had. And really this is the first time that we were able to demonstrate live.

We were just out in Munich couple of weeks ago here, you know, able to film a show for the first time what is possible. And it starts with the basic scenarios, but we worked our way out, you know, into a number of things and are excited to be able to show this off and on public roads by the end of the year. So we're classified as, you know, moving towards the vision of building the uncrashable car. And that's something that, like I said, I think even just a year ago, nobody really saw it coming as an application of this kind of technology and a use case for it. Everyone thought it was all about autonomy, which is still is that that's part of the foundation of why we work with a lot of these companies, in the first place, but expanding on that, and now standardizing that, that's what's changing the game altogether. - Perfect.

And just a follow-up just going back to the news on the Volvo standardization, you know, in the past, when you've seen in the industry, this domino effect where one major player makes a move like this and others quickly follow suit. And I'm just curious, I know it's early perhaps, but what the feedback you've received from other perspective customers, as you think about your order book growing potentially, again, by the end of the year, do we expect these to be, you know, similar kind of auto programs, or is there still some robotaxi, maybe even non-auto programs potentially in the works as well? - Sure, so in terms of, we've announced a new target for the number of major commercial wins that we expect this year, which is now six, up from three, where it was earlier. Year to date we're at four, we have a very high level of confidence that we're gonna get at least that remaining two by the end of the year. We really can't go into a lot of detail at this time in terms of what those programs are gonna be and the type, but I'd say two things about it.

One, is as we've said before, we are laser focused on the broader automotive and commercial trucking landscape and, and the corresponding technology players in that. That is what we're focused on in terms of going out and where we're spending our resources in the business to win. The second thing that I would say is some of these announcements that we expect by the end of the year, the ones that were very particularly excited about. And so I don't wanna go into too much detail at the time here. We don't wanna get out in front of our customers. We only announce our wins when the customers are ready to announce them with us.

And we look forward to hopefully having more exciting news here in the future. - And one of the things to note as well, when it comes to the level of interest that you can see in that domino effect, that was mentioned, so while we were out in Germany, you know, it was had some great meetings and set up with a number of various executives at some of the major automakers as part of this global customer road show that we've kicked off. And that's something that I think a lot of folks are very excited to see what we have and what actually we're gonna be showing off proactive safety live at IAA, you know, in Munich coming around the corner. And you've got some more exciting stuff planned for CES, but it's definitely proved a huge inspiration that's changing the game in terms of the narrative, not just about, you know, using this technology for, you know, autonomy programs they have, but actually even taking a broader view of what it can do.

- Perfect, that's all very helpful, thanks so much. - The next question is from Eileen Smith with Bank of America. - Good afternoon, everyone. So I wanted to start first and foremost and follow up on Itay's question around the Sentinel solution and the opportunity that you're now outlining for proactive safety. Obviously very many of us within the industry are aware, and you did a great job of educating folks on this when you went public, but your technology and the focus and offering that you're providing to customers on the highway autonomy side, is it possible at this point to disclose how much of your customer pipeline or your discussions at this point are attributable to more towards proactive safety rather than highway autonomy? - Yeah, I would say most of them are still geared more towards highway autonomy than proactive safety, since the whole notion of proactive safety is relatively new.

In fact, I mean, I think it was just a handful of months ago, that was when we announced the Sentinel solution along with proactive safety that, you know, we have something there. We really just showed off the first iteration of the software on that. And proactive safety is also, is meant to be just as much a software solution as it is the hardware. That said, you know, the series production business for a highway autonomy application is as strong as ever and still rapidly expanding.

In fact, that's oftentimes the entry point that we see into the various automakers, is a highway autonomy, you know, starting with kinda a high end vehicle option, but the practice safety discussion is really rapidly coming into play. And that's where you start to see the standardization discussion. I mean, you take a look at other kinds of technologies and systems historically in the automotive industry, and what's interesting is that, you know, a lot of times you take a look at seat belts, airbags, you know, even the mobilized systems of this world, you know, they can often take a decade or sometimes decades to ultimately become standardized, you know, on something after being offered as an option. And, you know, these are things that we take for granted today, but I think the same thing as no different when it comes to the lidar system and when it comes to the software system here, is that that same kind of trend is applying, but the distinction is it's not taking 10 years.

