Luminar Technologies, Inc.

Welcome, everyone, to Luminar's first quarter of 2025 business update call. My name is Aileen McAdams, and I am Luminar's head of investor relations. With me today is Tom Fenimore, Luminar's chief financial officer. As a reminder, this call is being recorded. You can find the press release and the presentation that accompany this call at investors.luminartech.com. In a moment, you will hear remarks from Tom, followed by a Q&A session. Before we begin the prepared remarks and then the 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 our 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 CFO, Tom Fenimore.

Thank you, Aileen. This afternoon, before we dive into the quarterly financial results for the company, I want to take a moment to share some important updates from our board of directors regarding our leadership at Luminar. Some of you have likely seen the press release we issued, but in the event you missed it, I want to recap it now. Founder Austin Russell, the president and CEO of the company and chairperson of the board, will resign effective immediately following a code of business conduct inquiry by the board of directors. This matter does not impact any of the company's financial results. Mr. Russell will remain on the board and be available to the incoming chief executive officer on transition and technology matters. This decision was not made lightly. The board recognizes the weight of this action and the impact it may have. However, the board takes seriously its duties of oversight, accountability, and commitment to Luminor's values, culture, and long-term success. In light of this transition, we are pleased to announce that Paul Ritchie has been appointed as our new CEO to be effective on or about May 21st, 2025. Paul brings a wealth of experience, having previously served as chairman and CEO of Nuance for nearly two decades. His visionary leadership and deep understanding of technology make him the ideal person to guide us in our next chapter of growth. We understand that this news may come as a surprise. We want to assure you that the board of directors and the leadership team is fully committed to ensuring a smooth and successful transition. Finally, while I suspect you have a number of questions about this, we plan to let the press release speak for itself. And now let's move on to our Q1 financial and business updates. As you notice from our presentation today, we wanted to use this quarterly business update to not only run through our quarterly financial results, but also take a step back and provide a broader vision for where Luminar is headed over the next few years. One of the things that makes Luminar so unique is that our technology uses the 1550 wavelength. As compared to our competitors who use the more traditional 905 wavelength, we're able to put on average up to 17 times more photons into the environment. This gives our customers the ability to not only significantly improve the safety of their vehicles, but also operate autonomously at all speeds, including high speeds. This is something truly unique. This is also the primary reason why our OEM partners have chosen to work with us. In doing so, however, each OEM has historically asked us to use our core LiDAR technology and develop unique OEM-specific product architectures around it. Iris and Iris Plus are just two examples of these highly customized design programs. Last quarter, we introduced the idea of consolidating our product portfolio and customers into a singular Luminar Halo platform in order to improve our development time and significantly reduce our development costs. This decision to move to a unified product architecture has been extremely well received by our OEM partners. Going forward, the core technology of our Halo platform will be largely standardized across all our customers with modest customizations. And we have a page in the slide deck to highlight four that have kind of signed on to this approach so far. This will enable us to streamline our product development efforts, improve our time to market, and further reduce our cost. As it relates to our business model beyond Lumen or Halo for our next-generation products, we'll be narrowing our development efforts around our core technologies, such as the transceiver, which includes the laser, the receiver, and the ASIC, the embedded software, and other core components. Simultaneously, we will also be outsourcing more of the commodity components of our LiDAR, for example, like a top housing or chassis or other components, to some of our key partners. This will allow us to further streamline the company and reduce costs and get our products to the market faster. This is a continuation of efforts to re-scope our company focus and right-size our cost structure. We've had to make a number of tough decisions over the past year to better position our company for the future, and we will continue to do so. In the coming quarters, we will look forward to providing incremental updates on our progress with this initiative, including new and existing customer wins using the Halo platform. Now, let's turn to an update on restructuring actions in our financials. Last year, we announced two major restructurings, one in April and one in September. That allowed us to significantly improve our cost structure. The key catalyst for these cost actions were the successful achievement of our Volvo launch last year and our expanded industrialization partnership with TPK. In aggregate, these actions were expected to save $120 million in cash and another $40 million in stock via stock-based compensation. We achieved these cost-saving targets. Specifically, versus a year ago, if you look at our non-GAAP OPEX, a good proxy to measure the cash savings from our restructuring actions, those have declined by about $115 million on an annualized basis. Our quarterly stock-based compensation, a good proxy for the stock savings, has declined by almost $100 million on an annualized basis. Overall, I'm proud that we're executing on what we set out to do in reducing costs in our business and extending our financial runway. This brings me to the next topic of our capital structure. I'll start with an update on our debt profile. As a reminder, our secured debt maturing in 2028 