Luminar Technologies, Inc. (LAZR) Evercore ISI Autotech & AI Forum Conference – (Transcript)

Luminar Technologies, Inc. (NASDAQ:LAZR) Evercore ISI Autotech & AI Forum Conference Call May 24, 2023 3:00 PM ET

Company Participants

Tom Fennimore – Chief Financial Officer

Aileen Smith – Head of Investor Relations

Conference Call Participants

Chris McNally – Evercore ISI

Doug Dutton – Evercore ISI

Chris McNally

Hello, everyone again, and thank you for joining this next session of our Autotech & AI Conference. Today with us we have the pleasure of having the CFO of Luminar, Tom Fennimore joined by the new Head of IR, Aileen Smith.

So a quick background and obviously Tom can put more in his own words, but Luminar founded by Austin Russell in actually 2012. Luminar is a pioneer in automotive-grade 1550 LiDAR for use in advanced driver assistance systems and autonomous driving.

Luminar’s LiDAR is actually built from the chip-up and strikes to add another degree of resolution and accuracy that other systems aren’t yet able to offer. To this point, their LiDAR is planned on 20 plus production vehicle models, including Volvo, Mercedes, Polestar and SAIC as they begin to implement the solution on higher-end vehicles before launching to more mass market, which we’ll hear about.

They also came to market via SPAC in 2020. Now, Tom’s been the CFO since 2020, and before that he was Co-Head of the Industrials and Automotive Group at Jefferies as well as Head of Automotive at Goldman Sachs.

Tom, thank you so much for joining us today. Luminar has been a staple of this sort of conference going back for many, many years even when we were doing it live in Menlo. We’ll get back to there sometime soon. But maybe you could just give an overview a little bit. Just a quick history for the generalist about the company and really what you’re focused on for the next couple of years of the future as Luminar goes from sort of production wins to obviously ramping into a high number of vehicles.

Tom Fennimore

Yeah, Chris, thank you for the introduction and it’s great to be back at this conference. So I think you did a good job talking a little bit about Luminar’s history. We were founded in 2012 by Austin Russell, who’s our Co-Founder and CEO. He’s one of these Silicon Valley stories where drop out of college, start the company. His expertise is really in optics and lasers, which is the core of our technology.

The core of Luminar is LiDAR. For those that aren’t familiar with it, as I describe it to my two young boys, we effectively shoot lasers out of cars to significantly improve their safety and ultimately enable autonomy. On top of that, LiDAR, which is the foundation of everything we do. We’re also in the software business and really trying to build around and monetize the ecosystem that our LiDAR enables, whether that’s on the software, both the perception side as well as other features of it, 3D mapping, insurance, etcetera.

We, Austin designed this LiDAR, as he says, from the chips-up. We didn’t buy off the shelf components and we’ll talk a little bit more about that, I’m sure, during the Q&A. But we operate at a wavelength that very few other LiDAR companies do. It’s very difficult to do that. There are prohibitive cost barriers that we’ve kind of cracked, but what it allows us to do is effectively put 13 times more photons in the environment, which allows us to see further. And so we believe we have the best long range LiDAR out there in the business.

We are already in series production with Shanghai Auto over in China. So we kind of, you know, crossed that barrier in terms of proving that we can actually make these and we’re in the process of ramping up where we’re going to be standard on the Volvo EX90, which they plan to launch and sell early next year.

And so we also have wins with Mercedes Benz, Daimler Truck, Nissan, Pony.ai. We’re working with Airbus on helicopters, and then we’re also working with a lot of other technology companies which are leader in the vehicle space such as Nvidia, Mobileye and Qualcomm. And so this isn’t a science project. We’ve already proven that we can put these on vehicles.

We have real customer wins. And as I like to say, what we’re focused on here is execution. For us, we have the business wins in place, we have the cash on our balance sheet plus a cushion to get us to profitability. And we now have the team in place for us to go out and execute. So it’s a matter of just bringing that all together. Continue to win new business from our OEM customers, both existing and new, and we’re very confident that, that’s going to continue to happen.

But ultimately, our goal here, and this is mission driven and it’s part of Austin’s 100 year strategy is we want to save a lot of lives. We ultimately want to work with our OEM partners to build the uncrashable car. And if we’re successful doing that, we think we can save 100 million lives over the next 100 years by reducing vehicle accidents.

