Luminar Technologies Inc

NASDAQ:LAZR

Welcome, everyone to Luminar's Fourth Quarter of 2024 Business Update Call. My name is Aileen McAdams, and I'm Luminar's Head of Investor Relations.

With me today on the call 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 the presentation that accompanies this call on our website at investors.luminartech.com. In a moment, you'll hear remarks from Austin and Tom, followed by a Q&A session.

Before we begin our prepared remarks and Q&A, let me remind everyone that during the call, we may refer to non-GAAP and 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 the press release and the 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's Founder and CEO, Austin Russell. Austin?

Hey. Can you hear me okay?

Yes.

Oh, perfect. Perfect. All right. Well, good afternoon, everyone. I'm calling in from, just outside of NVIDIA's GTC in Silicon Valley, where we're showcasing some of our LiDAR and Sentinel software on, and with NVIDIA's automotive platform to OEMs. So good traction there.

And as a recap of today's news, excited to be able to get out there by with the outperformance this quarter, and a strong finish to year-end from a sales standpoint, commercial momentum perspective, and achieving the product unification around Luminar Halo. Excited to jump in with regards to not just what this year was, but also what 2025 has to offer, and also as we look to scale up our LiDAR shipments by more than 200% this year.

But first, I want to start today off with a little bit of a refresher of the state of the union around LiDAR and Luminar before we get into some of our achievements for this past year and what's ahead.

So at the beginning of this last year, I described how Luminar had stand at or stood at the crossroads of 2 different realities. The core of our business had never been stronger. With our technology proven and Iris successfully industrialized for a global production vehicle. Yet at the same time, we all knew the broader automotive market was challenged on timely launches of new vehicle platforms.

Of course, today, we stand having successfully launched the first global production vehicle with the Volvo EX90 being shipped with leading class technologies for the first time at global scale, like Luminar and NVIDIA, to show the world what's possible.

Of course, later on last year, after the kickoff of the beginning we unveiled Halo during Luminar Day to be able to show how we're going to scale at the global stage. We'll talk a little bit more about that.

So those in the automotive industry know and fair to say that it's undergoing a seismic shift with the introduction of new technologies ranging from electric powertrains to advanced compute to LiDAR on new vehicle platforms. And introducing any one of those kinds of technologies to future vehicles is a major undertaking, much less multiple at the same time, into what automakers are calling software defined vehicles. This is a monumental undertaking with complexity that cannot be overstated, while also driving significant disruption up and down the value chains. And it's no secret that this result was such that many automakers had taken longer than their initial targets a few years ago to launch these new vehicle platforms as they collaborate with a differentiated supply base and develop centralized vehicle software systems from scratch.

With that said, one thing is very clear. Compared to a few years ago, or even recent history, more automakers than ever are planning to integrate things like LiDAR, AI, and advanced computing into their next generation vehicle lineups, with the majority of them expecting to do so by the end of the decade. The question is no longer if LiDAR is a relevant technology for the industry, but rather when it will become standardized across vehicles, just like other safety-enhancing technologies in the past, like radars, cameras, airbags, seatbelts, or even today, new technologies like GPUs in vehicles.

And unlike the electronics industry with quick-paced roll-ins and outs of products, the automotive industry is one of those very high-barrier-to-entry, but also very high-barrier-to-exit industries. It takes a substantially more conservative and decisive approach to integrating and rolling out new technologies. Time and time again, it's generally a 10 to 20-year adoption cycle to when the first new technologies are introduced, to when they start to become standardized, or even eventually mandated on vehicles.

We witnessed it with everything from mobilized vision technologies, to what's happening with the recent compute integrations, to say, for example, automatic emergency braking capabilities.

So the automotive industry is not like that in the sense that, say, your next generation phone, or tablet, or VR headset is introduced in consumer hands year after year. These technologies take years to be able to be developed, much less to automotive-grade qualifications, tested, validated, and integrated into platforms, and especially when those technologies are safety-critical, like LiDAR. This is a highly complex process, and people's lives are at stake in the industry, so it moves at a very deliberate pace.

And I truly believe that just like those other technologies introduced to automotive that [ we ] described before, LiDAR on every vehicle is inevitable. It's just a matter of development progress and time. And this sentiment has been echoed by industry leaders that we've seen both privately to us, as well as publicly on a number of occasions. And with a recent example being, for example, Nissan, just on their most recent earnings call, they specifically spoke around revolutionizing autonomous driving technologies and next-generation collision avoidance features, utilizing LiDAR for widespread standardization, first with them and then the broader industry.

