In a recent earnings call, Luminar Technologies Inc. (LAZR) CEO Austin Russell outlined the company's progress and strategic initiatives, including a significant partnership with Volvo (OTC:VLVLY) and the development of its next-gen LiDAR product, Luminar Halo. Despite a revenue decline in Q3, the company remains optimistic about its growth trajectory, emphasizing its role in enhancing driver safety and its anticipation of increased market penetration over the next decade. Luminar's advancements in LiDAR technology, particularly with the upcoming Halo product, are expected to drive global adoption and improve vehicle safety.
Key Takeaways
- Luminar's partnership with Volvo includes standard LiDAR technology in future models and over 1,000 EX90 vehicles delivered.
- A new contract with a Japanese OEM for next-generation assisted driving systems.
- Introduction of Luminar Halo, expected to launch in 2026, with improved performance and reduced costs.
- Q3 revenue reported at $15.5 million, with a focus on operational efficiency and cost-cutting measures.
- Strong growth in sensor sales, particularly with Volvo's weekly shipments.
- Anticipation of significant OEM partnerships and contract wins by 2025.
Company Outlook
- Luminar is positioned favorably amidst industry challenges, with expectations of increased market penetration in the coming decade.
- The company aims to enhance safety with its LiDAR technology and anticipates Level 3 autonomous driving systems to be widely available by 2030.
Bearish Highlights
- Q3 revenue declined due to a renegotiated contract, with a 7% quarter-over-quarter and 9% year-over-year decrease.
- Gross losses of $14 million on a GAAP basis reported for the quarter.
Bullish Highlights
- Luminar's unique 1550 nanometer wavelength LiDAR technology offers higher performance and safety.
- The company remains on track to achieve its business milestones for 2024, including the launch of an insurance product.
Misses
- The company slightly adjusted its year-end liquidity target to between $230 million and $240 million.
- A potential reverse stock split is under consideration, with updates to follow.
Q&A Highlights
- Luminar's partnership with Swiss Re (OTC:SSREY) could lead to a 40% reduction in accidents and a 20% decrease in insurance premiums.
- The Iris+ development is progressing, with samples undergoing testing and updates on timelines expected soon.
- Transition from Iris to Halo technology is anticipated to be rapid due to prior investments and backward compatibility.
Luminar Technologies Inc. (LAZR), in its latest earnings call, has conveyed a message of strategic growth and technological advancements despite facing revenue challenges. The company's partnership with Volvo and the introduction of its next-gen LiDAR product, Luminar Halo, are key highlights that underscore Luminar's commitment to enhancing vehicle safety and preparing for significant market penetration in the coming years. With a focus on maintaining operational efficiency and capturing market share, Luminar is poised to remain a significant player in the automotive technology industry.
InvestingPro Insights
Luminar Technologies Inc. (LAZR) is navigating a complex financial landscape as it pursues its ambitious growth strategy in the LiDAR technology sector. According to InvestingPro data, the company's market capitalization stands at $516.32 million, reflecting the market's current valuation of its future potential.
Despite the optimistic outlook presented in the earnings call, InvestingPro Tips highlight some financial challenges that investors should consider. One key concern is that Luminar is "quickly burning through cash," which aligns with the company's adjusted year-end liquidity target mentioned in the article. This cash burn rate is particularly significant given that Luminar "operates with a significant debt burden," potentially limiting its financial flexibility as it scales operations and invests in new technologies like the Luminar Halo.
On a positive note, InvestingPro data shows a strong revenue growth of 40.05% over the last twelve months, which supports the company's narrative of increasing sensor sales and strategic partnerships. However, this growth comes with a caveat, as Luminar "suffers from weak gross profit margins," with the data indicating a negative gross profit margin of -79.05%. This metric underscores the challenges mentioned in the earnings call, particularly the reported gross losses in Q3.
The stock's recent performance has been volatile, with InvestingPro reporting a significant 20.9% return over the last week and a 17.34% return over the last month. This volatility is consistent with the InvestingPro Tip that the "stock generally trades with high price volatility," which may be attributed to investor reactions to the company's strategic announcements and financial results.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips for LAZR, providing a deeper understanding of the company's financial health and market position. These insights can be particularly valuable given the complex nature of Luminar's business and its position in the rapidly evolving autonomous driving technology market.
Full transcript - Luminar Technologies (LAZR) Q3 2024:
Operator: My name is Yarden Amsalem, and I'm Luminar's Senior Manager of Investor Relations, covering for Aileen Smith while she is on maternity leave. With me today are Austin Russell, Luminar's Founder and Chief Executive Officer; and Tom Fennimore, our Chief Financial Officer. As a quick reminder, this call is being recorded. You can find the press release and presentation that accompany this call at investors@luminartech.com. In a moment, you will hear brief remarks from Austin and Tom, followed by Q&A. Our Q&A session will primarily consist of questions from the institutional analyst community. To ensure we are addressing as many as possible, we would ask the analyst to limit their question to one with one follow-up. Before we begin the prepared remarks and Q&A, let me remind everyone that during the call, we may refer to GAAP and non-GAAP financial measures. 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 presentation for more information on the specific risk factors that could cause actual results to differ materially. And with that, I'd like to introduce Luminar’s Founder and CEO, Austin Russell.