And we think once autonomy is here, we can save 100 trillion hours through productivity of not, you know, making the human drive the vehicle and giving them flexibility to not do that during scenarios, certain scenarios. So that’s an overview of Luminar.

Question-and-Answer Session

Q – Chris McNally

That’s great, Tom. And for those of you on the line you can pull up the YouTube videos and the stories. I mean I feel like Tom for multiple CESs obviously ADAS can reduce 30%, 40%, 50% of crashes that’s a million lives lost globally per year. And Luminar was also making the point, but not all ADAS is created equal, right. Sort of Gen One of ADAS doesn’t work in all light conditions, doesn’t work maybe sometimes for pedestrians or children. So that 13 times more photons in the resolution that’s what is going to is to making higher levels of ADAS. Tom, would love to talk a little bit about the launch partner Volvo because obviously it’s not Volvo, it’s Volvo Aguilas as well. Can you talk about the just the history of the timeline because it’s multiple platforms. You seem to be involved very heavily with everything that’s coming out of Sweden on that development team for them. And then maybe just an indication for the ability for Volvo to grow. This is a very important launch. But then the ability, you know, as the 90 goes down to the 60, et cetera. So just maybe we’ll start with Volvo.

Tom Fennimore

Sure. So we’ve been working with Volvo now for several years and they are our initial customer that we won. And you have to put in the most effort to win your first customer, particularly in the OEM space.

This is a very important decision for an OEM. Not only is this technology new that they’re putting on the vehicle, but it’s very important. Volvo has said publicly that this is going to significantly improve the safety of their vehicles, reduce collisions, severe collisions by up to 20%, which we believe is a conservative number.

And ultimately, they want to enable level four highway autonomy. And so, you know, there’s the impact that this technology has on the vehicle is very important. And it’s something that Volvo takes very seriously because their brand is synonymous with safety. In addition, when Volvo initially made the decision to work with us back in 2020, we were a young company, right? We were still in that start-up phase.

And in the OEM business, when you enter into a relationship with a supplier, it is a very long-term marriage. You typically have a three-year development pro-phase after the business is awarded where you’re setting up the production line, getting the tooling and all the automation equipment in place. You’re doing the engineering work to prepare your product for series production and go through all the testing and validation.

Not only that, but then our LiDAR goes on Volvo’s vehicle, they marry with the sensor suite, and then their software team, you know, is basically building the software algorithms around that. So that’s a three-year phase. Then production, actual series production can last for five to seven years and then you have to be around for years after that for aftermarket support.

So the OEMs, they want to, you know, they want to work with suppliers that they know are going to be around for at least ten plus years and they do their due diligence for younger companies like Luminar before they enter into important agreements like that. Our initial win with Volvo was we were going to be an option on their next generation flagship SUV, the EX90, as we continue to execute and they got more comfortable with us, they upgraded us from an option to standard.

So that means the consumer doesn’t have to proactively select the trim package to use Luminar LiDAR. It’s going to be on every vehicle that they sold. They’ve given us additional platforms like the Volvo Excellence, which they announced earlier this year, and they’ve said publicly that ultimately they want to make a standard on every vehicle that they make. And so, you know, just a quick footnote on that.

When we talk about our forward-looking order book, which we disclose, we don’t include every vehicle that Volvo makes in that order book. We only had the EX90 and the specific vehicle programs that we award. We tried to build that up on a conservative base. But, you know, as long as we continue to execute, we’re very confident that we’re going to get a lot more business from Volvo and other members of what I would call the broader Volvo family, Polestar, as well as other members of the Geely brand.

Chris McNally

That’s great. And that is a perfect way to be conservative with the bookings. So we can start to track when the launches of the, you know, the lower vehicles, the 60 and so forth are coming. And we could sort of work backwards to, you know, to timings when that would be more relevant for bookings. That’s super helpful. Maybe, Tom, I think I know the answer to this, but recently the EX90 platform that you just discussed, the market talked about a three, four month delay from Q4 into Q1 of next year. I know you reiterated your guidance for the year. You just touched on the details of how that’s the case, how you incorporate, you know, some of the launch cadence into, you know, what you consider in your production guidance. But it’s just — it’s another relevant point I think where you guys have been conservative in how you model the timing of sort of productions. But I just wanted to give you a chance to talk about that.

