LAZR (2021 - Q2)

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 and slides that accompany this call at luminartech.com/quarterlyreview. In a moment, you’ll hear brief remarks followed by Q&A. Before we begin, let me remind everyone that during the call, we may refer to GAAP and non-GAAP measures in our remarks. Today’s discussions also contain 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. Austin Russel

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 a 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 is a clear use case and strong demand for Highway Autonomy, there simultaneously exists an extremely compelling application of high-performance auto grade LiDAR and software for improving more basic safety capabilities on vehicles. There’s always working towards a 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 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. Volvo’s 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 its 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 sheds 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 that said, I’d like to move on to our -- 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. [Audio/Video Presentation] All right, exciting stuff. And this was just two weeks ago in Munich. This was our first public demonstration of Luminar’s Proactive Safety in action. This proves out that it isn’t just theoretical anymore. There is 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 and 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 our 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 secures 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 photo detector 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 5th generation of LiDAR chip. So, what you can actually see in the breakdown here, this chip that’s about the size of a cue chip. 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 could 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 flack, you can probably barely see it, of InGaAs, indium gallium arsenide. That’s a 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 blend of our LiDAR. It 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 roofline of a vehicle and though Frankenstein-like roof racks are becoming a thing of the past 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 robo-taxis. We also kicked-off a global customer roadshow to show off Iris and its seamless integration into a passenger vehicle roofline. 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. At 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, we were also just awarded our 100th patent, something to be super proud of, and 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, 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 lock down the remaining elements of the supply-chain and tooling and complete our testing for Iris. It’s worth noting that acquiring OptoGration also secured a key element of our supply chain for series production for the foreseeable future, which is very important amid 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 than originally anticipated, as many of our customers want to 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 in the watershed announcement from Volvo regarding standardization, we are now increasing our forward-looking order growth target to at least 60% this year. Our final milestone relates to maintaining a strong liquidity profile and cash position, with a target to end this year with a higher cash balance than we started the year. We remain on track to meet this objective and ended the second quarter with $580 million in cash, in 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 million to $33 million for the year, well above our guidance at the beginning of the year of $25 million to $30 million and the $26 million we publicly forecast 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 increase. 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 and 19% from the prior quarter. Our non-GAAP 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 start-up. Of the $6.7 million in non-GAAP COGS in Q2, $3.7 million was associated with non-recurring engineering expenses for our 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.

Thanks, everyone. So I appreciate you taking the time. At the beginning, we hope we didn’t do any permanent ear damage to anyone with the technical difficulties that we were encountering. The good news is that we stopped the alien attack over Orlando. So, you should all be safe, but we appreciate you holding on. We got some good Q&A coming up. And Matt, why don’t we go ahead and get started with our first questioner?

Great. Our first question is from Sam Peterman with Craig-Hallum.

Hi, guys, thanks for taking my question. I guess first on the order book 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 SAIC deal, your Pony deal, and then this Volvo standardization news?

Yes, sure. We’re not going to 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 the order book is growing is the important part. For clarity here, we’re only including expected revenue from our major commercial wins. It’s only for those specific programs, where we have wins. So, if you take Volvo, we announced earlier this year the standardization on the EV successor to the XC90, that’s the only thing that’s in our order book. Now, we’re pretty confident that over time, we’re going to continue to grow with Volvo as a customer like we did this year. And as we grow to get 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 that’s going to be continued to how we judge ourselves in terms of that forward-looking guidance with regards to that order book.

Okay. Thanks for the clarity there. One quick second one, I think I heard you say that, not only was hardware going to be standard on the new Volvo vehicles, but software was going to be standard as well. Is that right? And is there -- or is that a take rate with the software that just says, consumers have an option to upgrade with that software and purchase that after they purchase a vehicle? Or is that, are you going to be seeing software revenue for each vehicle like you’re going to be seeing hardware?