Austin Russell: Well, yes. Thanks, everyone. Good afternoon and appreciate you joining us. So I want to be able to jump straight in, but before that, I thought I'd be able to just give a quick sort of top five, the most significant business updates to be able to illustrate our business momentum. So first and foremost, Volvo is successfully ramping up the EX90. We successfully delivered now to a four-figure number of vehicles that's going to five figures very soon over the coming months. And now we've begun the first global deliveries outside of the US with Volvo as they ramp up the EX90 in a host of different countries. So seeing our successful execution in the EX90 launch, as well as our ability to ramp, they've now made the decision to start rolling us out on additional vehicle models. And specifically, we're thrilled to announce that Volvo will be featuring Luminar as standard equipment on the next model in their lineup. We expect to be able to share more details on this in the coming months. So that's been an exciting one and great to be able to have the support from Volvo, thank you. Next (LON:NXT) up, we're happy to announce that we've signed a new advanced development contract for the collaboration for next generation assisted driving system from a Japanese OEM, which includes a paid development for hardware, software, and vehicle integration into different car models. On the technology front, we have a major update with regards to our next generation product, Luminar Halo, which is at the center of our ecosystem. Whereas many thought it wouldn't be technically possible, we've now successfully generated the first point cloud, so to say, proving its substantially increased performance capabilities at a fraction of the cost and size compared to the Iris family. So in other words, it's the -- it's alive moment. So whereas Iris was designed to be able to show the world what was possible, this is the LiDAR that can be put in design for mass adoption and mass production across the rest of the industry. With Iris, we've proved it out, and now Halo is there to take the baton and scale it up with a launch expected in 2026. So lastly, over the past six months, we've executed some aggressive cost-down measures to be able to reduce our spend that doesn't contribute directly to our core business, while also driving greater operational efficiency through new technology and industrialization partnerships. So it's important to note that we've already largely made the required investments to build our technology infrastructure. And while these decisions that we've taken were not taken lightly, we're beginning to see the financial results of these actions. This quarter alone, we saw over $20 million of improvement in free cashflow, the largest ever in Luminar’s history. This is largely as a result of the actions taken in Q2, and costs should continue to come down as we ride the wave of our previous investments and actions. This is a critical proof point for our thesis in path to profitability, and Tom can provide more context on this in his remarks. This is the start, but not the end, and we'll ultimately have more to be able to do over the coming 12 months. Now, I'd like to be able to take us through this quarter with a little bit of a macro lens on automotive at large in our industry. So our momentum in this quarter demonstrates continued progress on our journey to commercialize LiDAR across the broader industry to enhance driver safety and to enable autonomous driving capabilities. In a broader environment that we all know all too well that can only be described as challenging, we delivered strong sequential growth to our first series production program, in aggregate delivering more LiDAR product this quarter to Volvo than the prior three quarters combined to all of our customers. This is the start. And as we reach a scale that will hopefully help demonstrate the growing out of the quarter-to-quarter noise, so to say, that we have today, and we expect this to ultimately be reflected in the financials as well. While this is anything but an easy launch, automakers have now begun taking notice of the significance of this launch and feeding that into the roadmaps. And we're very encouraged by what the future holds for us and our industry. At the same time, I've never felt more strongly about Luminar's leadership position in creating these next-generation technologies to enable vehicles to become safer and more autonomous. I mentioned in prior quarters, the broader automotive industry is coming through a seismic shift as they embark on creating new vehicle platforms to support next-generation assisted and autonomous driving tech, including LiDAR and represents one of the biggest upheavals in the industry for decades. Building and launching these new platforms is anything but easy, but automakers are all in as they look to be able to replace their aging platforms. So this architecture shift is also accompanied by a growing penetration of software and advanced computing, which adds incredible complexity to the entire stack on these cars. In fact, many now in the industry refer to these as software defined vehicles as a way to describe this new platforms. And with this monumental undertaking, the complexity cannot be overstated. The result has been a significant disruption both up and down the value chain. And the majority of OEMs have also taken longer than some of their initial targets to launch these platforms, as we discussed last, well, prior couple of quarters, as they collaborate with a different kind of supply base across the board and develop more centralized vehicle software systems. So this is why today we stand at crossroads, where the majority of major automakers now have LiDAR embedded into the roadmaps for release this decade, and the long-term opportunity has never been strong. But we're also powering through the near-term headwinds to ensure that we can realize the long-term success. And critically, we're executing well on the matters that are within our control and taking action to mitigate headwinds faced by an initially slower ramp-up timeline than was planned years ago. Some of those near-term headwinds have been prominent in our competitive landscape, which actually has aided some of our efforts in thinning of the herd, so to say. And at one point, a handful of years back, we had as many as 200 different competitors. But today, I can count on one hand the number of companies that are alive and theoretically capable of building product to global automotive standards. This is no longer a high tide lifting all boats, and this has worked in our favor. So in light of the various factors as well as the capital markets, we've rapidly matured to a focus not just on technology leadership and long-term value, but also being pragmatic stewards of the business in the near term with a focus on economic and operational efficiency. And as I've highlighted before, we're in a position of luxury from our prior investments. We invested nearly $2 billion to date to create, industrialize, and launch this technology platform from the chip level up and are able to take cost cutting decisions without materially affecting these near term deliverables or overall deliverables, allowing us to adapt to the current environment. We're up for this challenge. And as you saw during the quarter, we made another round of decisions to be able to further reduce our cost, this time largely centered around non-technical G&A overhead, which in aggregate can reduce our cost on low by an additional $80 million per year run rate. But importantly, while cost is coming down, Luminar is ramping up. We're scaling deliveries to our first production OEM, meeting their key volume and quality requirements and doing so at high yields. We're also setting internal records in terms of manufacturing productivity and quality rates and we couldn't be happier about our ability to effectively meet our customers' needs in series production, starting with Volvo and of course the other customers we support as well. Further to that point, Volvo spent some amount of time talking about Luminar LiDAR on their most recent earnings call. As they now begin to ship cars from their factory to dealerships across the globe, they shared their plans to collect data from our sensors around the world and train AI models with it to be able to enable the next generation assisted and autonomous driving systems. And as of this quarter, they announced that they've now successfully built out one of the largest AI data centers in Scandinavia