I mean, the amount of time it takes, and the reason why Volvo keeps coming up is 'cause they've really taken a lead position in addition to all the other automakers that we're working with, but they were the first to really bring this highway autonomy program before all the other ones fell into line and fell into place. And now they're just a year later, they're the first to standardize it. So that's part of the crazy acceleration that we've been seeing and a part of the rationale for the increased commercial traction, increased guidance and everything that we have ahead of ourselves. - I think to really answer your question, particularly after the Volvo announcement a few weeks ago, it's both. The same lidar that we have enables both the proactive safety and the highway autonomy, the proactive safety price point, as well as the significant safety savings it brings to the vehicle and the resulting insurance savings is what really drives the business model to put that on vehicle.

And then once it's on the vehicle, to upgrade the highway autonomy, there's no additional hardware required. It's additional software that is required to drive that capability. And so you can deliver that upgraded software either when the consumer buys the car, or you can do it after the purchase via an over the year update. And so once we sit down with our customers and explain that business model to them, they really start to appreciate the power of it. - That very much leads into the kinda second follow up question that I had from this is what is the, ultimately, as you guys think about the business model and the go-to market strategies, what is the spearhead for getting in with the customers? Is it the demonstration of here is level three for highway autonomy, but we can also make it applicable for you at level two, three proactive safety, depending on the price point, or is it we can offer you a holistic solution depending on what you want to give your end customer? - Yep, yeah.

And, you know, I think it's kinda interesting. It's a certain type of snowball effect, you know, down a hill here where I think starting out, it's kinda funny. A lot of times it's not clear for automakers exactly what kind of functionality is going to be needed and exactly what is going to take the market by storm. I mean, it's the same example of, you know, if you ask somebody, you know, 200 years ago, you know, what kind of vehicle do they want? They'd say, oh, well, I want a faster horse.

You know, it's you can't, like the whole concept of what new technology, you know, can enable on these kinds of systems is something that it's part our job to be able to see the future of what's possible. And that was the case where the highway autonomy. You know, I mean, we made a big bet on this, knowing that urban autonomy was gonna be really hard, it was gonna take a long time. Everybody was focused around that.

We went out to the OEM series production, highway autonomy applications, that paid off incredibly well. We're making that same bet with proactive safety. And you can see over time with highway autonomy. It was first us kind of showing, okay, here's, what's possible. And then you start to see a snowball effect of all these automakers, now, you know, tripping over themselves to be able to try and get a hold of this kind of technology.

And it's the same kind of scenario, but that's why the first stake in the ground that makes this difference is just so significant because it's also a huge investment, a huge a lot of work to be able to ultimately see it to fruition, to see it to reality. So to be able to make that multi-billion dollar commitment to see something through, that's what's super meaningful. And I think that snowball effect is gonna be no different here at the end of the day. - Fantastic. And one more, if I may, I wanted to follow up on the acquisition perspective.

You alluded to a lot on this call, but obviously you've now folded in Black Forest and Optogration. How much more do you think that you can execute on in terms of vertical integration? And is this something that we should be assuming that you'll be more aggressive on in the future or will it be more opportunistic in nature? - Yeah, I don't know if aggressive the right word. There are, you know, a handful of critical suppliers for us.

Remember we custom-designed a lot of our critical components. And bringing folks like BFE as well as optic ration in house, allows us not only to expand our competitive mode by making sure that those critical suppliers can only work with us, but it also allows us to control our supply base, you know, owning that receiver production capacity in the current environment is very valuable, and it allows us to industrialize and scale up a lot faster. M&A is gonna be you know, a very valuable tool in our arsenal going forward. We're gonna be very disciplined in what we look at. If you actually look at the last two acquisitions that we've done, we talked about optic ration, which was vertical integration.

And then the one before that is we did an acqui-hire of the Samsung autonomous software team over in Munich. And that team, that's where we did the test for the video that we showed earlier this year. And so vertical integration, software acqui-hire where the themes of our last couple of acquisitions.