And I'm frequently asked, the comparison is made of what's the differentiation specifically for Luminar and Luminar's technology on LiDAR. And it starts off with, I would say, what we see in the industry is a little bit of a bifurcation to what you could call kind of a premium segment for the market, and then a more lower cost commodity segment for the market that particularly we've seen gains of traction, notably in China.

And as a reminder, one of the things that makes Luminar's LiDAR unique is the fact that we built our own technology from the chip level up at a different kind of wavelength of light versus using more commodity off-the-shelf components at 905 nanometers, we use them at 1550 nanometers. That allows us to output orders of magnitude more pulse energy into the environment than 905 nanometers while maintaining eye safety, whereas 905 nanometers is substantially limited.

That allows us to detect even some of the hardest-to-see objects at distances past 250 meters in all kinds of lighting conditions and stands as stark contrast to our competitors' technologies, which can generally only see those kinds of difficult-to-see objects at a fraction of the distances, limiting the kind of speeds the vehicles can operate as well as not maximizing the safety capabilities that can be achieved.

And while some of those shorter perception distances can be helpful for lower-speed autonomous driving applications, they're insufficient to ultimately safely maneuver at higher speeds. And that's the fundamental difference that our LiDAR enables and what is required to ultimately unlock Level 3 autonomy, going beyond just the base assistive driving capabilities. Of course, it still significantly and further enhances with the extra performance the capabilities you can expect from a safety standpoint for Level 2 and beyond.

Now, what's happening right now in the market is that automakers and some of these platform providers, other companies, are more so initially using the LiDAR for these assisted driving capabilities while they develop those autonomous Level 3 capabilities to ultimately be able to enable drivers to take their hands off, eyes off, and what, use your phone, work on your laptop, watch a movie, take a nap, whatever it may be in your vehicle. And we're starting to see some of those in global markets, as well as the China market in particular, exciting to see that there's some significant adoption there as all those OEMs moving very quickly.

But that said, on one hand, the low-performance LiDAR is okay for now for some of those vehicles, particularly in China, that can support Level 2 applications when drivers remain actively engaged and the cost is fairly low, but it'd not be sufficient to ultimately unlock a higher level of performance and capabilities, higher levels of safety and higher speeds. And that's really where Luminar comes into play.

We're ultimately building LiDAR so that you can have those capabilities to be fully realized. And this is where we get to see significant adoption from the Western world OEMs representing on the order of 90% of the global volume to establish these kinds of cases and something we're very excited about.

So of course, I think it's important to say that as software for Level 3 and higher capabilities is solved for, and LiDAR's full value is continuing to be realized, we believe that that premium segment around LiDAR will ultimately be a critical part of the ecosystem and a winner here. And that's further supported, I would say, by beyond just the performance capabilities, substantial cost reductions what we have with Luminar Halo to be able to enable even broader widespread adoptions that ultimately surpass the other segments.

Now at Luminar, we firmly position as a leader within this high-performance category with our 1550 nanometer technology, and we believe that it's really the only viable solution for looking ahead what the requirements are for Level 3 and beyond. And at the same time, the only solution that's going to maximize the safety capabilities for the vehicle. So this leadership position that we have in the industry is underscored by the traction we continue to see with our automaker partners, and particularly with our next generation LiDAR, Luminar Halo.

Our Iris product was there to be able to show what was possible as we developed it and successfully launched it with Volvo, and now Luminar Halo is poised to lead the industry in performance, size, and cost. Its performance is multiples better than those of our previous generation of products in size and fraction thereof. It's a multiple of the efficiency, and it's all in a highly efficient package for seamless integration.

And in working with our numerous automaker partners over the past several years, we've not only learned and developed the performance specifications and requirements for the products of LiDAR more generally, we've also gained an incredible amount of design and manufacturing know-how and IP, and have learned the distinct advantages and disadvantages of every single iteration at the component level up from the 5 different generations of LiDAR products that we've gone through.

So again, ultimately, Luminar Halo is going to be the key enabler for what we believe to be a widespread mass adoption of LiDAR, and certainly in the Western world, and we're making solid progress with our OEM partners. So we've demonstrated Luminar's Halo's performance now to several OEMs that are actively engaged in automated development efforts.

And this is something that we highlighted in the presentation, and now we actually have fully integrated samples of Luminar Halo to be able to showcase with more mature point clouds that we're continuing to develop.

