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spk04: Good afternoon everyone and welcome to SEPTUN's first quarter 2022 earnings conference call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference call over to Hal Hsu, Chief Financial Officer.
spk05: You may begin.
spk06: Thank you and welcome everyone to SEPTUN's first quarter 2022 earnings call and business update. With me today is Jun Pei, co-founder and chief executive officer. During the call, we may refer to our unaudited GAAP financials and non-GAAP measures in our earnings release. The non-GAAP financial measures should not be considered as a substitute or superior to the measures of financial performance prepared in accordance with GAAP. Reconciliation for non-GAAP measures are included in our earnings release. I would like to remind everyone that comments made in this conference call may include forward-looking statements regarding the company's expected operational and financial performance for future periods. These statements are based on the company's current expectations and are subject to the safe harbor statements relating to forward-looking statements contained in our earnings release and the slides that accompany this call. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks, uncertainties, or other factors, including those discussed in the earnings release or during today's call and those described in our filings with the U.S. SEC. We are not undertaking any commitments to update those statements as a result of future events except as required by law. As a quick reminder, this call is being recorded, and you can find the earnings release and slides that accompany this call, as well as the webcast replay of this call at investors.septum.com. Now I would like to turn the call over to June.
spk00: Thank you, Hall, and good afternoon, everyone. Thank you for joining Septum's first quarter earnings call. We will provide a business update and review first quarter 2022 financial results with you. As you may know from our April 5th announcement, today is Hall Hsu's first earnings call as our Chief Financial Officer. I look forward to working with Hall in his expanded role as CFO to continue executing our 2022 milestones in this momentous year for CEPTAR. Our LIDARs are designed with the philosophy that it must achieve a balance between performance, cost, and reliability. Our MMT LiDAR is the direct result of our design philosophy that enabled Septon to win the largest ADAS series production award to date. This not only validates the viability of Septon's LiDAR for commercial ADAS, but also demonstrates LiDAR-enabled safe autonomy is more than a luxury feature. It is an integral part of automotive safety that should be available for everyone. I will start off with an update on our OEM series production execution. I'm happy to report we have started shipping D-samples in support of General Motors' Ultra Cruise program. The D-sample units have been shipped to multiple manufacturing sites across the US. As a reminder, D-sample represents the final stage in hardware validation with production intent. In what has been a long process, starting with our initial engagement in 2017, SEPTON is nearing the final phases of execution, making LIDARs available in consumer vehicles. We expect saleable vehicles to be equipped with SEPTON LIDAR towards the end of this year. By then, we'll be within just a few months from start of production, where SEPTON is the sole supplier for the next four years and beyond. We continue to work closely with our Tier 1 partner, Coetel Manufacturing, and have started transferring manufacturing processes, equipment, and software in preparation for scale production. With LiDAR being a critical component of safety for commercial ADAS, it is important to have a Tier 1 supplier as our partner to support scale production. Most global OEMs require Tier 1 supplier who will stand behind the product. We anticipate this partnership will not only drive future series production wins, but also help scale production to meet the growing demand of our products. Speaking more broadly on automotive, I continue to believe that commercial validation will be the ultimate differentiation. Our series production award not only give us a significant momentum and attention from other OEMs, but also place the increased attention on the importance of LIDAR in automotive safety. We continue to make progress on engagement with other top 10 OEMs and top trucking companies. We believe that in order for LiDAR to be implemented in everyday consumer vehicles, the price point must start below $1,000 and work its way down to mid-three digits per unit in order to accelerate large-scale adoption. Our unique MMT technology achieves a balance of performance, cost, and reliability. This balance enables Septon to deliver a high-quality LiDAR that can be placed into everyday consumer vehicles without compromising safety. In addition to our long-range forward-facing LiDAR, which won the largest ADAS series production award, we are also working on a near-range LiDAR product, NOVA, with which we continue to make progress with top automotive and trucking OEMs. We're starting to ship NOVA B samples to OEMs for evaluation this quarter. One of our key strengths in our LiDAR product is vehicle integration, such as the ability for the LiDAR to be placed behind the windshield. This offers distinct advantages in vehicle design flexibility and product reliability for the OEM and aesthetic benefits for the consumer. Vehicle integration flexibility stems from the small form factor and low power consumption of our LiDAR that is a benefit of our MMT innovation. We're one of the very few companies in the industry with this capability and the only company with a major series production award. We have received many calls from other interested automotive OEMs on this feature alone. We have seen accelerated enthusiasm from consumers on vehicles that have been awarded to us across multiple platforms. and consumer automotive demand is off to a strong start in 2022. Our LiDAR product was created with consumer ADAS in mind, and we will be one of the first LiDAR companies to capture this rising demand. In the coming decade, we expect ADAS to be the application that represents over 80% of the LiDAR addressable market and will provide the largest return on investment. We have applied many of the learning from the automotive market, particularly its stringent requirements for performance and cost, to our smart infrastructure customers. There is a growing demand for both our LiDAR sensors and our LiDAR perception software, where we are beginning to see our engagement mature beyond the proof of concept phase and leading to meaningful purchase order volumes. Moving up the software stack has helped us reach many customers who demand a complete perception solution. On the horizon, we have completed design milestones of our second ASIC, which will drive further performance enhancement and cost reduction. We look forward to sharing more news with you in the coming quarters. In the near term, our focus remains on OEM series production execution, and we are looking forward to building our momentum for the rest of the year. I will now turn the call over to our CFO, Hao Xu.