to be able to host and process this data from LiDAR and other centers on the vehicle. So, Volvo is about to have more cars on the road in the US collecting data than all other LiDAR equipped data collection vehicles from effectively every other company combined. And this is not to be understated in terms of its significance. So with LiDAR, this is true 3D ground true data as well, it's not just 2D data. And the importance of this is that it allows you to create that ground truth understanding of the world around you with incredible amount of precision and accuracy down to the centimeter level. So on top of this, Volvo is the first global automaker to make LiDAR standard on vehicle,s viewing improved safety as something that they should ultimately be fundamental to all drivers and this is similar to them being the first to introduce everything from the modern three points seat belt all the way up to the Mobileye camera systems before they became standard throughout the industry. And while the EX90 has been making a significant mark, the reality is it's just a small tip of a large spear for the automotive industry in terms of volume, with it representing only on the order of just 0.1% of the industry volume as it scales up. And this is the first of many committed programs with Luminar. And it doesn't take a whole lot to actually start making a big difference. For example, even with this whole EV revolution, even today, Tesla (NASDAQ:TSLA) is just on the order of 2% of vehicle deliveries globally, but makes a massively disproportionate impact. So it goes to show just how a small percentage difference can make such a huge impact. And importantly, though, we don't make vehicles overall. We make the technology, and we have the ability to work with everyone in the industry. And as a result, we expect to be able to drive market penetration globally at a rate that will deliver us into the double-digit percentage market penetration over the next decade. So to that end, seeing our successful execution on the EX90, Volvo has decided to expand their business with us and feature Luminar as standard equipment on the next vehicle model in their lineup as well. A huge step for us, a huge endorsement for us, and really speaks to their commitment for safety, our leadership in LiDAR, as well as our ability to execute an industrialized scale. I mentioned as well that we have expanded and signed a new advanced development contract with a major Japanese automaker. And that includes the continued collaboration on the next-generation system using the LiDAR and transitioning to our next generation LiDAR, as well as paying us for software, a new software development for this specific automaker. So we're really excited about the next phase of the relationship there. And as it demonstrates our leadership in everything from semiconductors to LiDAR to software. And we expect to be able to share additional information on this in the first half of 2025. So when considering the current industry challenges more broadly, alongside the progress that we're making with our customers and the things we're doing right to adjust and adapt, why is it that you'd say we're more excited about our future than any other point in our history? And I'd like to be able to take a step back and give a little bit of a reminder of what we're building at Luminar, why we know the future is bright for us, and the overall Luminar thesis, kind of going back to basics. So forgive me if this is something that some of you guys may know all too well, but for those that are new to the Luminar journey, I think this is really important or broad. So, Luminar's thesis in corresponding products and technology have always been focused around enhancing drivers rather than replacing drivers altogether through autonomous and safety features on existing production vehicles. And as a reminder, LiDAR, which is our core technology, is able to uniquely measure the exact distance to objects in 3D using laser pulses between the sensor and objects on the road. And through the use of our fully integrated stack, which as I mentioned ranges from chips to LiDAR systems to software systems on top of it, we're able to do this millions of times and do so every second. And knowing these exact distances to objects is what makes LiDAR so special as compared to camera-based technologies, which effectively have to guess where the objects are in 3D by extrapolating information from 2D images. And sometimes the cameras are right and the software and sometimes it's wrong. And this is the hard part is that when it comes to a safety critical application, it's all about that last 1%. We heard the notion from one of our customers that, you can't run over one of every 100 people or so, for example. It's all about that last 1% when it comes to autonomous driving. Because otherwise, you're limited to a Level 2 autonomous system. And what that means is that the driver has to be always paying attention, ready to take over the wheel at any given moment. So if you want to be able to get to Level 3, Level 4, and above, then that means not just hands off, but eyes off, and being able to have the system responsible for all these different kinds of education areas, that last 1%. On top of that, from an active safety standpoint, it's also part of the reason why even with these camera systems today and radar systems, we still lose over a million lives every year to vehicle accidents. And this is where LiDAR can have a very meaningful impact. So the enhancements of LiDAR are also not just relevant at day, but very relevant at night. So whereas camera-based technologies experience significant performance degradation at night and in other kinds of incremental weather conditions, this is not the case for high-performance LiDAR, which sees effectively just as well in pitch black as it does with bright sunlight shining into it, in our case. And as the world begins to shift to adopting more autonomous driving solutions and higher-level autonomous driving solutions, the technology that enables this must be flawless. It can't work some of the time and stop working simply because it's dark outside, for example. So in support of this, it's now widely understood by virtually all automakers that LiDAR, and not just cameras, is a fundamental requirement for operating autonomously. Because the car is in full control, there's no room for error, and consequently, it's the same for industry experts. Nearly all of them agree that there will be a one-to-one correlation between Level 3 and above equipped vehicles, as well as LiDAR shipments. And while LiDAR can very much have a positive impact for more fundamental and basic assisted driving systems, it's not a requirement, but it can still dramatically enhance the safety of that, which we can see even with examples today, like what Volvo is doing. So our customers in the broader industry generally agree when it comes to autonomy that the real boom will become to the Level 3 and above systems though as they're able to perform high-speed highway driving without requiring humans to constantly intervene. And ultimately these Level 3 and above systems, by 2030, we expect to be widely available as an optional system by nearly all automakers, with the ultimate goal being that Level 3 will be standardized as a feature just a few years later. It's nevertheless important to know that the option cycles in the automotive industry take time. There's a high barrier to entry and also high barrier to exit. Generally speaking, it takes up to 20 years from when a technology is first introduced on vehicles to when it becomes standardized throughout the industry. You have classic examples, everything from seat belts to airbags to anti-lock brakes to even that Mobileye system that I mentioned. And for EVs as a platform, actually, it may take even longer than that 20-year cycle for EVs to ultimately become standardized throughout the broader industry and combustion engines to fade. So, LiDAR is arguably actually on a much quicker pace of adoption than almost any other automotive technology in history. But suffice to say, it's very important this industry does require patience. So to us, it's very clear that LiDAR adoption is no longer a matter of if, but rather about when. And within that envelope, I think it's also important to be able to talk about what is it about our technology that we think makes us so special in the first place? And while there are many differentiators, including the fact that we have a uniquely vertically integrated strategy, starting from