And today, we're also beginning to see green shoots in the industry. We've seen a first shift to the left by an automaker asking to pull forward the LiDAR rollout relative to their prior LiDAR plan with an earlier vehicle platform. And we've been working with this automaker for several years and are excited about what's ahead.

So the thing is, what makes this possible is all around the accelerated development time line for Luminar Halo, as well as our decision to simplify our overall product portfolio. Historically, we developed a number of different LiDAR-related products simultaneously between the Iris family of products, as well as what we have been working on in the background with Halo.

With Iris initially there to be able to primarily serve Volvo and the requirements there before it forked off to dozens of other companies that we're able to provide it to, and then subsequently also Iris Plus with our lead OEM customer in that respect. So I would say this, is that from a development standpoint, now with the work on Iris largely complete, and Iris Plus, as I mentioned before and from the announcement and as we're talking about here, is transitioning to be Halo from our lead customer with Iris Plus, we now have a unified platform together that is a superset of all the different OEM requirements for what's needed in the LiDAR. And that allows us to have a singular product as opposed to a bunch of different variations of the same kinds of product to be able to simplify our development efforts significantly, saving on cost, enhancing efficiency, enhancing speed, among other things there.

This also gives us an opportunity to transition customers with Iris into series production to Luminar Halo on mid-cycle refreshes. So as a result of all of those factors, we're really all in on Halo and excited to be moving full speed ahead.

So I would say this, is that from a broader perspective, we had historically built Luminar to be able to have the capability to develop multiple products simultaneously around the LiDAR side. We know, as of last year, from some of the different restructuring actions that we take to streamline the organization. We've implemented it, they've been largely effective and haven't materially affected the overall development time line from what we've had. In fact, it's actually streamlined and sped things up in many respects.

And when it comes down to it this year, as we shift towards from developing all these different kinds of LiDAR products, that one unified LiDAR platform, we think there's going to be some opportunities for dramatic efficiency improvements that we're going to get to realize this year.

And again, why make this move now, in terms of a broader strategic shift in our business model? It's all because we're able to get our customers and our key customers on board with the Halo platform moving full speed ahead in the same direction with shared requirements. And that's something that we've been working for, frankly, many years on to be able to do and align those requirements and expectations.

So we're going to be talking a little bit more about that and I'll have more to share over the coming weeks and months about, how we will reinvent Luminar more radically as an organization under this new kind of business model, less around custom developments for OEMs and more with that shared unified platform.

And really, this becomes possible because we had invested nearly $2 billion over the past decade to be able to create, industrialize, and launch an entire technology platform, an ecosystem, and coming from the semiconductor all the way up to the LiDAR, up to the software levels, and have some of the best engineering and technical talent in the industry, as well as technology on the shelf because of those investments. So, we're now on the other side of that investment curve, which allows us to be able to realign the business without materially affecting near-term deliverables, revenues, et cetera.

So in concert with our Board of Directors, we're in the throes of developing that new strategic plan for Luminar under this new business model of that unified platform and look forward to sharing more.

Lastly, before I turn it over to Tom, I want to take a moment to review some of our key achievements from a business milestone standpoint and highlight some of the impressive work from the Luminar team in 2024. At the beginning of last year, we outlined 4 business milestones to achieve by year end.

Number one was passing the final Run at Rate production audit to achieve a global start of production with Volvo and ramp accordingly.

Second was launching a TPK facility for additional capacity and improved cost.

Number three was to unveil our next generation LiDAR, later unveiled as Halo, and deliver samples to customers.

Four, was to expand the ecosystem around our LiDAR.

And I'm happy to say that we've delivered across all 4 of these key business milestones at a company level.

We achieved the start of production for Volvo with the EX90 this past year, and we're also awarded the Volvo ES90, which is the sedan, so to say, equivalent of the EX90, which will go into production this year.

We also launched an expanded industrialization partnership with TPK in our transition to an asset light model for industrialization. We hosted a very successful Luminar Day where we unveiled this next generation LiDAR, Luminar Halo, and generated the first point cloud from Luminar Halo since while demonstrating its capabilities to customers, and feedback has been tremendously positive. We did all of this while aggressively working to restructure our costs as part of the business. And of course, while not without its challenges, I'm immensely proud of the Luminar team for all that we've achieved last year under the kind of broader macro circumstances.