and 2030 includes a springing maturity that requires us to reduce the outstanding face value amount of our 2026 unsecured debt below $100 million by June of next year. I'm happy to report that as a result of the actions we have taken over the past several months, we now have a line of sight of reaching that goal. We have reduced the balance on the 2026 debt from $625 million in August of last year to $185 million outstanding as of today. Accordingly, we plan to continue working towards reducing this balance in the near term and doing so in a disciplined manner that does not materially impact our cash balance. Let's now turn to our Q1 financials. Revenue for the quarter came in at $18.9 million, which was down 10% year-over-year and 16% sequentially. This was consistent with the guidance we gave that revenue this quarter would be lower than Q4. On a quarter-over-quarter basis, Q1 saw growth in series production sensor sales and NRE revenue, which is offset by lower sensor sales to adjacent market customers. More specifically, we shipped almost 6,000 sensors to customers in Q1, up approximately 50% from Q4 sequentially. The vast majority of these sensors were shipped to Volvo. For the quarter, we reported a gross loss of negative 8 million on a GAAP basis and negative 6.4 million on a non-GAAP basis, which again was in line with our guidance. This was driven by continued growth in series production sensor sales at unfavorable unit economics, which was partially offset by returns from some of our cost-saving actions. We also incurred approximately $1 million of tariff charges in our COGS during Q1, and we are very close to resolution with our key customers to mitigate our tariff exposure for the rest of the year. OPEX came in at $64 million on a GAAP basis and $45 million on a non-GAAP basis. On a gap basis, OpEx was down nearly $10 million quarter over quarter, a direct result of the cost reduction actions we announced last year. Moving on to our cash and balance sheet, we ended Q1 with $188 million in cash and liquidity, which includes $138 million in cash and marketable securities and our undrawn $50 million line of credit. Including $209 million available in our equity financing program, our total access to liquidity stands at nearly $400 million. Our change in cash in Q4 was negative $44 million, which was higher than the negative $16 million level in Q4. This was entirely driven by activity in our equity financing program, specifically raising $48 million in Q4 of last year versus a negligible amount in Q1. Since we didn't file our 10K until late March, we had limited time in Q1 to utilize our ATM facility and instead opted to equitize a portion of our 2026 convertible NARDS during the open period. Ultimately, while we got it to an average of issuing about $30 million and on average per quarter under this ATM program through the remainder of this year, we also indicated that this activity would be lumpy quarter to quarter. Free cash flow for this quarter was roughly $44 million, representing an $18 million improvement from the $62 million used in Q4. Driven by our cost reduction actions and working capital swings, this marks the lowest level of quarterly cash burns since 2022, as the benefits of our ongoing cost reduction actions continue to manifest. Moving on to 2025 guidance. Despite all of the macro uncertainty, we are reiterating our 2025 revenue and other guidance in improving our year-end OpEx target. For 2025, we continue to expect full-year revenue growth in the range of 10% to 20%. As a reminder, our revenue and censorship guidance for this year incorporated a more conservative production outlook relative to our customers and third-party guidance, specifically a 50% haircut to IHS floor cuts at the time. So while the volatile geopolitical and macro environment presents risk, we believe that our conservative approach provides a sufficient buffer to reiterate our guidance at this time. But this buffer is less than what it was at the beginning of the year. For Q2, we expect revenue will decline slightly per quarter, driven by lower sequential sensor sales to non-series production customers. We continue to expect to generate a non-GAAP gross loss of negative five to negative $10 million per quarter on average, through the remainder of this year. One element of our guidance that we are revising positively is OpEx. Given the progress we demonstrated on non-GAAP OpEx in Q1, as well as actions to be implemented as part of our unified product architecture strategy discussed earlier, we're revising our year-end quarterly OpEx outlook from the mid to high $30 million range to now the low $30 million range. We can continue to expect the end of the year with greater than $150 million of cash and liquidity, which includes cash and marketable securities and our $50 million under online credit. As I communicated in prior quarters, we believe our current cash and liquidity position, as well as access to additional liquidity, provides us with sufficient runway through at least the end of next year. I've also mentioned in the past we may require approximately up to $100 million in additional capital to reach profitability, and we remain focused on aggressively executing our cost reduction plan and streamlining our business to lower any additional funding requirements. Finally, I wanted to make everyone aware that we are gonna file an extension for our 10Q for the quarter. This concludes our prepared remarks, and I will hand it back over to Aileen for Q&A on the business and financial update. While I understand there's interest in the leadership transition, and I appreciate the question, We won't be discussing that topic further on today's call other than what was disclosed in the press release and 10 and 8K. For today, we're focused on the Q1 financial results and business update and happy to take questions on those topics. In the near future, we hope to have another business update call with Paul Ritchie to go into more detail on some of the actions we talked about today. Over to you, Aileen, for Q&A.

Thanks, Tom. We're going to hand it over to our analyst community now. I'd ask that analysts limit their question to one initial question and one follow-up. Our first question is going to come from Josh Patois at JPMorgan.