the semiconductors making our own lasers, receivers, processing electronics, among other things, for our chips, all the way through the LiDAR and software, we could talk about one thing that makes the LiDAR very unique and kind of distill it down to it of one aspect. So as we've talked about in the past, the technology starts with a special wavelength of light that we use at 1550 nanometers versus the current industry prominence, which is 905 nanometers. One of the most fundamental limitations of lasers is related to eye safety, which serves to limit how much power can be put out instantaneously from a LiDAR's laser. And correspondingly, this limit on power also affects the system's performance capabilities. In contrast to the rest of the industry, we operate at a much longer wavelength of light than others, which enables us to put 17 times the amount of pulse energy into the environment. And more energy equals better performance. More peak power is better results, better ranging, which translates into better safety and the ability to meet these stringent global OEM performance standards and also with fewer components. Because we use this 1550 nanometer wavelength that's safe for the human eye, the increased pulse energy delivered translates directly in dramatically better performance at longer range for the 3D images point clouds that we generate. This is required for cars to be able to operate safely at higher speed and for Level 3 autonomous modes, as well as enable reliable high speed active safety features. Specifically, and because of our technology stack, we're able to see and detect even some of the hardest to see objects at distances past 250 meters in all kinds of ambient light conditions. This stands in stark contrast to competitive technologies, but generally can only see objects required for safe driving in distances of maybe up to 100 meters. While these shorter perception distances are suitable for lower speed driving, it's insufficient to be able to safely maneuver at high speeds. And the performance can also directly translate into lives saved. And the thing is, is the vast majority of vehicle accident or fatalities actually occur at higher speeds in the first place, making it all the more important. Getting to this stage in our technological advantage was anything but easy, but nevertheless begs the question of why hasn't everyone followed in these same footsteps? The reality is that the performance advantages of using this wavelength and of building the technology is well understood. The simple answer is that doing anything at 1550 nanometer is very, very hard to do. 905 nanometer components have generally been widely available at low cost, and much of the landscape LiDAR historically followed the path of least resistance and lowest initial R&D investment or development systems. However, that limit has a ceiling associated with it. And with Luminar, there is no ceiling attached to that. We've uniquely developed our 1550 nanometer technology from the chip level up. And we've had to create multiple fundamental innovations to make 1550 possible from both a technical supply chain and economic perspective. We have this integrated stack that encompasses a chip level design as well as system level software. So our chip capabilities are unrivaled as part of a broader Luminar Semiconductor Inc. entity that we've consolidated there, creating laser chips, receiver chips, and processing electronics chips to create a significant moat around our ability to be able to deliver these technologies, while on top of that, our software facilitates the integration of our devices into our OEMs and creates a very nice lock-in effect as well. So wrapping up, the bottom line is this. We feel great about the factors that are within our control. Our technology, our leadership position, and our ability to be able to adjust our business to the current times and the broader macro environment. The factors that are outside of our control can be challenging, but we're more than up for them and believe that when the industry begins to ramp production of vehicles, to have LiDAR spec'd in, as with the programs that we've won to date and additional programs that we will, we'll be in a position to be able to capitalize on the vast opportunities that lie ahead of us. So taking a step back, one last point I want to mention is that on the technology front, Luminar Halo development is rapidly progressing. And the Luminar Halo is going to be the key enabler to this mass global adoption of long-range LiDAR technology. In fact, as part of these remarks, I mentioned at the start in Q3, we actually generated our first point cloud with Luminar Halo, being able to demonstrate this industry-leading long-range LiDAR data fidelity to dramatically improve the safety of these vehicles as well as enable those autonomous capabilities and in a fraction of the cost and form factor. And as a reminder for everyone on call, whereas Iris was designed to be able to kick off a new era of safety and autonomy, Luminar Halo is designed to be able to accelerate it to mass adoption with those improved cost size and performance factors. Furthermore, we're applying learnings from industrializing our first product, Iris, to Halo, leveraging the factory capabilities, leveraging all that infrastructure investment, leveraging the technology platform. And this gives us the confidence as we look towards the launch of Halo in 2026, which is at an even significantly faster pace than what we've done for previous product developments. And with that, I'd like to be able to turn things over to Tom to be able to talk through our annual business milestones and be able to provide a little bit of commentary on quarterly financials, as well as our outlook for growth. Thank you.
Tom Fennimore: Thank you, Austin. Let me start by reviewing the progress to our four 2024 business milestones. We have already achieved our first business milestone earlier this year with the successful launch of the Volvo SOP. We have also achieved our second milestone already, which was to launch the TPK facility for additional capacity and improved cost, which we did in Q2 with our expanded arrangement with them. Our third milestone was to unveil our next-gen LiDAR and deliver samples to key select customers. We unveiled Luminar Halo in April and remain on track as Austin said for sample deliveries to select customers by the end of this year. Our final milestone was to continue to expand and invest in the ecosystem around our LiDAR. We discussed in prior quarters the progress we made on our semiconductor and software businesses. In this quarter, I'd like to give an update on our insurance business. We continue to make progress on industrializing our insurance product as we recently finalized a partnership with our primary insurance partner, and we've also finalized the design of the customer experience with our soon-to-be-launched insurance app. We should be in a position to start writing our initial insurance policies early next year. Ultimately, we remain on track to meet all of our business milestones this year. And now, let's move on to our Q3 financial results. Revenue for the quarter was $15.5 million, down 7% quarter-over-quarter and 9% year-over-year. This was below the guidance we gave during our last starting call that Q3 revenue would be in line to modestly higher. The primary reason for this decline was the renegotiation of a large non-automotive, non-series production contract we mentioned during the last quarter. Excluding this renegotiated contract, revenue would actually have been up meaningfully quarter-over-quarter. In particular, we saw strong growth in our sensor sales during Q3, as we continue to meet Volvo's weekly shipment requests while improving our manufacturing yield and quality rates. Let's move on now to gross loss. For the quarter, we reported gross loss of negative $14 million on a GAAP basis and a loss of $11.7 million on a non-gap basis. This is in line with the guidance we gave during the last quarter that our gross loss on a non-GAAP basis would increase relative to Q2 levels excluding the contract loss. On a non-GAAP basis, Q3 gross loss was negatively impacted by roughly $8 million relating to the slower series production ramp. About half of this charge was from supply chain charges due to lower volume, and about the other half was from inventory write-downs due to higher inventory levels at quarter end. This was partially offset by early returns from our efforts to reduce COGS, the process improvements I mentioned