I have the utmost confidence in our ability to execute for 2025. And today, we're going to be outlining a few of those key milestones achieved by the end of the year. So you can be able to take a look. The first and foremost is to be able to continue to ramp the production and delivery of the Iris related sensors for series production customers, and achieve those economies of scale with over 200% growth associated with our deliveries into the market.

The second one was meeting the key requirements for Halo for our customer contracts and execution.

And number three was to be able to streamline the business with the new business and operating model that we described as we have that unified product portfolio going from, what, developing 5 different variants of products at the same time to 1 with Luminar Halo. And that's going to help accelerate our efficiency as a business and path to profitability as well.

So we remain very confident in our strategy and execution. Our technology leadership remains unparalleled in the high-performance LiDAR space. Our customer relationships are progressing well, and while we're pragmatic about the near-term industry challenges, we're very optimistic about the market's long-term expansion. And as the industry continues to shift toward safer vehicles and towards Level 3 autonomous driving capabilities, we firmly believe Luminar is exceptionally well-positioned to capitalize on this enormous opportunity ahead.

And with that, I'll turn it over to Tom to discuss financials. Thank you.

Great. Thank you, Austin. Let's start by reviewing Q4 financial results.

Revenue for the quarter came in better than expected at $22.5 million, up 45% quarter-over-quarter and 2% year-over-year. The primary driver of this revenue growth was higher sensor sales, both to Volvo and non-series production or adjacent market customers. During Q4, our sensor sales to adjacent market customers increased substantially, mainly due to a large order from one of our customers. While we expect this customer will continue to generate significant revenue in the longer-term, we expect the shipments during the most recent quarter satiated their near-term demand.

During Q4, we shipped over 4,000 Iris sensors to our customers and over 9,000 for the calendar year. The vast majority of these sensors were shipped to Volvo.

Moving on to gross margin. For the quarter, we reported positive gross profit of $12.5 million on a GAAP basis and $14 million on a non-GAAP basis. Three factors drove our positive gross margin. First, we reversed $10 million of NRE contract losses accrued in prior quarters related to our Iris Plus development work. As Austin mentioned, in Q4, we transitioned our lead Iris Plus customer to Luminar Halo development, allowing us to terminate this Iris Plus development work and reverse that contract loss accrual.

The second factor that drove positive gross margin was planned production downtime at our Mexico facility to align our production with our customers' demand. This allowed us to ship sensors from inventory that were already marked down to ASP levels. We estimate this was an approximately $4 million benefit to gross profit during the quarter.

The third factor was the previously mentioned large sensor shipment to an adjacent market customer, which was done at significantly higher ASPs than what we sell for non-series production. We estimate that this was about another $4 million benefit.

Some of these factors like production downtime will not repeat going forward and others like sensor sales to non-series production customers will repeat, but will be choppy on a quarter-to-quarter basis. However, we are encouraged that we generated a positive gross profit during the quarter.

While reaching gross profit positive is an important milestone for us, we are guiding to be modestly gross margin negative for each quarter in 2025, and I'll discuss more of that later.

Now to discuss and give an update on our cost actions as well as our OpEx. Last year, we announced 2 major restructurings, one in April and one in September that allowed us to significantly improve our cost structure. The April actions were expected to achieve $80 million in total cost savings, about half in cash, half in stocks by the end of 2024.

And the September actions were expected to achieve an additional $80 million, almost entirely in cash by the end of 2025 when fully implemented. These actions have started to yield demonstrable results in our financial performance.

Relative to Q1 before our cost actions were implemented, our non-GAAP OpEx, a good proxy to measure these cash savings declined by $72 million on an annualized basis. Our quarterly stock-based compensation approximately for the stock savings declined by about $80 million on an annual basis over the same time period.

Moving on to cash and our balance sheet. We ended the year with $233 million in cash and liquidity, which includes $183 million in cash and marketable securities and $50 million on our undrawn line of credit. This year-end actual numbers were in line with our guidance. Including the $209 million available on our equity finance program, which reflects a $75 million upsize we're going to do shortly after earnings. This amounts to total access to liquidity of $442 million.

Our change in cash during the quarter was $16 million, well below the $52 million from Q3. This improvement was primarily driven by proceeds from our equity financing program, which amounted to $48 million for the quarter and was partially a function of timing as we only did $6 million in Q3. The proceeds generated under this program during the quarter continue to demonstrate our access to the capital markets and remain an avenue we can pursue to bolster our liquidity if and when needed.