Yes, I mean, I think when it comes to software, this is absolutely 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 plant. So, when it comes down to it, absolutely is going to be a significant contributor to the long-term revenue that we have. We already have deals in place as part of 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 the majority of our holistic revenue by the second half of this decade.

Next question is from Itay Michaeli with Citi.

Great. Hi, everyone. Just a couple of questions. First, maybe on Proactive Safety and the work you’re doing there. I was hoping, if you can 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 evasive steering component? Love to kind of understand kind of the incremental safety benefits you’re working on relative to traditional ADAS?

Yep. So, when it comes to Proactive Safety, I think the key distinction here is the proactive nature of it. I mean, really, most active safety, they probably should be called reactive safety, but I don’t think that would be a good branding. So that’s -- but the reality is, is that, the systems are almost surprisingly ineffective in 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 a couple of weeks ago here, able to film and show for the first time what is possible. And it starts with the basic scenarios, but we’ve worked our way out into a number of different things and are excited to be able to show this off on public roads by the end of the year. So, we would classify it as 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 coming as an application of this kind of technology in a use case for it. Everyone thought it’s all about autonomy, which we would still list as 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.

Just a follow up, just going back to the news on Volvo standardization. In the past we’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 the feedback you’ve received from other prospective customers, as you think about your order book growing potentially again by the end of the year, should we expect these to be similar kind of auto programs or is there still some robo-taxi maybe even non-auto programs potentially in the works as well?

Sure. So, Itay, in terms of we’ve announced a new target for the number of major commercial wins that we expect this year, which is now 6 up from 3 where it was earlier. Year-to-date, we’re at 4. We have a very high level of confidence that we’re going to get at least that remaining 2, 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 going to 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 landscaping 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 we’re very particularly excited about. And so, I don’t want to go into too much detail at the time here. We don’t want to 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, we had some great meetings set up with us a number of various executives at some of the major automakers as part of this global customer road show that we 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 going to be showing off Proactive Safety life at IAA in Munich coming around the corner. And we’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 using this technology for autonomy programs they have, but actually even taking a broader view of what it can do.

The next question is from Aileen 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 a 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?

Yes, 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, we -- I think it was, what, just a few handful of months ago, that was when we announced the Sentinel solution along with Proactive Safety that, 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, the series production business for 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 Highway Autonomy, starting with the kind of high end vehicle option, but the Proactive Safety discussion is really rapidly coming into play. And that’s where you start to see the standardization discussion. I mean, if you take a look at other kinds of technologies and systems historically in the automotive industry -- and what’s interesting is that, a lot of times you take a look at seatbelts, airbags, even the mobilized systems of this world, they can often take a decade or sometimes decades to ultimately become standardized on something after being offered as an option. And these are things that we take for granted today. But I think the same thing is no different when it comes to a 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 for it takes so. And the reason why Volvo keeps coming up is because they’ve really taken a lead position in addition to all the other automakers that we are 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 part of the rationale for the increased level of traction, increased guidance and everything that we have ahead of ourselves.

And Aileen, I think the real answer to 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 every 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-air 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 kind of 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 3, 4 Highway Autonomy, but we can also make it applicable for you at Level 2, 3 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?

Yes, and I think it’s kind of interesting. It’s a certain type of snowball effect, down a hill here where I think starting out it’s kind of funny -- a lot of times it’s not clear for automakers exactly what kind of functionality is going to be needed, exactly what is going to take the market by storm. I mean, it’s the same example of, if you ask somebody, 200-years ago, what kind of vehicle do they want? They’d say, “Oh, well, I want a faster horse.” It’s like the whole concept of what new technology and -- can enable on these kinds of systems, it’s something that it’s part of our job to be able to see the future of what’s possible. And that was the case with the Highway Autonomy, I mean, we made a big bet on this, knowing that urban autonomy was going to be really hard. It was going to take a long time. Everybody was focused around that. We went up with the OEM series production Highway Autonomy applications, that bet 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 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 us different is just so significant, because it’s also a huge investment that you had 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 going to 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?