spk06: Thank you, June. In February, we closed our business combination with Growth Capital Acquisition Corp. and renamed the surviving entity Septon Inc. Concurrent with the transaction, we closed the pipe investment anchored by COIDO in the total amount of $59.5 million. We received approximately $48 million net of fees. Moving on to our first quarter results, total revenue for the quarter was $1.5 million, up 239% year-over-year and 16% sequentially and consists of 100% product revenue. GAAP net income was $41.2 million or $0.36 per share and $0.32 per diluted share. Non-GAAP net loss was $12.2 million or $0.11 per share, both basic and diluted. Weighted average basic shares outstanding for the first quarter was 115.9 million, and on a diluted basis, it's 127.1 million shares. Non-GAAP adjustments include a 56.7 million gain on re-measurement of earn-out share liability, 2.7 million non-recurring transaction costs related to our SPAC transaction, stock-based compensation of 1.3 million, and a $0.8 million gain on re-measurement of our warrant liabilities. Non-GAAP adjusted EBITDA was negative $11.4 million. As of March 31, 2022, we had available liquidity of approximately $160 million. Total available liquidity consists of approximately $45 million in cash and short-term investments, $15 million remaining on the Trinity Loan Facility and a commitment to purchase up to $100 million in equity from Lincoln Park Capital. As we said in our FY 2021 earnings call, we expect 2022 revenue to be back half-weighted as our development programs achieve their remaining milestones. Starting off with automotive, We remain on track to complete the de-sample phase by the end of the year and have saleable vehicles equipped with Cepton LIDAR. We expect to ship several thousand units this year, equipping multiple vehicle models manufactured in multiple assembly plants across the United States in preparation for scale production. On smart infrastructure, we are seeing robust demand for our VISTA-P and Sora-P LiDAR, as well as our Helios software product from our customers around the world, and this will drive meaningful volume as projects mature throughout the year. We remain extremely focused on execution of the industry's largest ADAS series production award to date and on winning additional awards. We are confident in our long-term growth plan and our path to be a market share leader.
spk05: Now, I'd like to open the call for questions.
spk04: Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star and then 1 on a touch-tone telephone. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys to ensure the best sound quality. If at any time your question has been addressed and you would like to withdraw your question, you may press star and two. Once again, that is star and then one to join the question queue.
spk05: We'll pause momentarily to assemble the roster. Our first question today comes from Matthew Galenko from Maxim Group.
spk04: Please go ahead with your question.
spk03: Hey, good afternoon. Thanks for taking my questions. Can you give us an update on what you're seeing in the supply chain and, from your point of view, if there's any elevated risk and how you're managing that?
spk00: Thank you very much for the question. Junpei here, CEO of Septon. For the Q&A session, I also have our Senior Vice President of Business Development, Mitch Hortini, joining us in answering the questions. But specifically coming to the supply chain, there are certainly very much awareness of the issues with the supply chain. Very fortunately for us, we are actually into the A, B, C, right now, D sample stage with limited volume requirement. We are being alerted for all the supply chain issues, but we're not hitting a huge obstacle with the current quantity needed to supply samples for the General Motors autocruise program. Frankly, it's not actually affecting our execution at all. at this point, but we're very much vigilant, making a lot of preparation for this coming year, 2023, where the SOP will actually start.
spk01: Yeah, thanks, June. This is Mitch Hortini. I'll just add, you know, when you're working with Coedo and General Motors, they have tremendous risk mitigation processes that help us with this issue, and they've been working with us as needed to address any concerns there. On the smart infrastructure side, that's a little bit more lower volume. Yes, it's become a little bit harder and more expensive to get some key components, but we've been able to procure those and, for the most part, pass on that cost increase to our customers.
spk03: Got it. Okay, that's helpful. And then I guess as a follow-up, I'm not sure if I missed it in your prepared remarks, so I apologize if you mentioned this, but are you standing by the guidance you previously provided or did you provide an update to that?
spk00: Yes, we are actually standing by our current guidance. Specifically, we have the execution of the GM program, the Ultra Cruise program, all on schedule. This is a very early process from 2017 until we got a design win in 2019. At the time we were awarded the design win, The schedule was a SOP of 2023. After almost three years of hard work until now, the SOP time is still 2023. So yeah, we stick to our guidance. And Matt, this is Hal.