Free cash flow for the quarter was negative $62 million, slightly higher than the negative $58 million in Q3. The increase was almost entirely driven by $8 million of higher cash interest during the quarter from our August debt transaction. We expect to file an amended S3 and prospectus supplement associated with the extension of our equity finance program and stock to be granted to one of our strategic suppliers over the next few days.

I wanted to touch base on our order book. In the past, we disclosed forward-looking order book as an alternative financial metric that we updated annually as a means by which the investment community can measure our commercial progress and opportunity. Now that we have achieved series production, we are no longer going to update this on an annual basis and instead replace it by disclosing our sensor shipped, which we believe is a better metric to measure our progress. This is consistent with what other LiDAR companies that have reached series production stage have done.

For full disclosure, our forward-looking order book as of 2024 would be lower relative to 2023. However, we believe this is a temporary phenomenon due to the Halo transition with our key customers from the Iris family. As a reminder, we established a very high order book for what was included in the order book and not. Specifically, only series production awards or equivalent were included, and we exclude customer contracts that are only in the development stage. While reception for Luminar Halo has been significant, the product still remains in the development phase with a number of series production award opportunities pending completion of certain technical milestones.

To be absolutely clear, we continue to work with all of our customers from last year, have not lost any customers, and we expect the decline in the order book in 2024 to be temporary as we complete the outlined development milestones for Luminar Halo and hopefully with anticipated better economics.

Our commercial opportunity for Halo remains strong. We have entered into Luminar Halo development contracts with 2 major automakers since our last earning calls and have secured a series production equivalent contract with a major construction and off-highway machinery manufacturer. More details to come here shortly on those.

Moving on to 2025 guidance. For 2025, we expect the full year -- our full year revenue growth to be in the range of 10% to 20%. This growth will be almost entirely driven by a greater than 3x forecasted increase in our sensors from approximately 9,000 in 2024 to a range that we're currently forecasting of, call it, 30,000 to 33,000 this year. This growth in sensor shipped will be offset by the lower revenue from the nonautomotive customer we discussed on our Q3 call and basically the full year impact of that renegotiated contract.

We are being conservative in our revenue guidance and are basing our 2025 sensor shipped at a rather significant, call it, about a 50% haircut to the latest IHS latest forecast. We want to be conservative until we see more proof points of a sustained ramp in our customers' production volume.

For the first quarter, we expect revenue will decline quarter-over-quarter and be closer to Q3 '24 than Q4 levels. This is driven by basically the lower sequential sensor sales to that non-series production customer we discussed earlier.

In the past, we talked about reaching a mid-$30 million revenue run rate on a quarterly basis. Given the recalibrated contracts as well as lower assumed volume for series productions, we don't think that, that is going to happen this year.

We expect to generate a negative non-GAAP gross margin on a quarterly basis throughout this year, driven by the lower sensor sales to nonseries production customers as well as resumption of our series production facility in Mexico and some modest tariff headwinds. More specifically, we expect negative quarterly gross loss to average about $5 million to $10 million per quarter.

While we've made progress on improving our sensor economics and COGS overhead through various cost reduction efforts, the unfortunate reality is that the lower-than-expected production volume remains a major hurdle for us in achieving the necessary economies of scales to achieve sustainable positive gross margin. We may generate positive gross margin from time to time like we did this most recent quarter, but this will be highly dependent on sensors shipped to nonseries production customers, which remain lumpy.

I briefly want to address the current tariff environment. Geopolitical tensions are creating significant uncertainty for companies with global supply chains like Luminar. At this point in time, we have determined that our LiDAR sensors we ship from Mexico to the U.S. are likely subject to the most to the recently implemented tariffs. That said, even if we take no actions to mitigate this exposure, we expect the impact on our gross profit to remain relatively modest. However, it is important to note that we remain one of the only LiDAR suppliers with a global footprint across North America and Asia, and we are actively exploring alternatives to modify our production footprint accordingly.

For 2025, we expect non-GAAP OpEx will decline from the mid-$50 million range in Q1 to the mid to high $30 million range by the end of the year as we continue to make progress on our cost reduction efforts.

We expect to end fiscal year '25 with greater than $150 million of cash and liquidity, which includes cash and marketable securities and our $50 million line of credit.

We expect to issue on average about $30 million per quarter, will be a little bit higher, a little bit lower depending upon the quarter under our equity financing program.

For fiscal year '25, we expect our free cash flow to improve driven by our cost reduction efforts. This brings me to my final topic of our capital structure and cash runway. I'll start with an update on our debt profile.