earlier, and higher sales to non-automotive markets, which typically command higher ASPs and margins. Let's move on now to OpEx restructuring cash spend. In September, we announced additional steps to increase the size of our restructuring plan that are incremental to the actions we took in May. We expect these actions we announced in September and started to implement in September to generate approximately $80 million in annual cash savings on a run rate basis once they are fully implemented by the end of next year. Since the beginning of the year, we made the tough decisions to reduce our workforce by approximately 30%, among other actions, taking the streamliner cost structure such as contract reduction, reduced travel, and a reduction in our real estate footprint. In total, since beginning of the year, we have undertaken cost actions which we target to generate up to $145 million in annual run rate savings once they're fully implemented by the end of next year. In Q3, we started to see the early results of these cost reduction efforts. Specifically, there was a $10 million improvement in Q3 non-GAAP OpEx relative to Q2 and a $20 million reduction in our free cash flow loss. Importantly, the impact of the actions we started to take in September are not reflected in our Q3 results, and they will start showing up in Q4. We are also actively continuing to look at our cost structure and what actions we can take to reduce our cost, particularly as we continue to make execution progress on Iris. Our change in cash, which excludes an end impact of approximately $90 million in debt we raised in August, was $52 million during Q3, an improvement from the $57 million change we saw in Q2. We ended the quarter with roughly $249 million in cash and liquidity, including marketable securities, and our $50 million undrawn line of credit. As of September 30th, we had $182 million remaining on our equity finance program with virtue. During Q3, we raised $6 million through this equity program. This was below the $19 million we raised in Q2, and I would expect this number to be higher in Q4. When you look at what's available under equity finance program and combine it with our existing liquidity of $249 million, that gives us access to $431 million of capital, which we expect to provide us ample runway to reach at least the end of 2026. From a liquidity standpoint, we discussed last quarter we would need approximately $100 million of additional capital to reach profitability, increasingly optimistic that our September cost cutting actions could reduce this $100 million capital need, but likely won't completely eliminate it. While we're in no rush to raise additional capital given our liquidity runway, this is something we would like to address sooner rather than later, and have multiple avenues available to us today to do so. This brings me to the final part of my section, which is provide guidance for Q4. I would like to remind everyone that our guidance is meant to be more directional versus specific in nature, as we are still in the early days of scaling series production. And as a result, our series production revenue remains very fluid and heavily dependent on the pace of our customer's production ramp. The slower series production ramp in Q3 resulted in higher levels of sensor inventory. And we believe we currently have sufficient inventory on hand to fully serve most, if not all, of our expected Q4 demand. As a result, we decided to take the necessary actions to adjust our manufacturing rate for several weeks to better align with our customers' production rate. As a result of these actions, we expect Q4 non-GAAP gross loss to improve relative to Q3. In addition, we expect OpEx and change in cash to continue to improve and Q4, reflecting the benefits of our recent cost reduction actions, though this will be offset somewhat by the higher interest expense from our recent convertible debt transaction. In terms of revenue, we expect Q4 to grow modestly versus Q3, reflecting continued growth in sensor sales. In addition, we are adjusting our year-end cash and liquidity target slightly lower from $240 million to a range of $230 million to $240 million. Where we end up is ultimately going to be dependent upon the higher cash restructuring expenses we incur as well as what we ultimately draw down on our equity line of credit. On October 30th, we -- our shareholders also passed an authorization allowing our Board of Directors to enact reverse stock split at their discretion. We are planning to share more information on a potential reverse split and its terms in the near-term after our Board decides what they're going to do. As of November 8th, roughly $23 million of our Series 1 2030 convertible bonds have been converted to equity, with approximately $59 million remaining. We continue to have approximately $203 million on our unsecured convertible debt maturing in 2026, as well as $192 million on our Series 2 2030 convertible debt. The cooling-off period from our August transaction has now expired, and we're actively looking at ways to continue to reduce the $200 million or so of balance on our 2026 unsecured convertible bonds. Finally, given the accounting complexity of the convertible debt transaction we completed in August, we will likely need a couple days plus or minus extension to file our 10-Q this quarter. There are some additional reviews that we're doing around the final accounting for the convertible transaction. We are confident that we'll be able to file the 10-Q within this five day extension period. This concludes my prepared remarks. I'd like to thank the Luminar team again for another strong quarter, and I would like to hand it back over to Yarden for Q&A.
A - Yarden Amsalem: Great. Thank you, Tom. We are now going to hand it over to our analyst community. Our first question is going to come from Winnie Dong at Deutsche Bank (ETR:DBKGn).
Austin Russell: Hey, Winnie.
Winnie Dong: Hi, thanks so much for taking my questions. I'm just curious, post the election, any implications do you think you would have on Luminar on a go-forward basis, specifically as it pertains to EV policies? And then my second question is on cost reduction. Curious if there's any further low hanging fruits that you can potentially take action on or if like the recent actions you've already taken on pretty much is close to what you can do for now. Thank you.
Tom Fennimore: Yeah, Winnie, I'll start with the second part first. I think we've plucked most of the low-hanging fruit, But we're continuing to look at our cost structure, the progress we're making on executing and continue to look at ways to continue to cut our costs. I would say a lot of the easy actions I've already been taking, but we're constantly looking at stuff to do. With regards to the election, look, I think it's too early for us to tell. We continually monitor the geopolitical events and how that can impact our business. At the end of the day, what we're really focused on is executing on our business plan and developing and producing the best LiDAR in the industry. We do that, we're going to be fine no matter what happens in the geopolitical realm.
Austin Russell: I'll also say that, when it comes to safety and saving lives and improving roads on the US, that's probably one of the maybe few bipartisan issues that people are very supportive of. Nobody likes people being injured or losing their lives out on roads. And this is a problem that we're solving at global scale and great to be able to have that support. And of course, yeah, great to be able to have some tailwinds along with it.
Winnie Dong: Perfect. Thank you guys so much.
Yarden Amsalem: Thank you, Winnie. Our next question is going to come from Tristan Gerra at Baird.
Tom Fennimore: Hey, Tristan, you on the line? I think you're on mute.
Yarden Amsalem: Okay, we'll move on to the next analyst. Our next question is going to come from John Babcock at Bank of America (NYSE:BAC).
Tom Fennimore: Hey, John.
John Babcock: Hey, guys. How are you doing?
Tom Fennimore: Doing great. How about you?
John Babcock: Good. I guess one of my questions, you talked about this new advanced development contract with an OEM partner. I was just curious, is that an existing partner that you had or is this one that you've announced in the past?
Tom Fennimore: I think as we said in there this is like the next phase of this development contract. So, it's a customer that we talked about in the past and it's taking that next step there and getting us ultimately closer to the series production phase.
