Luminar Technologies, Inc. (NASDAQ:LAZR) J.P. Morgan’s 50th Annual Global Technology, Media and Communications Conference May 25, 2022 1:10 PM ET
Austin Russel – Founder and CEO
Tom Fennimore – CFO
Conference Call Participants
Samik Chatterjee – JPMorgan
Great. Good afternoon, everyone. Welcome to the session. We have the pleasure of hosting Luminar, and as you can see on the stage we have Austin Russel, who is the Founder and CEO; Tom Fennimore, who is the Chief Financial Officer. So thank you both for making it to the conference in-person. Thank you to the audience as well for coming in-person this year.
Q – Samik Chatterjee
Good timing because we have a list of questions that I want to go through, but since you had the press release about the new hires and attracting a lot of new talent, impressive talent, I should say. Austin, why don’t we start with that? What sort of the sort of — what are the capability skill sets they bring into the company? What does that sort of tell an investor about the road map that you’re trying to set out there?
Yes. I mean I think that’s the most major and significant advances that we had as it relates to a holistic internal perspective and execution perspective from a leadership standpoint. And really, this is the whole next phase of Luminar’s leadership really helping come in from an execution perspective. And as we be able to drive towards series production and readiness by the end of the year and continue to meet all of our objectives as a company.
And I think, I guess, I couldn’t ask for a better roster of folks coming in. We have, I mean, been able to fortunately be in a position where we’re able to attract some of the best talent in the world in their respective fields with everything going on. And due to the — I think they’ve all been really impressed by what we’ve done.
So — but the quick summary is we have two folks that we specifically talked through today as well as some other ones that have joined over the last handful of months, but two of the most significant ones are Taner Ozcelik, who’s joining us as our Executive Vice President and General Manager, and he’s going to be taking on probably on the order of about one-third of the business off of my plate. And really helping drive forward a huge part of the company.
And particularly, when it comes to an execution focus from a hardware standpoint, he previously founded the NVIDIA’s automotive business and helped scale that up to what it is today, and I think an appreciable portion of the long-term value there. And when it comes to the next person, CJ, CJ is going to be taking over our software team and software development efforts, which we think is a huge part of Luminar’s future. And that’s a really important aspect of whereas the hardware and the LiDAR and everything has been the foundation of what we’ve been working with automakers on, and it’s the foundation of how we’ve gotten to where we are today.
And that’s going to continue to scale, but it’s going to be an incredible business even on its own. But when combined with software, we think that’s where a lot of the magic happens as well. And that’s where you can really start to scale this beyond just a handful of OEMs that already have software programs, but to be able to further increase the capabilities and address the majority of the market that doesn’t have software programs. So CJ joined us after previously serving as a Director of Autopilot over Tesla and the Director of Autonomous Systems over at Apple most recently. So he just joins us from there.
So that’s — well, both for that matter of huge wins for Luminar and looking forward, absolutely to what’s ahead as we continue to execute, deliver and because they’ve never been more bullish. And I mean, well, obviously, they’ve never been more bullish on Luminar as well.
Huge wins on both hardware and software, it sounds like. That’s great. Austin, let’s dive into in depth some of the sort of company-specific parts. But I think before even we do that, obviously, there’s a lot of excitement around LiDAR and the growth opportunities that it has. But just to level set sort of any new investors that are looking at this technology, why should they be sort of looking to LIDAR as an investment sort of technology from here on over the next 10 years? What are the growth opportunities that you see? Why should investors really be focused on LiDAR as a sort of technology that they should look to ride for the next 10 years?
It’s a great question. And I think from the most foundational sense, the whole point of LiDAR is that it can give at least when it’s a high-performing system that has long range and meet some of these requirements, you can give a very good understanding of what’s going on around you in a very precise ground truth capacity. Normally, you take a look at these existing legacy centers with cameras and radars it’s been embedded on cars for the past decade or two decades in the case of like radars and other things, for example, you get a very course understanding of what’s going on.
Where really the car is kind of just guessing as to what’s ahead. And the whole point is the LIDAR is you know just centimeter-level accuracy of what’s ahead in our case. And that makes all the difference to being able to go from having a system that can work 90% of the time to the 99.999%, the 10 9s that are required to achieve the level of safety that’s needed for next generation of safety systems for consumer vehicles as well from an active safety perspective as well as, of course, autonomous functionality.