In August of last year, we executed an exchange transaction, which reduced our convertible debt by nearly $150 million, while also raising $100 million of new debt capital. Since August, our convertible debt declined by $38 million through early conversions of our 2030 convertible bonds, leaving about $237 million outstanding on our convertible debt that matures in 2030.

In total, our debt now stands at approximately $540 million versus $625 million a year ago. We plan to start chipping away in a disciplined manner at the remaining $203 million of convertible debt maturing in 2026 and doing in a way that we don't think is going to materially impact our cash or liquidity profile.

We believe our current cash and liquidity position and equity financing program provides us with sufficient runway through at least 2026. I mentioned in the past that we may require approximately an additional $100 million of additional capital to reach profitability beyond that. We continue to execute aggressively on our cost reduction plan to lower that potential funding requirement. While we're in no rush to execute a transaction in the near-term, we are also evaluating our options for raising additional capital, and we'll continue to actively monitor the market.

That concludes our prepared remarks. I'd once again like to thank the entire Luminar team for a great 2024 and continued execution progress.

With that, I'll hand it back over to Aileen to start our Q&A session.

We're now going get into our Q&A with our analyst community. Our first question is going to come from Jash Patwa at JPMorgan.

Austin, great to see you at the GTC. In that vein, I'm wondering if there's any news regarding the reference architecture for NVIDIA's Hyperion platform and if Luminar is expected to continue as the reference LiDAR sensor as it was on earlier NVIDIA platforms? And I have a follow-up.

Absolutely. And I think as we mentioned earlier is that we're in progress right now of shifting the broader customer base that we've had across the board, which is, what, like, over a dozen different partners from the Iris family of products over to Luminar Halo. And so I think we certainly expect to be able to be in the lead to be driving this when it comes to a Hyperion platform or other kinds of partners that we've been working with accordingly for the Halo transition as well.

Ultimately, Halo is going to be driving significantly better economics and as opportunity for, I would say, more widespread and mainstream adoption, whereas Iris was really sort of proving out what was possible. But the key is that not these aren't some theoretical efforts there too. We're very excited to be showcasing some of these capabilities already as it stands today. And if any of you guys are at GTC, we encourage you guys to come by and see it live with us in NVIDIA at our booth there.

That's very helpful. Just as a follow-up, historically, we've heard from Luminar and some of your industry peers about a metaphorical barrier preventing Chinese suppliers from securing global OEM contracts due to escalating geopolitical tensions. However, a recent success by one of your Chinese counterparts suggest that the competitive landscape might be more complex than we would have previously anticipated. Curious if you could just discuss the competitive dynamics, particularly regarding which competitors you encounter most frequently during the sourcing processes? And it would also be helpful if you could highlight areas where Luminar excels and where it may face challenges compared to the competition.

Yes, absolutely. And as it relates to China market in particular, I think that to the credit of China, there has been significant and rapid development within that market for LiDAR adoption, where, what, there's now millions of vehicles being shipped accordingly, even with some of the more lower performance LiDAR technologies that are equipped on those. And I think that's a little bit of a foreshadow for what happens in the Western world. But I would say more broadly, I think the Western and Eastern ecosystems around it have different kinds of product requirements when it comes to an OEM standpoint, different kinds of performance requirements, different kinds of safety requirements, and different kinds of capabilities they ultimately want to be able to deploy.

I also think that really the Eastern world has been moving more quickly for the initial adoption than the Western world, whereas the Western world is going be the thing that ultimately delivers most of the volume being responsible for on the order of 90% of the global volume.

Our goal is to sort of position ourselves as the Western world leader, and we see is there is sort of a dividing ecosystems there. I think over the last 3 years, it's actually become probably significantly more divided and isolated. And I think this is largely what OEMs are preparing for in a divided world. There's a lot of conversation around, hey, we don't want anything with a single line of Chinese code in it for example, where they're saying that it could be at risk of, well, their entire vehicle platform if they start doing other kinds of development and engineering work in China.

With that said, I think that there's obviously some kind of speculation of if there really haven't historically been any production wins for companies within China. Outside of that in a material capacity, I -- there aren't today either as far as we're aware. But that so -- I mean, I heard a lot of different things. I've don't always believe everything that's that you read. But that said, when it comes down to it, I think to the credit of the Chinese ecosystem there, it starts to show what is possible.