John Babcock: Okay, that's helpful. And then as it pertains to the new Volvo car that you're going to become standard on, any sense in terms of timeline on when that might launch? And also if you can just talk about whether that vehicle is going to use Halo or it's going to be using the existing Iris technology.
Austin Russell: We will say, when it comes to the previous contract, we're talking about that we're doing the design integration studies that I mentioned for Halo and some of that planning. But as it relates to with Volvo, currently it's with the generation of the Iris family. And then, ultimately, as you figure a lot of automakers are very excited to be able to adopt and transition to Halo, because it can enable that mass scale and adoption, whereas Iris is great for kind of starting off with these different platforms, getting the data out there, as we mentioned with Volvo. But yeah, I think we mentioned there will be more to share. Ultimately, this is in OEM's hands to share in the first half of 2025.
John Babcock: Okay. Have you talked about any sort of timeline on when you might be able to commercialize the Halo LiDAR?
Austin Russell: Yes. So…
John Babcock: If you include that as part of the Investor Day or technology?
Austin Russell: Yeah, it's coming up. In automotive years, it's right around the corner, which is in 2026. So that's our launch timeline for it. And we're excited to already get some great positive feedback from customers. We mentioned, as part of our, one of our business milestones that we'd be showcasing already and getting in the hands of some customers initially. And, people are very excited to see the results of the point cloud and showing what's possible with such a simplified bill of materials, the next generation semiconductors that we have, our integrated software, and of course, the cost and form factor that we're able to deliver with Halo.
John Babcock: Okay. And then just last question before I turn it over. If you could just, I don't know if it's possible to maybe provide some early expectations on ‘25, at least like how we should think about volumes generally. I mean, I don't know if you might be able to kind of talk about which or how many vehicle models you'll be in next year. I mean, I think in the Polestar (NASDAQ:PSNY), you also have the EX90. If there are any that I'm leaving out there, that would be helpful. And also, I don't know if there's any sort of volume or cost expectations or additional detail you can provide. Anything on that front would be useful.
Austin Russell: John, I look forward to sharing that with you in a few months when we do our year-end call.
John Babcock: Okay, fair enough. Thanks.
Yarden Amsalem: Thank you, John. Our next question is going to come from Jash Patwa at JPMorgan (NYSE:JPM).
Tom Fennimore: Hey, Josh.
Jash Patwa: Hi. Hi, thanks for taking my question and congratulations on the two wins and encouraging to see the rapid progress on Halo development. I wanted to start with a high level question around the market share capture window. What innings of the market share capture window do you see the industry in today and how soon can we expect the slew of next-gen platform announcements and contract wins being announced? Curious if it's early 2025, second half of ‘25 or ‘26 when we see those additional winds flowing through. And relatedly, could you also just touch on the nature of your relationship with platform partners like Mobileye and NVIDIA? How are these relationships structured today? What are the key focus points for them when evaluating LiDAR partners? And whether you expect these relationships to evolve into exclusive partnerships over time? Thanks and I have a follow-up.
Austin Russell: Yeah. No, that's great. I think when it comes to the LiDAR adoption cycle, things have definitely been taking off. I think we need to make sure again to put it into perspective though overall. Obviously, some of the OEM timelines for their new platforms specifically, we mentioned this is no surprise, it's been very widely publicized for the past year or two or whatever, but a year or two later. So that's kind of the near-term stuff to deal with. But in terms of the broader kind of [zooming out] (ph) macro adoption cycle, we mentioned that for traditional kinds of technologies, as long as 20 years from the first introduction to standardization across the industry. And I think, again, we're seeing a much more compressed cycle. We're going to continue to see a lot of acceleration over the course of the next few years. I don't know if there's any kind of specific month or quarter or anything that's magical that's necessarily happening. But I'll say this is that in addition to kind of advancing with the development with this kind of slew of additional automakers, a big focus is making sure that we can successfully execute on the automakers and the partners that we have here today. And the reality is that there's tens of billions of dollars of business, even with just the OEMs that we're working with today, as you start to get more and more penetration across their lineups and fleets. So there's already opportunities to substantially multiply the value. The key is that we have to show that successful execution. And that's really where when folks like Volvo start to say, hey, you can launch with the EX90, okay, give the green light for more vehicles. Hey, when certain other automakers see, hey, we're meeting the milestones here, then you can keep progressing with the platform and then eventually transition to halo and do all of those things there too. So, I think that's definitely happening and, at a rapid pace there. Obviously over the course of the next 24 months, I'm sure we'll be excited to share more. And I'm sure it's also public that different OEMs, I would say, for the next major platform, have different launch timings, but a lot of them are kind of converging around that. Yeah, I would say 2027, 2028, 2029, time frame as a pre-empt. So obviously, we have some much earlier wins that'll allow us to ride that revenue curve earlier. But they're just taking off now, getting off the ground.
Jash Patwa: Understood. That's super helpful. Just as a follow-up, the additional win with Volvo surely showcases that Volvo and its consumers are appreciating the value-add provided by the Luminar's LiDAR sensors. Curious if you have any early feedback from consumers as it relates to the LiDAR technology, and more specifically any insights from a safety standpoint that you might be seeing in the data? Also just wondering if you could share any color around the insurance business with regard to the go-to-market strategy, the ramp-up trajectory, and any implications from a profitability or cash flow standpoint?
Austin Russell: Yeah. Maybe I can do the first half and you can do the second.
Tom Fennimore: Sure. Yeah.
Austin Russell: Yeah, I'd say that when it comes to Volvo more broadly, there's definitely that conviction. The consumer interest is extremely significant. And I think this is one of the driving factors behind the marketing of the EX90. The campaign is just starting, right, in terms of as they're kicking it off, as Volvo is able to ramp up their production capacity, I think, we'll see a lot of that marketing drastically increase. I mean, they have, what, over 2,000 dealerships globally that are going to be supporting and making the case for Luminar around the world. And that's something that is, I think, really special and unique for us to be able to be a critical part of that journey and story. But Volvo is known historically as being kind of the introductory path for new kinds of technologies to the broader industry. So as it gets more and more awareness there from a consumer standpoint, I think that's where you'll start to see more and more demand push from a consumer side, not just from an OEM standpoint, which it's basically been all OEM driven up to this point. I think ultimately beyond the consumer side, there will also be a regulatory push as the safety standards and requirements increase significantly, we see the new 2029 mandate for regulations there. That's the only system that we've seen demonstrated to meet those capabilities has been with our LiDAR and software. And this is kind of what we've published and what our insurance partner, Swiss Re, has published as well, with an up to 40% improvement in terms of reduction in accidents and accident severity. So those are huge stats and obviously one that Volvo's very excited about, but have big implications for savings around the ecosystem created by the product, which insurance is one example of that.