Yes. I don’t know if aggressive is the right word, Aileen, there. There are 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 OptoGration in-house allows us not only to expand our competitive moat by making sure that those critical suppliers can only work with us, but it also allows us to control our supply base, owning that receiver production capacity in the current environment is very valuable, and allows us to industrialize and scale up a lot faster. M&A is going to be a very valuable tool in our arsenal going forward. We’re going to be very disciplined in what we look at. If you actually look at the last two acquisitions that we’ve done, we talked about OptoGration, 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 did 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, be more active in M&A in a disciplined way.

And 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, Black Forest Engineering, OptoGration, everything, these aren’t out of the blue. We actually -- I mean, a part of the strategic vision that we have and what we’ve executed against this, we actually have been able to get exclusive agreements with these guys early on in some cases use in advance. So, that’s part of how we’re able to get such a great deal on it here too, because, 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, didn’t cost down even more and really be able to continue to innovate at an even rapid -- more rapid pace.

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 advance 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 four 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 going to result in series production or in the case of programs like Airbus, major commercial programs. So, that’s the answer to latter half of your question. The answer now is, and I said this on the last call, the reason that, that 14 number, 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 becoming full for that initial wave of sub launch in that, let’s call it ‘20 -- end of 2022 to 2024 timeframe, making sure that we flawlessly execute on those initial launches is our top priority here. And we want to make sure that we’re going to 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 don’t want to -- we want to make sure that we’re not biting up more than we can chew in the near term here.

I think it’s fair to say also, for some of the metrics, we’re not necessarily updating every possible metric every quarter and some more on an annualized basis in terms of what can be expected for these things, like, for example, the order book that we’ll have in terms of specifics. But yes, it’s a 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 we just doubled our plan target, 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, we’ve seen momentum building in the industry behind LiDAR just generally, particularly around some series production wins, right? I think, obviously, you guys have Volvo and SAIC, and then whether it’s BMW or GM, or Hyundai or whoever it may be, or Daimler, it seems to be a lot of momentum building, right, even with the EV Chinese start-ups, right, the Chinese EV start-ups? So, I guess my question is, a lot of them tend to be with 905 nanometer LiDAR players. And I have to imagine that a lot of them are still striving for Level 3 autonomy, eventually, whether that’s now we’re upgrading later down the line with software. So, I guess my question to you is, if they are capable of delivering that kind of capability, right, the Level 3 Highway Pilot or 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 these things, too. I mean, you have to be able to sort through the noise as well, when it comes to all these things. We still completely maintain in terms of our focus. And what we focus 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 -- 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. 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 Mobileye 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 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 capabilities that you’re going to see realized, 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 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.

Quick one, Michael, let’s go ahead.

Yes, yes, sorry. Just quick one. You talked about, how you’ve innovated around the InGaAs detector. Can you just talk about what progress you made around the laser itself, the fiber 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 within the building materials?

Yes. So, we have -- when talking about the long-term stuff and if you’re actually there, we actually already have supply agreements in place with our laser provider, receiver, ASIC and basically just the key lidar components that have gone into it, already for in its scale less than a $100 costs. So, that’s done and it’s in place. There is no more magic to it. I mean -- well, I shouldn’t say, there is actually a lot of magic to it 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 want to discount any of that. The 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 is -- from a technology standpoint, that’s where -- 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 want to be clear, there is no new product that’s required for us to have a great business case already for the programs that we have. Like, it’s already really solid. I mean, the ASPs 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, 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 if you’re 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.

Next question is from Emmanuel Rosner with Deutsche Bank.

Yes. Thank you so much. So, first is a follow-up on the building materials question. So, as part of this vertical integration effort, does that also help you on your trajectory to reduce this building material? Can you maybe give us an update of where you stand out? Where do you expect to stand by the time a commercial production starts late next year? And then, obviously, you just mentioned that you’re well on track for the $100 at scale. I’m interested in the intermediary stages, and to what extent the vertical integration is helping.