spk06: I just wanted to add a little bit more color. So for 2022, as we mentioned, the revenue is going to be back half-weighted. Right now, we're not seeing any constraints on the demand side. And you mentioned the – you asked about the supply constraints. If it becomes worse toward the end of the year, that we may have some, you know, issues meeting those units, but we're not seeing that right now, so we're standing by our full-year guidance.
spk03: Thank you. And one last question, then I'll jump back in the queue. I guess it's been – well, as you approach production with GM, And I guess it's been a couple of quarters now that you've sort of been public with, you know, who you're working with. I guess give us an update on how other OEMs are responding to that development. And as you move closer to production with GM, are you seeing some of the fast follower type OEMs move through the pipeline or, you know, move more quickly through the pipeline? Or how has that changed over the last couple of quarters? Thank you.
spk00: Yeah, that's a great question. Certainly with the GM announcement up to today for the past couple of quarters, we're getting a lot more attention from other OEMs. I'll let Mitch actually elaborate a little bit more on this.
spk01: Yeah, Matthew, this is Mitch. We're still currently engaged with all 10 of the top 10 global auto OEMs. More than half of those were in at least the RFI phase. The RFI phase can vary from a few months to in excess of a year, depending on the OEM. So we have gained a lot more interest from additional top 10 OEMs because of as more details about the GM Ultra Cruise program come out. I would say the interest is more about vehicle integration. performance and cost and solidifying those three and keeping an eye on our development milestones. So yes, to summarize, it is definitely accelerating. Thank you.
spk05: Once again, if you would like to ask a question, please press star and then one.
spk04: Our next question comes from Sam Peterman from Craig Hallam Capital Group. Please go ahead with your question.
spk02: Hi, guys. Thanks for taking my question. I wanted to ask on NOVA. It's pretty interesting that you're starting to ship that B sample. And I was just curious, how broad is the interest you're seeing for NOVA relative to kind of what you've seen and what you are seeing for your long-range LiDAR products?
spk00: Well, again, thanks for asking that question. In general, the entire automotive industry, with the GM design win and with the latest progress from many other fronts, there is a gravity towards LIDAR is going to be used for the automotive safety in the future. This will include both the long-range LIDARs and short-range LIDARs. NOVA is the near-range LIDAR we have developed. It's really getting a lot of attraction. So Mitch can fill in on the enthusiasm for this product.
spk01: Yeah, definitely. As June indicated, the automotive space, especially the OEMs that have already announced adoption of LIDAR, are already beginning to look at additional applications for LIDAR, which includes near-range, short-range, medium-range applications. I think if you look at our Nova product, what's interesting for potential customers is it's reusing the MMT technology which we're validating for General Motors. We're simply scaling that technology down. The maturity, the cost projections, the reliability is all proven relative to other solutions on the market. So that's the interest. In terms of applications and use cases, I would say it's an order of magnitude higher than long-range LIDAR and expands even well beyond automotive. So there's just a tremendous amount of interest in our NOVA product.
spk02: Thanks for that detail. The second question, you talked on the last call about some pretty good engagement in China with OEMs there. I was curious if recent events have changed OEM's outlooks or plans or timing for deployment at all. And if you could talk to that, that'd be great.
spk05: Hey Sam, this is Hal.
spk06: So our China progress is continuing. So part of our plan is to bring up the China team in terms of technology and application expertise. We're also trying to find a tier one that we have a confidence to work with and address the China opportunity together. The China market is, as you know, overall is at 40% of the global automotive market. So it is a large one that we are focused on. In China, the speed of technology innovation is actually quite fast. If you follow the development of their EVs, they're actually putting LiDARs in somewhat near term, right? When we think about near term, it's two years out. So look, pay attention to future announcements from us. We do expect to have some program win this year.
spk02: Okay, that's great. And then last one, kind of a simple question, but not knowing anything about how this works, figured I'd ask it. On the process transfer and the equipment transfer, to Coedo that's ongoing, when do you expect that to complete and is that a pretty simple process or are there many risks to that transfer going smoothly and production ramping? Any detail around that would be great.
spk00: Yeah, that process is not a simple process. It started well over a year ago, whether it's actually the technology transfer or actually the tooling, the software control part of every component. So all of the things are being transferred throughout the last year. Now it's actually at its final stage. In fact, I myself have seen the production line in action. that was very rewarding to see finally there's a volume production process in place. The risk of that is actually pretty much retired at this point.
spk02: Okay, that's great. That's all for me. Thanks, guys.
spk04: And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to management for any closing remarks.
spk00: Thank you again for joining this conference call. Septon is at a very enviable position of supplying Ultra Cruise and being sole source for the Ultra Cruise program into many platforms of cars in this very competitive marketplace that really differentiate us and this year and the coming years will be the years of execution. Please pay attention to us as we execute this program and you'll see cars with our LiDAR on the road.
spk05: Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining.
spk04: You may now disconnect your lines.
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