And those are the things that are really at the top of the list in terms of what we value as we look at, you know, being more active in M&A in a disciplined way. - What is true is that we do get aggressively good deals, if there's anything that's aggressive. And by the way, it is worth noting for something like this, like you take a look at both, you know, Black Forest Engineering, Optogration, everything, you know, these aren't out of the blue. We actually, I mean, the part of the strategic vision that we have and what we've executed against us, we actually have been able to get exclusive agreements with these guys, you know, early on, in some cases, years in advance.

So, you know, that's part of how we're able to get such a great deal on it here too, because, you know, I mean, we see the value of the technology so early on, like in the Optogration case, these guys are the only guys in the world that could do this. So that was what was really helpful for being able to bring it in house, secure the supply and cost down even more and, you know, really be able to continue to innovate at an even rapid, more rapid pace. - Fantastic. Thanks so much for taking the questions. - The next question is from Michael Filatov with Berenberg. - Hey guys, how are you doing? So last quarter you showed that you had 14 prospects in the advanced development and production opportunity stage.

Can you give us an update on that pipeline number and can you tell us how many of those are for series production projects with OEMs? - Sure. So first of all, all of them, are for series production or equivalent programs, that's where we want our BD team to spend 120% of their time, is focusing on major industry players that are gonna result in series production or in the case of programs like Airbus, major commercial programs. So that's the answer to the latter half of your question, the answer now is, and I said this on the last call, the reason that that 14 number, you know, it shrinks when we convert them into wins, and then we kind of replenish it with new opportunities and we're actually turning away opportunities that we're seriously considering and devoting resources to it. We need to be very disciplined and our dance card is, you know, becoming full for that initial waves of launch in that, let's call it end of 2022 to 2024 timeframe, making sure that we flawlessly execute on those initial launches is our top priority here. And we wanna make sure that we're gonna win as much business that we can to make sure that we can grow as much as we can over the longer-term, but at the same time, we wanna make sure that we're not biting off more than we can chew in the near-term here. - I think it's fair to say also for some of the metrics, you know, we're not necessarily updating every possible metric every quarter in some more on an annualized basis in terms of what can be expected, you know, for these things, like for example, the order book that we'll have in terms of the specifics, but, but yeah, no, it focus is important, it's a virtue and yes, we recognize that and it doesn't mean that we're not taking on new wins as obviously we have, we just doubled our plan target, you know, but the key is the quality of the wins.

And again, we don't count testing, we don't count development for that, we count series production or equivalent. - So another one, you know, we see momentum building in industry behind lidar, just generally, particularly around some series production wins, right. I think, you know, obviously you guys in Volvo and SDIC and then whether it's BMW or GM or, you know, Hyundai or whoever it may be or Daimler, it seems to be a lot of momentum building, right, even with the EV Chinese startups, right, or the Chinese EV startups.

So I guess my question is a lot of them tend to be with 905 nanometers lidar players. And I have to imagine that a lot of them are still striving for level three autonomy, eventually, whether that's now we're upgrading later down the line with, you know, software. So I guess my question to you is, you know, if they are capable of delivering that kind of capability, right, the level three highway pilot, or, you know, traffic jam pilot, what brings Luminar in the door versus those other players, right? I don't think you're competing on price.

Maybe it's the software, but I guess that's my question. - Yeah, I think in terms of focus for all of these things too, I mean, we have to be able to sort through the noise as well, you know, when it comes to all these things. You know, we still completely maintain in terms of our focus and what we focused on, is that in terms of we won all of the series production deals that have been relevant for highway speed autonomy and enabling this level of capability. This is, you know, in theory, there's no reason why you couldn't have another lidar system. You would still need the software somehow, but you could have another lidar system enable a better L2 type functionality. You know, that's something that can work.

I would, to be honest, I actually questioned some of the value of what lidar actually has beyond, say just like a mobilized system, a camera system or whatever it is for just like lane keep assist and automated cruise control. And that's part of the whole reason of why we have this highway autonomy capability that can be enabled with automakers, and at the same time, the proactive safety capability. So I think in terms of, like I said, in terms of the capabilities that you're gonna see, realize that that's what's unique in terms of having the specification to be able to do this. And like I said, I think what we're seeing is if there's any other attempts at this, which I'm think there'll be no shortage of different kinds of attempts, but they won't necessarily make it to fruition. - Okay, understood.