Yes. 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 the -- it’s all about volume and the volume driver. Like, we have the architecture. We actually have part of what we announced just a moment ago here, is that we now have 85% of our series production supply chain and tooling walks down. So, things are really falling well into place as expected as part of what we’ve been on track for. But, when 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 series 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’re talking 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 this process is completed, you’re generally on-track for the $500 base start-up production?

Yes. Yes, we’re on track for the $500 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 end markets. Obviously, as part of your existing wins, it seems that you were getting some traction with aircraft, and robo-taxis. 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 a broader sense?

Yes. I’d say, I think it’s important to have an initial establishment of lead partners in different verticals like, I don’t know, you take like Mobileye as an example. Like, they’re not actually an OEM themselves, but I think they’re going to 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 -- 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 market will be a little bit more fragmented between the U.S. and China, and as with all, it is important to establish a base there. And then, when you take a look at Airbus, I mean, the kind of certification process that it takes to be able to be air worthy, it actually is quite a number of years. So, you want to be able to start that clock early on. Does that mean that we’re going to go now take on every airplane manufacturer? Absolutely not. 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 as well as trucks for that matter.

And next question is from Gus Richard with Northland Capital.

Yes. Thanks for taking the question. Just, you’ve got 85% of your supply chain locked up for your see C-sample. What’s left to go? And then, sort of as a follow-on, are you using an off-the-shelf laser?

Yes. 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, Gus, right now, we’re over 85% of our tooling, really transitioning that from the prototype stage, where you’re really building parts more for the prototypes and early stage development, to going to the actual tooling, or the production tooling that will be used for once we get the series production. We have less than 15% to go. And part of -- and it’s just -- it doesn’t fall into any specific category. It’s just some of this has longer lead times in terms of actually converting that tooling from prototype into the production stage.

As part of it’s just refinement of process too, for all of that. So, you kind of 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 be 100% in Q4. So, when it comes to the laser, by the way, too, it is a custom laser solution. So, we’re not aware of any off-the-shelf laser that could ever get you to the kind of economics that are needed, or our -- or specifications or list goes on and on, same thing with the receivers, same thing the chip, same thing with the other the other stuff. So, it’s part -- they really have to be designed together, as part of this, like, we actually -- like we’re designing our own chips, 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 going to get data, so you can refine your Proactive Safety. Are the OEMs willing to share data? I know some are.

Yes. As I said, not everyone always, associated with this. But, we make sure as part of our series production arrangements there too that there generally are data related clauses associated with these things. So, those are different factors. It’s ultimately different for each OEM. But that’s absolutely something that we do 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, its orders of magnitude more than any kind of -- I mean, the largest robo-taxi 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. So, you don’t actually have to pay people to drive with a $100,000 prototype systems. This is a series production, driven system that can collect data to continue to improve it. And that applies to Proactive Safety as well as highway autonomy. And 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 like urban autonomy and other areas. But, that’s where we’re starting.

Okay. And then, just the last one for me. Can you give any update on you’re working with Mobileye on their robo-taxi and how that relationship is going? And do you expect that to continue on into their production?

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

Got it. Thank you so much.

The next question is for Tristan Gerra R.W. Baird.

Hi, guys. Great to see that you’re raising the full year revenue outlook. Is that driven by higher quality testing on existing design wins, or is it basically part of 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 with this potentially means in terms of your outer 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 sensor 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 going to 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. And the second part of the question is, it really varies customer by customer in terms of what the weighted average duration is of the series -- of our forward-looking order book, for lack of a better word. 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 won, nothing else, just those major commercial wins. About 60% of that 630,000 units that we have expanded 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 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 lidars differentiate with the competition on the reservation standpoint?