So that makes all the difference. And — of course, there’s the LiDAR itself. You — not all LiDAR is created equal by any means. And obviously, this is where Luminar shines as part of the core technology is the person only kind of meet the spec why we also have more major commercial wins than the entire rest of the industry combined and corresponding market value as well. And that makes all the difference in terms of this.
Now obviously, I think from a holistic perspective, I do think that there is still massive — well, I mean, maybe this goes, there is massive opportunity for growth. And I do think that the true value of what this will deliver even from just a hardware perspective, but also more importantly, with the hardware and software combination is substantially underappreciated in terms of just how much of a dramatic impact this is going to make for the entire next phase of the automotive industry in general.
I mean, obviously, automotive is the primary focus in terms of end market for most LiDAR companies today.
But — and maybe this is specific to you as well, where your focus is on automotive because of the specs you can deliver. But when you think about, again, the next 10 years, is automotive going to be, by far, the largest sort of opportunity? Or are there other end markets where LiDAR as a technology is quite a bit relevant over the next decade as well and could be potentially as large as automotive.
Yes. So I think you take a look at the — there’s no question there are opportunities in other adjacent parts of the space. And I think that’s where we’re starting to see a lot of companies that originally had this idea of going into the holy grail of automotive, start pivoting more towards lower spec applications and other kinds of adjacent markets and industries and ones that it’s more easier to scale. Were you also — I mean, — it’s very, very difficult to build an automotive grade product they can truly go into a series production car. I mean to be able to have the spec, the robustness, the capabilities, just the pure engineering, the safety, the — I mean, either cost, I mean, you’re talking on the order of $0.5 billion of what we’ve had to invest to get to even that point of where you can make that happen.
And that makes all the difference. So you have to obviously have to spec it and other stuff to start out with that. But I would say there’s no question. I mean if you take a look at — LiDAR was a foreign concept a handful of years ago. Now you have what tens or now hundreds of millions or maybe even billions of iPhones shipping with LiDAR embedded in all of them. And other kind of consumer products and electronics that are starting to standardize this kind of technology as part of this whole next phase and wave of not just automotive, but even technology in general.
That said, I mean, I think the value proposition that’s there is — and then just the TAM is at least in order of magnitude larger than pretty much everything else combined for the automotive industry. And that’s why we really went all in on that because when you’re talking about the kinds of capabilities, it requires orders of magnitude greater capabilities than what you may see on like an iPhone LiDAR for that.
And of course, like I said, a lot of complex systems. I mean this is a system that people’s lives have to depend on. And obviously, part of the goal is actually saving a substantial amount of lives in there. So the performance is really, like I said, a factor of 100 different when it comes down to it. And that’s where ASPs are also can be more in the $1,000 type range or hundreds, then like it’s not a $10 type thing like a camera sense or other things, so.
Got it. Okay. Diving into the OEM partnerships, Volvo was one of the first partners you announced, and you have subsequently gone on to announce many more sort of partnerships and wins. How are — what are you finding in terms of the OEMs and their road maps? Are they pretty much converging to a sort of a consistent view of how they want to go from, let’s call it, level 2 to level 3 and 4? Or still OEMs, different OEMs on very different sort of divergent parts about how they want to tackle sort of going to L3, L4 in the future?
Yes. I mean I think there’s definitely a dramatically greater amount in unification than there was, call it, five years ago, three years ago, even a year ago. There’s still some level of surprising misunderstandings that maybe happened in the industry. But that said, and diverging thoughts on things, but I think that’s become more the exception than the rule at this point, and that’s something that I think, obviously, we’re quite proud to be able to have the opportunity to be able to really define kind of the future technology road map of all these various companies and kind of the majority of in our work with majority of the major automakers in what’s ahead.
But that said, I would say this is that one new emerging trend that we’ve also been pushing forward to a significant degree, that we see is that the whole point is next generation, LiDAR capabilities and everything that we’ve done historically has been seen as just purely for the autonomy use case and being able to either remove the driver or get the driver out of the loop in certain driving scenarios.