And then one more quick one, oh, sorry. - Quick one, Mike, my quick one, Michael. Let's go ahead.

- Yeah, sorry, just quickly, you know, you talked about, you know, how you've innovated around the ingest detector. Can you talk about what progress you've made around that, the laser itself, the fiber, the laser, I mean, are you at the cost point with the laser today where you need to be in order to achieve those margins down the line? Is it purely a question of scale or do you need to do something else around the laser just to get to that point with the building materials? - Yep. So, we have, you know, when talking about the long-term stuff and the projections there, you know, we actually already have supply agreements in place with our laser provider, receiver, ASAC, and, you know, basically just the key lidar components that have gone into it already for, in its scale, less than $100 cost. So that's done, it's in place. There's no, there's no more magic to it.

I mean, well, I shouldn't say, there's actually a lot of magic to it, that that's gone into it, but, and there's a lot of execution that still has to be had. Don't get me wrong. I don't wanna discount any of that. This stuff is really hard, even at the scale and the level that we're investing into this.

But when it comes down to it, there's from a technology standpoint, that's where we, that's been a core focus of ours is to make sure that we're building these components from the ground up to be able to make sure that we can meet those long-term cost targets. But I just wanna be clear, there's no new product that's required for us to have a great business case already, you know, for the programs that we have. Like, it's already really solid. I mean, the ASP's that we're getting are probably a lot more than even folks may have initially anticipated, just from the value proposition that we're actually really getting there and what it can be enabled.

Again, if you're trying to enable like a better incrementally, better L2 system, you know, that's where the pricing pressure comes into play. I mean, like I said, it's, to be honest, it's questionable if you really need or want a lidar at all. And to be surprised if they actually make it through. But when it comes to highway autonomy capability, real value.

When it comes to proactive safety capability, real value and insurance value as well. So that's how we're thinking about the problem. - Understood, thank you.

- All right, next question is from Emmanuel Rosner with Deutsche Bank. - Yeah, thank you so much. So first is a followup on the building and field question.

So as part of these vertical integration efforts, does that also help you on your trajectory to reduce this build materials? Can you maybe give us an update on where you're sending out, where'd you expect to stand by the time commercial production starts, you know, late next year. And then obviously you just mentioned that you're well on track for the $100 at the scale, but I'm interested in the intermediary stages and to what extent the vertical integration is helping. - Yep. So I'd say the answer is, yes, it does help, but I would say that the biggest factor by far in terms of what actually helps is the standardization that we have. I mean, that's, it's all about volume and the volume driver, like we have the architecture, we actually have part of what we announced, you know, just a moment ago here, is that we now have 85% of our series production supply chain and tooling locked down.

So, you know, things are really falling well into place, you know, as expected as part of, you know, what we've been on track for. But what it comes down to it, there's no replacement for volume. In order to achieve any of these kinds of costs and ever have something that you can reasonably sell for hundreds or even thousands of dollars, you have to be producing huge volumes, like hundreds of thousands of units. We're not aware of any one that actually has a viable path to be able to do that, or any kind of serious production arrangements that would enable that to happen. So that's kind of the significance of what we have in part of why the standardization was just such a big factor and that it also accelerates that cost curve, not just for the long term, I mean, we talked about the long-term, but also just kind of for the intermediate as well.

So we're going back now through our whole supply chain and really nailing it down to be able to make sure that we can get even better economics than we initially anticipated. - Okay, so I guess numbers-wise before, before this process is completed, are you generally on track for the a $500 by start of production? - Yes. Yes, we're on track for the $500, you know, for the first full year series production when we get into reasonable scale to get that.