We're going to continue to position ourselves as the premium player in the market. And I think that's going to really continue to resonate from for the greatest level of safety application and the biggest level widespread adoption for the Western world, and that's what we're doubling down on.

Our next question is going to come from Winnie Dong at Deutsche Bank.

Question, the first one is on Luminar milestones that you're looking for this year. I was wondering if you can elaborate on maybe some sort of specific customer development you might be looking for. Is there any specific number of contracts that you might be hoping to get for SOP during this year?

Yes. And I'd say between all of our key OEM customers, everything from Volvo to Nissan, to Mercedes, to beyond for all the other ones that we've talked about and the technology customers, there's generally more detailed milestones from a product standpoint that are included in those in terms of what's needed to ultimately successfully launch with them.

And the key is of what we've been doing is basically now with a lot of the work being done from the Iris family of products, transitioning that over to Halo and establishing those milestones. So we already have those for some of those key OEMs and contracts in place today, and that's where we're getting the rest of them over. That really, I would say, the focus right now is around maturing the different component level subassemblies for some of which we already have production intense subassemblies, other ones we're still developing to be able to get to that stage. So we also ultimately will want to have Halo product samples in the hands of our various key customers by year-end.

Just maybe a follow-up to that. As you're looking to streamline the operations, I'm just curious how that is going to impact your current series production of Volvo or perhaps not. I'm just curious how that changeover will happen in, yes.

So Winnie, we're doing this in a way where it shouldn't have any material impact on this. You rewind to where we were 3 years ago. We were developing 3 products at once: Iris; Iris Plus; Halo.

Most of the work on Iris is substantially done by the end of the year. I wouldn't say it's going to be 100% done, but I would say there's going to be -- I would say more maintenance level type of work on that.

Iris Plus, as we talked about, we're no longer working on that. We transition our lead customers there directly to Halo. So as we kind of get towards the end of this year, there's going to be one product that the team is going to be working on, which is Halo. And so that is going to allow us to free up, I would say, even more resources, streamline the operations more, really narrow our focus, and it shouldn't really impact any of the execution or any of the production on Iris.

And then in terms of the OpEx and the cost reduction, thanks for providing the color on outlook. Can you give us a bit more detail in terms of the incremental actions that will be done this year to drive out that cost? [Indiscernible]

I think -- yes. If you go back to what we announced in April, that is substantially complete. When you look at what we did in September, I would say we're about halfway done there. And I would say the remaining half will be you'll see that kind of ramp up in terms of the savings and ramp down in the OpEx through the rest of the year. And then because we've been able to stop the work on Iris Plus, that's going to kind of be the next catalyst to kind of streamline the organization even further for continuing and even more cost savings than what we've talked about historically.

Our next question is going to come from Federico Merendi on for John Babcock from Bank of America.

So from the press release, I gathered that your free -- I mean, your cash burn might be around $200 million in 2025. So that leaves you roughly with $100 million at the end of the year, excluding the credit facility. So -- and Tom, I think you said that you will need additional $100 million to reach profitability. So does that mean that you will reach profitability sometime, say, in -- at the end of 2026?

Yes. Like, first of all, I think your math is generally accurate and in line with the guidance that we've given. I think '26 in terms of reaching profitability, maybe a little bit too soon. I think we really need to get Halo to the market given the better-than-expected sensor economics. So I think it shouldn't be too long after '26 for us to get to that level.

That $100 million we're doing what we can to kind of continue to chip away at our cost structure to reduce that amount. As we've said historically, I don't think we're going to be able to get it all the way to 0, but we're making good progress there to really minimize our additional capital needs to get to profitability.

Understood. And you mentioned that you're commencing operation with TPK, which from my understanding is in China, and --

No. We've always said Asia, we haven't necessarily said China.

I think in the 10-K, you mentioned that the operations are in China, no?

We purposely said in our press release now Asia and we purposely said China [indiscernible] that we're constantly evaluating our manufacturing footprint and supply chain. And we'll give updates on what that looks like at some point later this year.

Although to clarify, TPK is Taiwanese. Yes.

No. I know that. I think from what I remember, in your 10-K, you mentioned that previously, it was in China. But so my end question was, so how are you going to mask the tariff risk or potential bans from foreign technology in The United States?

Yes. So the latter that in terms of the ban of technology in the United States, that's something that we're -- that is, I would say, a materially impact or material risk at this time for us. The tariffs and like, look, the tariff landscape seems to be changing on a daily basis. So that's something we're looking at. Historically, not to geek out too much from a tariff side, our -- the product we made in Mexico has a Mexican country of origin. We're looking at ways to kind of mitigate that tariff impact in the near-term here.