And I’m a big believer that, that is — I actually don’t think that will be the primary or say, the highest volume initial use case for what we’re doing in automotive. I think the driver behind the standardization scenarios is really more than anything as much safety as it is autonomy. It’s not about replacing the driver. It’s about enhancing the driver, it’s about moving towards a vision of ultimately building the uncrashable car.
And we’ve seen some statistics that — I mean, it’s kind of while you take a look at vehicle accidents. And I think it can be in many areas like the number one cause of death between ages like one in 44. And clearly, that’s something that needs to be solved. It’s something that’s just become an accepted part of life as vehicle accident fatalities. There’s tens of millions of in addition to the — on the order of 1.5 million annual death on a global scale, there’s on the order of tens of millions or 50 million or whatever may be serious accidents and collisions that happened that can be prevented.
And this is something that — it sounds like a simple problem of just like not letting your car let you run into the thing right in front of you. But turns out is actually very complex because you have to have an extreme level of confidence if you’re going to take over the steering wheel and braking system from the user and the consumer. And that’s what we see making all the difference. And that’s the kind of value proposition from a safety-focused value proposition that we think is going to be driven in a few different dimensions.
Number one, ultimately by OEMs in terms of the desire for future technology, safer vehicles makes a difference. Number two is by consumers, in terms of the drive to be able to also just drive saver vehicles. And number three is from a regulatory perspective, more regulators are also taking note of this, the vehicle accident rates are not decreasing, anything close to the level that they were thinking. In fact, it’s actually going the opposite direction, even like from, for example, the statistics most recently from this past year, which is I think, a shock to many that despite all of these advancements of vehicle technology and supposed safety and all that, is it like to accelerate stick like picking up, so — which is messed up.
So all of those things, I think ultimately, I would be surprised that this wasn’t ultimately a regulatory requirement in the not-too-distant future. And then lastly is also from — we talk about the social benefits of safety. Nobody wants to die in a car, nobody wants to have their kids die in a car. Clearly, that’s a huge benefit. But the reality is that the accidents are also expensive from an economic perspective. And this is where we see the actual — when you take a look and you zoom out from a total cost of ownership perspective, the technology actually paying for itself multiple times over when you end up having an appreciably safety vehicle from an insurance standpoint, the cost of insurance goes down substantially when you have safer vehicles, less collisions, less incidents.
And that’s what makes a huge efforts. So all of those drivers are converging today, and we’ll see the realization of these results over the next decade. And I mean we have relatively conservative modeling in terms of from a business and economic standpoint. I mean, — we’re or at the JPMorgan conference, right? So we had basically around estimated 3% to 4% market penetration by the end of the decade, which — I mean, tell me wrong, I’d be disappointed if we didn’t ultimately do substantially more than that.
But I think to illustrate the case, 3% to 4%, that nets you a $5.5 billion revenue, $2.5 billion EBITDA business with a $60 billion forward-looking order book. So even just a small percentage of the market actually makes dramatic results and outcomes. And that’s how you can ultimately build a business that’s worth hundreds of billions of dollars. So that’s the trajectory that we are 100% focused on.
That actually brings me to one of the things I’ve been wondering about, and you mentioned this is the regulatory framework, right? We’ve seen all seen sort of most of the L2 systems out there today are camera based just the performance is not there as much as a LiDAR can offer. And they have been these IHS safety ratings, et cetera. Like where are you seeing? Where is the conversation sort of proceeding with the regulators? And sort of moving up that curve in terms of what’s required. It’s almost similar to what you had with emissions, right? You moved up the curve in terms of what you wanted vehicles to achieve over time, how are regulators looking at this in terms of like there has to be an increase in the performance of these systems over time.
Yes. No, it’s a great question. And Al sitting in the front row right here is actually collaborating on these — having these kind of exact conversations around what’s next with Luminar and the future of what standards ultimately need to be? Because I think part of this is just a question of there needs to be a dramatic improvement in the safety standards that there. Right now, they’ve been set to a very low bar overall. But in all fairness, there hasn’t been any clear path you step function and capability. So you would end up with — if you set the 5-star safety standard, it’s something like extreme — like dramatically higher right now, you would end up with no cars that would come even remote like every car would be 1 star effectively on kind of the new scale.