- Understood. Then a follow up on an earlier answer around the pipeline or funnel of opportunities, I think you were saying that you're very focused on the automotive and then commercial vehicle and markets, obviously as part of your existing wins seems that you were getting some traction with the aircraft and, you know, robotaxis, and so should I understand this as actually now becoming somewhat more selective and focusing on the highest volume opportunities? Or was it just to be understood in the broader sense? - Yeah, I would say, I think it's important to have an initial establishment of the lead partners in different verticals. Like, I dunno, you take like Mobileye as an example, like they're not actually an OEM themselves, but I think they're gonna be a key ecosystem player and contributor to the value of this kind of autonomous system going into the foreseeable future. I think with Pony, they have their, they're the lead autonomous vehicle company or independent company in China, I think by a wide margin and by many metrics already globally. I think that the market will be a little bit more fragmented between the US and China and as a result, it is important to establish a base there. And then, you know, when you take a look at Airbus, I mean, the kind of certification process that it takes to be able to be airworthy, it actually is quite a number of years.

So, you know, you wanna be able to start that clock early on. Does that mean that we're gonna go now take on every airplane manufacturer? Absolutely not. Whether, you know, but having a single lead partner in each of the key verticals that represents the pinnacle of what's possible, I think that's part of the strategy in terms of what we have and really now we're all in, on the rest of the OEM ecosystem to be able to deliver this and see this through. And that applies to both cars, you know, as well as trucks, for that matter. - Understood, thank you very much.

- Our next question is from Gus Richard with Northern Capital. - Thanks for taking the question. Just, you've got 85% of your supply chain locked up for your C sample, what's left to go and then sort of as a fall on, are you using an off-the-shelf laser? - Yeah, so I'll handle the first part and I'll let Austin handle the question on the laser since he's the expert in that. So, you know, Gus, right now we're over 85% of our tooling really transitioning that from the prototype stage where you're really building, you know, parts more for the prototypes and early stage development to going to the actual tooling or the production tooling that will be used from once we get the series production.

We have less than 15% to go. And part of, and it's just there, it doesn't fall into any specific category. It just, some of this has longer lead times in terms of actually converting that tooling from prototype into the production stage. - Yeah, it's part of, it's just refinement a process too, for all of that.

So, you know, you kinda have to be able to tweak it accordingly. It's a closed loop design cycle. It's actually not, it's not the core lidar components that have some of the longest lead time, interestingly enough, there's, with regards to the supply chain. But we expect to have that, the 100% in Q4. So when it comes to the laser, by the way too, it is a custom laser solution. So, you know, we're not aware of any off the shelf laser that could ever get you to the kind of economics that are needed or power or specifications or, list goes on and on, same thing with the receivers, same thing with the chip, same thing with the other stuff.

So it's part, they really have to be designed together, you know, as part of this, like we actually, you know, like we're designing our own chips, you know, for example, for the next gen lasers as well. It's not just the receiver side of it. - Understand. And then I think you mentioned earlier, you're gonna get data so you can refine your proactive safety.

Are the OEMs willing to share data? I know some are. - Yes. You know, as you said, not everyone always, you know, associated with this, but, you know, we make sure as part of our series production arrangements there too, that there generally are a data related clauses associated with these things. So, you know, those are different factors. It's ultimately different for each OEM, but that's absolutely something that we do have incredibly value as being able to have that resource of getting this massive amount of data. I mean, when you take a look at the sheer amount and volume of data from these cars out on the road, you know, it's what, orders of magnitude more, you know, than any kind of, I mean, the largest robotaxi fleet out there too, is like Waymo with 500 vehicles.

I mean, you're talking about hundreds of thousands of vehicles out of the road collecting data that you don't actually have to pay people to drive, you know, with a hundred thousand dollars prototype systems. This is a series production, you know, driven system that they can collect data to continue to improve it. And that applies to proactive safety as well as highway autonomy. And, you know, not to get too far out there, but actually it can even, that amount of data can allow you to expand even beyond highway autonomy, ultimately over the longer-term, even to like urban autonomy in other areas.

But that's where we're starting. - Okay, and then just the last one for me, can you give any update on your working with Mobileye and their robotaxi and how that relationship is going? And do you expect that to continue on into their production? - Yeah, yeah, no, it's good. It's going great as expected.

There are two, I think there was some, there's some confusing noise at the beginning of the year about that specifically, but it's been great. And I think, yeah, we remain the only system that can really beat the required specifications to be able to power these systems out there and meet the required economics. And, you know, we've already been able to solve that, solve that problem with them, you know, from day one. I mean, that's part of the reason why they partner with us or working with us in the first place. I think when it comes to it, there's no question that these kinds of partnerships can also be, it can be very valuable for the immediate application of the deployment, but also just as part of a general ecosystem partnership. You know, when you take a look at, for example, the chip sets, you know, there's Nvidia and there's Mobileye, you know, that people use, and being able to be compatible with these kinds of systems, and part of the broader ecosystem is very important strategically, you know, for this.