Tom Fennimore: Yeah, so on the insurance side, We're planning to register in the Top 10 states in the US, which comprise about half the vehicle sales in the US. We're targeting, I would say, annual insurance savings for the EX90 and other vehicles with our ladder of about 20%. Given the safety improvements, we believe that that's a meaningful discount to give to the consumer to hopefully attract adoption, while at the same time, making sure that we still get decent profitability on the insurance side. We're partnering with a couple of people in the insurance space that quite frankly are smarter than insurance than we are to make sure that we're doing this in a responsible way. Look, the ultimate adoption rate, I think is a little still TBD at this moment. We're going to be targeting people who buy the EX90 in a variety of ways. We're hoping that the savings is meaningful enough. It could be a few hundred dollars of a premium per year, which in my opinion is very meaningful given how much insurance costs have been increasing, but time will tell. I don't expect it to be a material contributor to our P&L over the next few quarters, but I hope after that, if it's successful, that will change.
Jash Patwa: Got it. Thanks for taking my questions and good luck.
Yarden Amsalem: Thank you, Jash. Our next question is going to come from Mark Delaney at Goldman Sachs (NYSE:GS).
Austin Russell: Hey, Mark.
Mark Delaney: Hey. Good afternoon. Thank you very much for taking my questions. First, I was hoping for an update on Iris+ development. And in particular with the news from the last update call that you were going to make more use of the Iris platform, maybe you could help us better understand how that is going and when we should expect to see Iris+ shipping for vehicles in series production?
Austin Russell: Yep, I think it's just to remind everyone what we talked about, what we did last quarter is we were borrowing more of the Iris architecture, which we successfully industrialized and reached SOP with Volvo. We're borrowing more of that architecture to Iris+ for our lead customer there. We recently prepared the first set of samples and they're going through the testing process. And so we hope to have an update on exactly what that timeline is going to be here in the near term. But I think we're off to testing and I think the initial results are encouraging from that.
Mark Delaney: Got it. My other question was around Volvo and recognizing that you are going to take specifics on the vehicle that that's up to them but maybe you can just help us from a Luminar perspective, is the win that you've secured, is that -- how does that compare relative to the EX90 and can you give us a better sense as to when this new model win would be in series production?
Austin Russell: It's going to be smaller than the EX90 and we're hoping that it is going to launch here over the next several quarters.
Mark Delaney: Thank you, I'll turn it over.
Yarden Amsalem: Great. Thank you, Mark.
Tom Fennimore: Ultimately, our goal is that as we prove the successful launch and ramp capabilities with each model, then the goal is obviously to expand across the vehicle mix with a given OEM. Volvo delivers a better part of a million vehicles per year. So ultimately that's the goal of where we can do the math of what we want to get to. And if we can prove that out, I think there's a path over the long term.
Yarden Amsalem: Great. Thank you, Mark. And our next question is going to come from Kevin Cassidy at Rosenblatt.
Kevin Cassidy: Yeah, thanks for taking my question, and congratulations on the progress. But I just want to understand a little better of the roadmap of how you go from Iris and then crossover to Halo. Is Iris going to ship in the EX90 forever? Or does that get an upgrade to Halo? Or, just kind of how to get that pipeline? It took a while to get Iris into production, but then Halo to me in two years, it seems very fast.
Tom Fennimore: Yes. And it is a much more accelerated pace of development because it took the better part of a decade to be able to build out that core technology platform to be able to develop the different semiconductor technologies, to be able to really pioneer all these different aspects of the platform. And now we get to ride that investment curve to be able to have much more rapid pace of adoption and acceleration. And I think for even what's beyond Halo, you'll ultimately see the same kind of rapid pace there as that comes into play. And the same thing when it comes to costs, like the factory build-outs that we're doing for scaling beyond what we have for Mexico, a fraction of the cost, same with the product costs, same with the build materials, same with the supply chain, same with the engineering that goes into it. Now, significantly we are building Halo to actually be backwards compatible with Iris. So this gives us an opportunity to be able to, should we want to and OEM desire to, which I think is ultimately aligned, to be able to slot that in accordingly. And this is something that it's important from a data standpoint to be able to have that compatibility because you have automakers investing billions of dollars into these technology platforms and data collection platforms and getting out there with these vehicles to be able to do that. And you want to make sure that continues to carry forward. So that's something that I think is super meaningful and part of the stickiness as well. And that's something that we're excited to be able to do with Halo to be able to give them a smooth transition. And these are the kinds of conversations that we're having today with automakers across the industry.
Kevin Cassidy: Okay, and you touched on something that was going to be my follow-up question was the fraction of the cost. So that leaves a lot of open discussion, but I would imagine volumes go up more than the cost comes down, would be one way to think of it. But is it -- are you saying 50% lower costs or 25%? Can you give us some ballpark of what the cost might be, the difference?
Tom Fennimore: We expect better than 50%. It's a little hard to give an exact percentage to this point, but we're able to deliver greater performance in the point cloud and the sensor at about a third of the size. And yeah, we expect it to be less than half the cost. Now, of course, part of the cost problem is also solved for with scale. For example, the stuff that we have to do today is a lot more expensive when it's at the initial front end of the ramp curve versus when you start to reach more substantive run rate volumes, for example, with the EX90. And that's something that you have to be able to have. Of course, when you're talking 2026, we're already well into the ramp curves of even the initial programs, much less the additional programs that we want to be launching with. So that's something where it allows us to be able to leverage the economies of scale with simplified materials. And we're talking in addition to cost of down components, it just also has significantly less components in simplified design in the first place. And part of this is because we're also designing this hand in hand with some of our industrialization partners as well, including CBK, that we described as part of our new partnership efforts to be able to save on cost, both on an OpEx as well as on a product standpoint individually. So this is all kind of coming to a head and allowing us to be able to be in a position of where automakers have a very clear business case to put this across all cars.