So it hasn’t really made sense historically. But now that it’s actually possible and now that taking huge leaps and bounds forward towards these kinds of capabilities, not just leaps and bounds, it’s doable. It’s possible. People can put it in their cars today. And that’s what’s driving the catalyst for change with this.
So I wouldn’t be surprised to see an overhaul of some of these frameworks over the next I mean, it doesn’t happen overnight, right, even when they plan these things out. But I mean, over this — that’s what I say, by the end of this decade, I would be surprised if this wasn’t ultimately becoming more of an assumption like you would have to — people would be making a deliberate decision to not have this safety system rather than to have it some.
Let’s discuss some of the wins. I mean, till date, let’s say, the Volvo, the Mercedes Benz, all of those are still sort of to the average investor was like, okay, this is a high-end, vehicle that’s going to have it, but the Nissan win sort of changes all of that. How are you sort of now thinking about mass market adoption and standardization on these sort of more volume platforms through the end of the decade.
Yes. So I think there’s two different aspects to this. One is when it comes down to it. There’s — within some of even the high-end automakers — it’s not a given that they haven’t ultimately on every car and every model and everything and this is why when it comes to a lot of times when people introduce these kind of new technologies, it will maybe start as an option on one high-end vehicle and then over the course of a decade, cascade or so even two decades, cascade to the entire rest of the vehicle lineup.
And I think what you’re seeing is kind of an unprecedented pace at which some of the automakers are working with, Audi starting to standardize or plan to standardize this kind of technology, that’s out there. probe a higher-end vehicle OEM standpoint as well as kind of a more mass market angle. And I don’t think any kind of new technology or maybe any system or technology has really been standardized as quickly in the industry here. And that’s what ends up making all the difference.
So that — we also mentioned that we’re seeing a significantly increased volume indications as well, not just from new customers and new OEMs that we’re working with, but also even existing partners that we have from additional volumes, whether it’s new vehicle lines or other types of opportunities that we have. And that’s where we’re seeing increased opportunity there.
But I think that the game changer is, as you pointed out, is when you have someone like a Nissan coming out and saying, hey, we see this as fundamental to the future of all vehicles, not just high-end vehicles. This should be available to everyone. And there’s no reason why it can’t be. And there’s — and I think the key point is that there is a solid business case to put this on every car. Not like 10 years from now. There is a business case today to do it.
And that’s where I think Nissan went out there to be able to — and by the way, to their credit, it’s interesting because a lot of times, the Japanese OEMs are actually historically much more conservative in these things when they make decisions around key topics. So I think that’s where it gets really interesting and is a massive indication of what’s to come that maybe like I said, it wasn’t even fully appreciated, but I think — I mean you’re inside the industry as well. I mean these decisions and progress carries a lot of weight.
Let me take some of the questions that are coming in over the webcast, and I’ll open it up to see if anyone in the audience has any questions in a few minutes. So let’s take this one. The question reads, regarding SAIC, Austin stated in 2021 that both parties have a goal of standardizing to all lines. Does SAIC still share the same goal with Luminar?
Yes. So I think when it comes down to — I think maybe it’s a line of where we said that we want to be able to standardize ultimately on I mean, we’ve said that for likely for everything, I mean, not just any single OEM, but every OEM and every vehicle line and every car over the long term as well. As I mentioned, it only takes that 3% to 4% for the 2030 in terms of our projections, which, by the way, just a reference, like just a Nissan alone has that kind of market share that’s there. But the reality is that, yes, I think it’s not just SAIC actually. Like most OEMs have been transforming towards having that vision of seeing this kind of capability standardized and that mental model is shifting and accelerating.
So I mean we’re very much all in with SAIC and a lot of exciting progression there. I think it’s easy to forget about SAIC because they’re out there in China in a different — a different world in zone, maybe not as well known in the U.S. But I mean, in China, they’re obviously — well, maybe not obviously, they’re very — well, they’re the big — they’re the biggest.