And that's really why they're all coming to us. - Got it, thank you so much. - The next question is from Trinsen Gera with RW Baird.

- Hi guys. Great to see that you're raising the (indistinct). Is that driven by higher quantity testing on the existing design wins or is it basically part of a testing on new design wins that presumably would be announced later in the year? And also as the second part of that question, if you could remind us of the duration of your order books, if there is an average and what this potentially means in terms of your out a year longer-term revenue outlook.

- Sure. So when you look at our revenue first half year to date, a little bit under half of that is what I would say from center sales and components to our customers, whether it's for B samples or pre-production units or programs that are still in the development stage. A little more than half of our revenue year to date is from what we call program revenue.

And as we win more and more of these series production programs and we start doing the engineering and development work to get ready for those SOP launches with our customers, we start to earn revenue for that work that we're doing. And given that we've won a higher number of programs than we were expecting at the end of the year, a lot of those have already started to launch, and we're gonna have multiple more launching by the end of the year, and that's really what's driving the higher revenue outlook. So that's the answer to your first part of the question. Then the second part of the question is it really varies, you know, customer by customer in terms of what the weighted average duration is of the series (mumbles) forward-looking order book, for lack of a better word. You know, to give you one benchmark here in terms of how that order book, which is over multiple years translates to an annual data point. So when we went public last year, we shared productions with the street that suggested in 2025, that we would sell a little over 630,000 units, which would drive a little bit more than 800 million of revenue.

If you look at just what our forecast is for the major commercial wins that we've won, nothing else, just those major commercial wins, about 60% of that 630,000 units that we have forecasted to obtain last year in 2025, we've already kind of won and we would expect from those programs that we've won so far. - Okay, that's very useful. And then as a follow up, you've talked about, you know, how critical it is to have a long-range leadership for highway autonomy applications, are there other metrics such as resolution and pixel resolution per second that matters? And if you could talk about how your lidar differentiate with the competition on the resolution standpoint. - Yep, yep. So there's really 14 different key metrics that come into play, you know, when you have this kind of lidar system to be able to enable this level of autonomy and to be able to get, specifically, to get the driver out of the loop. You know, and that applies everything from, you know, obviously the range and the all the way across the board from interference to exportability to scalability and manufacturability, to like all of these different things, you know, it doesn't work in rain, fog and snow, et cetera.

And those are 14 different key conditions, we actually meet or exceed all those different requirements, and that's part of the whole value proposition. It's easy to be able to get a handful of them, it's very tough to get them all simultaneously, you know, with a given architecture. And then that's part of the whole value proposition that we have.

Then to the question specifically on resolution, yes, you know, we do pride ourselves on the 300 points per square degree, plus, you know, max resolution capability with the device. You know, it's very difficult to be able to see low-profile objects out on the road way a distance that you need to become, able to come to a safe stop for well in advance. And, you know, these are people's lives at stake, you know, when it comes down to it. So that's why having that extreme level of performance is important. So, you know, diving into that next level of detail with the point cloud is key.

But there's a lot of stuff that goes into it. There's also obviously the software side as well, that has to come into play to be able to make all of this work. And there's a lot of other parameters that, like I said, you know, sometimes we've heard the term specsmanship used, you know, if you try and like optimize each of the individual ones, you have to do all of those 14 simultaneously.

But, you know, I mean, obviously you can take our word for it, but the reality is is that, you know, the ultimate voice of the customer, you know, for series production, that's the thing that matters most. One thing we're noting with the revenue side of it, you know, we're kinda talking casually about this program revenue, but the reality is that that's actually a very distinct feature for Luminar. I mean, the majority of our revenue is coming from, you know, series production programs that we're working with, that have been awarded and that this is serious stuff. I mean, they're making huge investments internally. They're obviously working with us and even paying us non-trivial amounts to be able to help enable them, you know, with this.