If we're unable to mitigate it, it's going to have a modest impact on our gross profit, not an immaterial one, modest, not based upon where everything is today significant, but we're constantly looking at our manufacturing footprint and how we define our product to minimize that tariff impact, both in the near and longer-term.

We also mentioned 60% of our product content comes from Thailand as opposed to Mexico. So that's just one other factor there too that as we kind of think about the broader landscape, we don't want to make any harsh reaction as things keep changing every week. But we'll -- I think as Tom mentioned earlier, we're really the only company from a LiDAR standpoint that has the truly global footprint. Ultimately, stuff in China, we believe will be produced for China. There's stuff outside of that in Asia or Mexico or as that situation evolves or whatever, but in different parts in the Western world. So I think that's going be an important part. We have the flexibility to sort of go with the ebbs and flows of the global trade ecosystem to be able to shift according to this crazy web of geopolitics and tariffs that we have to deal with and everyone has to deal with.

Our next question is going to come from Morgan Long on for Mark Delaney from Goldman Sachs.

So well understood on the comments around order book disclosure. But can you try to help us better understand the implications on the backlog from the change from going from Iris Plus to now doing the Halo platform and how that changes like the quoting process with customers at all?

It really doesn't change a lot the quoting process here. What happens here is because Halo is in an earlier stage of product development. And we have, I would say, a more strict than others in the industry definition of what we include in the order book. We only include something in the order book if it's an official series production of order equivalent. Halo has to kind of meet certain development milestones that are defined in our development contracts with our customers. And when -- hopefully, we meet those, then that's when they kind of reconvert back into the series production award category. So by our technical definition, because Halo hasn't gone through the development process yet to get the series production award, it wouldn't be our order book. But as we continue to do that, it should be replenished.

The other thing I would highlight there is Halo is going to have better unit economics in Iris or Iris Plus. So as it replenishes, hopefully, replenishes at better longer-term economics for the home team.

Very helpful. And then I just wanted to double check that there's been no change to the time line for Halo. Is that still expected end of 2026?

Yes, generally in that time frame. And so, I think it's, I would say, end of '26 we're targeted vehicle lines that have SOPs in 2027.

Our last question is going to come from Tyler Anderson on for Richard Shannon at Craig-Hallum.

So I just got here a little bit late. But for the ramp in development going on for the new Volvo win, how should we think about the ramp -- like time line for that?

Are you referring to the ES90?

Yes.

Yes. So what I would say is IHS has a, in our opinion, a pretty aggressive volume ramp for the ES90. In the guidance we've given, if you look overall, we've assumed about a 50% haircut to IHS. Don't get me wrong, I hope IHS is right and we're wrong, but we want to be more conservative until we see a more sustainable ramp. And so I would say what's embedded in our 2025 guidance, I would say, is not a significant ramp in ES90. We are prepared to do it when we see the customer demand. We have the capacity in place, but we're not forecasting a significant one like IHS is in that for the ES90.

And I would say the ES90, we -- that's what started production in April of last year. We have seen a ramp up there during Q4 and then the early parts of '25. There is the potential for an even more higher production volume once the new China facility comes in, but we've been more conservative on what that ramp would look like as well.

Absolutely. And I think we're also trying to be super conservative more generally. We've also we've sort of learned from previous years that we'd rather under promise and over deliver when it comes down to it. So that's why the haircut to volumes. I mean, obviously, it's still pretty significant growth with over 200% and more than that that we would expect that we're kind of guiding to from a series production center delivery standpoint, then that would be driving the revenue. Obviously, the overall corporate revenue was more moderated because of another onetime renegotiation of a nonseries contract that that he talked about from but that's news from 6 months ago or whatever.

When it comes to the growth there, IHS would be, what, the equivalent of, like, 500% growth compared to the 200% growth that we're guiding to. So I think it's all upside from here as we launch with the ES90, and we're counting down the handful of months here, and then Polestar 3 as well among other vehicles. So this is kind of the EX90 was the vision in the start of the wave, and now it's coming in and scaling up. So excited to make it happen.

That marks the end of our Q&A session. I'd like everyone, or I'd like to thank everyone for sticking around and participating in the call and for the analysts that asked the questions and investors and other folks who've joined us. We look forward to talking to you guys next quarter.

Thanks.

Thank you.