So I think that ends up making a huge impact in difference than I think we’re going to be really excited. I’m really excited for them to also publicly show off what’s ahead. In fact, I mean, it’s kind of amazing. They’ve actually already started like — if you’re in China, and you’re on WeChat, which basically — everybody is, you’re already starting to see ads that from coming from SAIC that are literally saying, this is the next-gen capability enabled by Luminar, here’s the car, here’s the tech, here’s the capability. This is happening and right around the corner. And I think I’ve said publicly that we’re going to start seeing cars to consumers start rolling off these lines in the — in times that’s measured in not years, but months. So.
Yes. As a reminder, the initial platform were going on with SIC or Shanghai Auto is the our tech platform. This is their high-end electric vehicle that they’re launching to compete against Tesla in the China market, as Austin mentioned in their marketing for that vehicle, they’re actually making Luminar’s technology prominent in how they’re positioning in it as a technology leader. You can actually take a reservation today to buy that vehicle with Luminar’s LiDAR on it. And as Austin said, they’re probably getting pretty close to launching production on a specific platform. It’s very safe to say in direct response to that question that we are talking to SAIC about how we can expand our relationship in addition to that initial platform number or vehicle program that we’re launching with them.
Next one reads, Austin has frequently remarked. So we know people are following what you say — Austin has frequently remarked, we see…
People never listen to me like five years ago and for, I don’t know.
Austin’s remark, we say no to many folks than we say yes to [indiscernible] full. When will Luminar be able to start working with everyone.
I would say this is that we are working right now. And I can think we’re like we’re working with the majority of kind of the major players today in some capacity. It’s really just a question of series production and that point, and there’s a couple of factors that come into play. I would say it’s totally reasonable and totally fair. And I think, frankly, this is not a principle that’s just took Luminar, it’s something that I would advise any new company developing complex technology and trying to — like — and working with an industry as complex and intensive as something like this in automotive that focuses a virtue, and it’s so easy to get distracted and go 10 different directions, going to work on 10 different things.
And that’s where we’ve really stuck to relevant opportunities that we have how do you say, high technology leverage, high repeatability around — like we don’t go around — we’re not like a traditional Tier 1 where we go and develop custom products for each OEM, for each vehicle line, for each car. We have one technology. It’s a fundamental platform that we can start leveraging one by one with some of these key OEMs.
And I was saying it doesn’t actually take like — to meet all the financial projections over the next decade, we don’t have to like — and then some, we don’t have to win any new OEMs. Like that’s the cool part of that. So — the focus is really all on execution. Like — and that’s why it’s just so important of never losing side of that focus. We released this, for example, quarterly update both in written and video form, which I encourage you guys to check out to kind of show some of the progress along the way of what it means to go to series production with something like this and just the level of complexity — and of course, bringing in great talent like Taner and CJ to be able to help execute all the way through in series production.
I mean there’s really only — there’s very, very few examples of folks that have brought these kinds of complex technologies. NVIDIA is a great example, Taner. Tesla is a great example, albeit for more camera-based Level 2 systems. With that and we’re the best leaders in the industry at each that are going to ensure that we execute on that. And we ever being set up for our success.
Great. Let me see if there’s any question in the audience. So I think Tesla has been pretty vocal that they can achieve L3, L4 with the computer vision-based system that doesn’t require LiDAR and LiDAR is a bit of a redundancy. I guess, what’s your response to initiatives like that? And how scalable was that beyond Tesla to maybe other OEMs who don’t have the same data sets or data capabilities?
Yes. So I mean, I would say this. And like I said, folks like — and we announced today that CJ, who is the Director of Autopilot, there joined onto Luminar. So that’s, I think, a great maybe even message probably speaks for itself to some extent. But the reality is, is that Tesla built a great Level 2 system. They built a great assistance driving system. They’re actually able to design out Mobileye, who they’re originally working and create a similar kind of system in-house from scratch.
Now of course, it’s debatable from an economics case like at the end of the day, does it really make sense or not to try and replicate the Mobileye type ADAS system that’s on the vehicle. But the reality is that they were able to successfully scale it. They got great data from that. But I think it’s important to calibrate in terms of the capabilities. I think a lot of the industry criticism from pretty much every industry leader around like, for example, Tesla Autopilot is primarily centered around — if you go to the root of it is people try and criticize the product, but there’s nothing wrong with the product, it’s just the marketing behind it. It’s people call it full self-driving, which it’s, as we all know. It’s not — so not self-driven at all actually.