Yes. So, there’s really 14 different key metrics that come into play 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. And that applies everything from as you said, the range and the resolution, all the way across the board from interference to exportability to scalability and manufacturability, to -- like, all these different things, doesn’t work in rain, fog, and snow, etcetera. 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 with a given architecture. And that’s part of the whole value proposition that we have. To answer the question specifically on resolution, yes, we do pride ourselves on the 300 points per square degree, plus, max resolution capability with a device. It’s very difficult to be able to see low profile objects out on the road way at distance that you need to become -- able to come to a safe stop for well in advance. And these are people’s lives at stake when it comes down to it. So that’s why having that extreme level of performance is important. So, 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, so sometimes we’ve heard the term specsmanship used, if you try and like optimize each of the individual ones, you have to do all those 14 simultaneously. But, I mean, obviously, you can take our word for it, but the reality is, is that the ultimate voice of the customer, for series production, that’s the thing that matters most. One thing worth noting with the revenue side of it, we can’t -- we’re kind of 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 series production programs that are -- that we’re working with that have been awarded. And 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 with this. And there’s a lot that’s gone into that. And that’s something that’s also just unique to Luminar. Again, the goal is not to try and sell one-off units for testing to 500 different customers here. We think that’s absolutely the wrong approach. That is a distraction. It’s possible, you can do it, but that’s not going to scale you into ultimately becoming up $50 billion, $100 billion or $1 trillion company, at the end of the day.

Great. Thank you very much.

Hey, thanks. And Jaime, Dan, [ph] if you guys can each do one question, we’ll finish up with you.

Thanks for the update and great presentation. I know we’ve been talking about passenger cars, but any update on commercial vehicles? I know Volvo produces trucks, any update on the trucking side?

Yes. So, our lead production partner for trucking is Daimler Trucks. One of the reason why we’re working directly with them and their partner Torc is because -- you take a look at the overall long-haul trucking market 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. These trucking companies and operators are economic animals at the end of the day. So, the focus is -- and 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. And that’s 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 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 AV trucking perspective, trucking OEM perspective. So, it makes sense to work with them. And then, when it comes to holistic trucking side in general, I think, you’ll have more to see from us later this year.

And just for the sake of clarity, there is a Volvo Trucks and there is a Volvo Car. And while they share the same name, they’re actually two separate companies.

Thanks, Jaime. Danny, we got a one final question?

Great. Thank you. Thank you for squeezing me in. Just wanted to go back to the Volvo agreement, because obviously we 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, how the roles of perception software may differ? Who’s doing the sensor fusion? And how there could be room at the table for multiple parties to provide software solutions here? Thank you.

Yes, absolutely. So, there’s two things. I think just taking a holistic step back, there is no question that multiple OEMs have said that they want to be more software companies than they are today. They want less hardware, more software, whatever it is. What it really means is less commodity auto parts business, more value accretive 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, that doesn’t mean that we won’t work with them as a result, by any means. It’s quite the opposite. We partner with OEMs to be able to see the systems through. But, you take a look at case of -- 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 more than smart enough to recognize that the system that we have, what we develop, 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, Volvo kind of being the farthest ahead on this with their subsidiary, Zenseact. That’s part of the reason why we partnered with them to actually bring a holistic software package out to the rest of the industry, because the reality is, is that there’s a lot of talk, 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, when people talk about an OEM working with a lidar system, or a lidar win, there is a 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 a car? And that’s part of the significance is that you really have that clear software development plan, the strategy and resources to be able to make this happen. And then, like I said, this applies to 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.

Great. Thank you.

Thanks, everyone, for joining the call. We really appreciate your time. And thanks for working through us as we went through a little technical difficulty at the front. And we look forward to talking to you through the quarter and the next business update.

We’re going to have a dedicated server here next time if -- sounds like I was actually introducing -- setup, it was just introducing crazy voice. So yes, thanks for hanging. All right. Well, great update. And yes, we’ll see you all around next time.

Thanks, everyone.