And there's a lot that's gone into that. And that's something that's also just unique to Luminar. Again, you know, the goal is not to try and, you know, sell one-off units for testing to 500 different customers here. We think that that's absolutely the wrong approach, that is a distraction.

Is possible, you can do it, but that's not gonna scale you into ultimately coming, you know, 50, 100 billion, trillion dollar company at the end of the day. - Great. Thank you very much, very useful. - Hey, thanks. And Jaime, Dan will, if you guys can each do one question, we'll finish up with you. - Right, thanks for the update and great presentation.

I know we've been talking about passenger cause, but any update on the commercial vehicles, I know Volvo produces trucks, or any update on the trucking side? - Yep. So our lead production partner for trucking is Daimler Trucks. Part of the reason why we're working directly with them and their partner torque is because, you know, you take look at the overall long haul trucking market, you know, globally, and I think they actually have nearly 40% market share. So it just made a lot of sense to be able to go specifically with them, you know, these trucking companies and operators are economic animals at the end of the day. So, you know, the focus is in the interesting part, is that it's actually the same product, is the same capabilities, the same highway autonomy goal with this, to get the driver out of the loop as it is for passenger vehicles.

You know, and that's part of the, part of the significance there. So I think on the trucking side of all of this is definitely very important. We are also working with the majority of autonomous vehicle trucking companies as well as independent companies. So that's something that is also great. But I think the exciting part, as much as anything, I think Daimler Trucks is probably by far the farthest ahead from an AB trucking perspective and trucking OEM perspective.

So it makes sense to work with them. And then when it comes to, you know, the holistic trucking side in general, I think we'll have more to see from us later this year. - And just for the sake of clarity, you know, there is the Volvo Trucks and there is the Volvo Car, and while they share the same name, they're actually two separate companies. - Yeah. - Aright.

Okay, good, thanks for the update. - Thanks, Jaime. Danny, have you got a one final question? - Great, thank you. Thank you for squeezing me in. Just wanted to go back to the Volvo Group, because obviously we know, you know, you're trying to get out there with your perception software, but automakers themselves are trying to play a bit more of a role in the perception software that they're using. So maybe you could just talk in the case of Volvo, you know, how the roles of perception software may differ, who's doing the sensor fusion and how there could be, you know, room at the table for multiple parties to provide software solutions.

Yeah, thank you. - Absolutely. So there's two things, I think just taking a holistic step back, there's no question that, you know, multiple OEMs have said that they wanna be, you know, more software companies than they are today. You know, they want less hardware, more software, you know, whatever it is. what it really means is less commodity auto parts business is more, you know, value of creative stuff.

Whether they're successful or not, or whether they're good at it, I think it's a totally different question. And just to be frank, I think the answer is most OEMs are not necessarily great software developers. But that said, you know, that that doesn't mean that we don't work with them as a result, by any means. It's quite the opposite.

You know, we partner with OEMs to be able to see the systems through. And, but you take a look at the case of, you know, you're asking for the example with Volvo, say, we do provide the full lidar perception solution there too. They're not trying to develop that themselves.

And they're smart enough to recognize that, you know, the system that we have and what we developed, it just makes a lot of sense and it works well. So that said, there is still other software that you can develop. In fact, you know, with Volvo kinda the farthest ahead on this with their subsidiaries and SAC, that's part of the reason of why we partnered with them, to actually bring a holistic software package out to the rest of the industry. 'Cause the reality is, is that, you know, listen, there's a lot of talk of who's actually developing the rest of the software stack for a system, not a lot out there. And it's the same thing of like, you know, when people talk about an OEM working with a lidar system or a lidar win, there is the golden question of who's actually making the software? Like, is it actually going to do anything at the end of the day or is it just, is it a hunk of metal that's going into your car? And that's part of the significance, is that you really have to have that clear software development plan, the strategy and resources to be able to make this happen. And then, like I said, this applies at the perception level and also a proactive safety and highway autonomy for what we're delivering.

So it's something that we're proud of, but absolutely we do partner with OEMs to be able to make this happen. All right, good stuff with your great update. And, yeah, we'll see you all around next time.

- Thanks everyone. (whooshing sound)

2021-08-20 07:39

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