But the point is that it’s a great assistance driving system. And I think there’s a lot to be said about what you can do with huge volumes of data, huge capabilities. You can advance very quickly. Of course, the whole point is with 3D data and LiDAR data, it puts you into a completely different league altogether. And this is where you can see these huge order of magnitude, step function improvements in safety and actually finally the ability to enable autonomy.
And it’s a big jump, right? It’s not like it was really close to being — despite what maybe some have been led to believe. It’s not close to being solved in the current form. It’s like many words of magnitude off from the requirements on safety, the disengagements and everything that’s needed to truly operate a driver out of the loop vehicle.
So this is absolutely — I think the — this is the best shot that we have that the entire industry has of being able to enable any kind of true autonomous capabilities. And I’ve said very clearly, even when it’s 100x easier with the LiDAR and everything that we have, it’s still not going to be solved off the bat. It’s still going to take time to ultimately expand the operating domain. But this is why we’re very focused on the highway scenarios and other more constrained environments off the bat, which makes a difference.
But of course, from a safety standpoint, that’s where it’s also, again, orders of magnitude less complexity, but you need this kind of sensing capability. And I think that’s, again, a huge driver for why you see these folks joining on and why I think it’s clear that this is something that’s going to be realized on every vehicle. And I think, like I said, the rest of it kind of speaks for itself.
If there was any other company out there that would be motivated and have the expertise to design an automation system that works with camera only, it would be Mobileye. And Mobileye in the autonomous system that they’re developing for the mobility as a service, they’re including a LiDAR on or LiDAR. And so if Mobileye can figure out how to make autonomous systems work with cameras only, then I think that, that says a lot.
Let’s take another question. OEMs would like to place the LiDAR behind the car windshield for styling design reasons. Can Luminar place a LiDAR behind the windshield or are there issues with that placement?
So a couple of different considerations here, too. So I would say this. It’s theoretically possible to do anything with this. And this is actually — from an integration design perspective, this is not actually — this is a more general concept. There’s not — there’s nothing specific about a Luminar center that has it where you can put it behind there and not put it behind there. Putting any kinds of these active sensors, any kind of LiDAR behind a windshield, just inherently is going to dramatically reduce the overall performance and scope and everything of what you have by a significant factor. And therefore, as well as the safety correspondingly of the vehicle and its operations there.
So I think — don’t get me wrong, it’s still like way better than nothing like with what’s there, clearly. But the reality is that I think when people are putting this — and the reason why OEMs are not putting it behind the windshield in for the substantial majority and why they’re embedding it in the roof line, is really around when it comes to a performance standpoint, safety standpoint. And when you have this crown jewel technology that’s on your car, I think what people have gone from is trying to be under a mentality of trying to be able to see what you can do to hit as much as possible.
But it’s completely shifted to a point of where you actually want to show off that your vehicle has this kind of capability. And it’s something that you think is actually going to be a new design icon and symbol in the lexicon of the design language around automakers. I mean, ultimately, you had like shark fins with the radios. You have scoops on performance cars. You have different kinds of things that ultimately became their own symbols. I think, obviously, this is a pretty material one from a capability perspective that we think changes the game. And that’s why more people have been focused on that.
I think as things progress over the course of a decade, obviously, we’ll get sleeker and sleeker and sleeker in terms of the integrations that you see. But I think people are actually excited to show it off more. In fact, what’s interesting — and this is really interesting, actually. We’ve now even had automaker — some of the automakers who are going to come to us and say, hey, what would it look like if we didn’t have anything around the LiDAR. Like literally, we just showed the raw LiDAR out on the roof like that’s how cool the technology is that we just want to show off, which — I mean — that’s pretty constrained.
But like it goes to show the kind of mentality that people are in. So can you do it? Yes. Is it a good idea? You tell me if you want to like if there’s any more lives, it should be lost as a result of that.
Okay. Let’s take the last one quickly here. I know it’s going red already, but will Blade be offered as an aftermarket product for truckers?
Great. We are on time as well. So thank you. Thank you very much, friends. Thank you, everyone.