Kevin Cassidy: Okay. And if I can get one more question in you, you had mentioned about Volvo building a data center because of all the data they can collect with a LiDAR, compared to camera, I imagine there's -- but you had an initiative for a while of mapping. Is that still active?
Tom Fennimore: Yes, actually. And we've been working on the mapping side for some time. I think that the meaningful part now is it's all about data and scaling up. We've actually had some development contracts, including one with a major automaker on the mapping side to be able to cover some of the cost of development and build some specific features there. But where you start to see just the insane value building up is when you get this mass level of data and scale. You look at other autonomous vehicle test companies today, like even the Waymos of this world, they spend on the order of $1 billion a year to be able to collect data from 500 cars out driving around the US, measuring what's going on. We're about to have tens of thousands of EX90s going around collecting data with our LiDAR, ultimately hundreds of thousands shortly thereafter here over the coming quarters. And that's something where, just unprecedented scale across the globe. And the level of detail that and understanding we're going to have around the world is really second to none when you have this level of precision. So that's something that a lot of the seeds that we planted and bets that we made years ago, sometimes it's hard to see, but we're trying to think years ahead as this intersects our ultimate roadmap. And that's something that I think is a perfect example of that, of building and capturing the ecosystem value that's created around the LiDAR. The LiDAR is just ultimately going to be a small fraction of the total value created that we capture out of this. And that's where a perfect example of the rest of the ecosystem, even if between things like mapping and insurance and everything, these are not huge costs. I mean, it's, what, maybe each of them is like on the order of 1% of Luminar spend. So, it's very, very high leverage.
Kevin Cassidy: Great. Okay. Thank you.
Yarden Amsalem: Thank you, Kevin. Our next and final question is going to come from Tristan Gerra at Baird.
Tristan Gerra: Hi guys, congrats on progress given the challenging environment. At what point do we get to a model where software is actually the primary contributor of revenue and margin and where it subsidizes, or maybe even that becomes the revenue contributor, and then the actual LiDAR becomes part of the whole software offering, and obviously with the implications on gross margin, is there an outlook for that? And how many years away is that?
Tom Fennimore: I would say more broadly from a software standpoint, in terms of the value add from a software perspective, there's already a lot of that that's happening today. Some of it's us, some of it's, I realize I didn't totally answer the platform partner question earlier with folks like NVIDIA (NASDAQ:NVDA) and Mobileye, as well as the automaker that are creating these AI systems, and in some cases in conjunction with us, that are going to be extremely powerful and are already a significant part of that revenue mix. I would say, and if you take a look today, finally enough, because we're still in the early phases of the ramp, the majority of our even small revenue today is from things outside of series production line or semiconductors, software, AI systems, like, and obviously some adjacent market sales. But I think the software side is definitely going to be a huge part of the story when it comes to later on in the second half of this decade. I'd say it's about three years behind where we are on the LiDAR front. And more and more automakers have also realized just how meaningful it can be to have the right software partners at play. The reality is that the majority of automakers don't have a software solution today to be able to scale with. And as they're planning to be able to launch the next generation platforms, that's going to be something that's needed. And I think it's clear that Luminar has a hand to play, including from this announcement that we just had today.
Tristan Gerra: Thanks. And then for my follow-up question, if the shift from EVs to hybrid is still ongoing next year, does that impact your revenue pipeline or design win pipeline at all? Is there -- do you see over the next couple of years, still a higher [tax] (ph) rate with EVs versus hybrid. And then finally, if you could remind us of some of the engagements that you had with some auto OEMs outside of Volvo. I think you had mentioned Nissan (OTC:NSANY) a few years ago, and also some traction in China. Have those been delayed or, but do you still have ongoing relationship or are those still opportunities?
Tom Fennimore: We have ongoing relationships, great dialogue, great progress. I think, Tristan, as you mentioned, there's this whole, I would say, shift going on in the industry about how much more we want to devote to EVs versus hybrids versus traditional gas engines. We're agnostic to that. We work on any platform. We just need the automakers to make a decision on which direction they're going to go. And then we're going to be ready there to serve them and put our LiDAR on that vehicle. But I would say there's been an industry wide pause and that's in almost every major region that you just mentioned in LiDAR decision-making, because they need to decide which direction they're going to go. And then as soon as they decide, then they'll come back and decide how they're going to deploy LiDAR on that vehicles in what quantity. We don't think there's ultimately in a longer term, going to be a difference in our business based upon which direction they're going to go. There may be some near term headwinds because I would say we're overweighted to EBs in the near term because of decisions the industry made a few years ago to invest in EVs, but ultimately we're agnostic. The longer term potential for LiDAR is there. And as soon as these decisions are made, we think it's going to unlock these next rounds of LiDAR RFQs.
Austin Russell: It's really all just a question of the platform timing, right, because it's public that -- had been public for some time, as we've talked about. Some of the automakers there, and I think it's actually very much the right decision for the next-generation platform. Some of them were going all EVs and only EVs. And we don't think that's right, because ultimately, that won't be helpful to us in the longer term either. And I know that it's funny, a lot of people think of Luminar as just like an EV company, which is kind of weird. Since actually, the majority of our wins are not on -- not just EV only platforms, it's also including combustion engine and hybrid. But of course, from a planning standpoint, as Tom mentioned, it just happens to be the things like the EX90 are EVs that are just the near-term ones we decided earlier on. I think as this scales up, the reality is that for some of the larger OEMs that are there, there's going to be a nice mix of multiple different kinds of power trains and ones that were integrated into. And, that said, folks like Volvo, they're having their strides and success when it comes to EVs. And I think they can do that as a smaller OEM as well pretty successfully. But when it comes to some of the big mainstream ones that we're starting to work with, I think that's where it's going to be leading more towards combustion and hybrid.
Tristan Gerra: Great. Thank you very much.
Yarden Amsalem: Thank you, Tristan. This marks the end of our Q&A session. I'd like to thank everybody for sticking around and participating in the call and for the analysts that asked the questions and investors and other folks that have joined us. We look forward to talking to you guys next quarter. Thank you.
Tom Fennimore: Thanks, everyone.
Austin Russell: Thank you.
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