Tom Fennimore

Yeah. And when we built up our guidance not only for 2023, but the other medium and longer term guidance that we shared at Luminar Day earlier this year, we tried to be conservative in doing that. Launching any vehicle program in the OEM spaces is difficult. And there tends to be delays as opposed to accelerations of timelines.

Look, we’re you know, for us, it’s very important that we’re ready to go at the end of the year for Volvo as well for other potential customers. We can’t control when our customers are going to be ready. We can control to make sure that we’re ready on the timelines they want us to be. And that’s what we are for Volvo.

The other thing I would say there is we kind of did something that was a little unconventional in the guidance we gave at Luminar Day, which is when we passed that 1 million unit mark, we kind of gave a range in that ’26, ’27 timeframe. And the reason we did that is we’re working on over 20 vehicle line programs and launches at this time.

And we know that all of them are not going to go perfectly. And, you know, ultimately there may be slippage for whatever reason. Once again we’re going to do everything on the Luminar side to make sure that we’re not the cause for that slippage. And so far that’s the case.

But we’re also mindful that these are very complex systems that our OEMs are putting on the vehicle and they need everything ready to go. And so if everything goes according to plan, you know, we’ll hit that million unit mark in the ’26 timeframe. If you know there’s some slippage, then it’ll probably be, you know, more in the ’27 timeframe.

Chris McNally

Perfect. It’s a good segue. My next question was around momentum and new business awards. All right. So you’ve talked about ’26, ’27, which essentially is those customers you’re working with now. So they’re, you know, those awards happen over the next 12 months. To your point then there’s the two to three year delay. That’s the automotive cycle. One of the things we try to do on the investor side and it’s not always correct on ADAS is we kind of think about who’s paired with who, like where do we, you know, what — where would we see Luminar and what type of vehicles when it comes to different perception systems. And when we try to do that with Luminar, we see that particularly on camera perception. You work across the different players. So you work with Mobileye, on Mobileye Drive and Robo Applications. You mentioned you work with Qualcomm and Nvidia camera perceptions on other ADAS. So that seems pretty unique to Luminar where there’s typically some version of a pair. So maybe you could talk about when you’re in these RFPs, you know, what is Luminar bringing on top of sort of camera perception because it seems universal that you are working with a slate of obviously different OEMs and different perception Tier 1s and Tier 2s?

Tom Fennimore

Yeah. So a few questions embedded there and let me take it kind of one by one. So one, we try to be the Switzerland of the automotive industry. We want the ability to work with everybody. We don’t want to be exclusive with any one party.

Look, each OEM is going to make its own decision in terms of which software platform they’re going to use, which compute they’re going to use. And we want to be in a position that we can work with everybody because each OEM is going to make their own unique solution. Two, what helps when you have the best technology in the industry is that people want to work with you, right?

So not only do you need to be willing to work with everybody, everybody wants to be willing to work with you. And so I think that is an acknowledgment that our tech out there is the best or one of the best in the industry. And so it also helps us in terms of winning new business. As you said, the more people that you’re aligned with, the more systems, the more out batch you get. And so that is very helpful. Look, I’d say that there’s two decisions that OEMs need to make when they select this.

One is do they want to use a LiDAR? And then two which LiDAR do they want to use? So let’s take those one by one. You can build a L2 or maybe even L2 plus or however many pluses you want to end to a system camera only. The issue is, is that sensor is ultimately a two dimensional sensor and you are estimating not necessarily with the highest degree of accuracy where the objects are in your environment.

And part of the reason and I think you referenced some of the demos that we’ve done is because these camera systems are ultimately estimating where the objects are. They’re unable to prevent many collisions. They’re ultimately designed to try to mitigate them, slow up the car, but they’re ultimately not avoiding it.

And so what we’ve done and we do this with our customers and you’ve seen it with some of our demos, we’ll take off the, you know, cars that are available on the street today drive them at dummies. And the systems in there do not prevent the collision even at traveling at relatively low speeds. What a LiDAR enables is you are doing real-time 3D mapping of the environment around you and you ultimately know where every object is and its precise location.

And that gives the system a lot more confidence to stop when it needs to stop, but also avoid those false positives which can create a miserable driving experience. So that’s the benefit of LiDAR when it comes to ADAS. Now, why then Luminar? Once again, going back to our technology, we’re putting 13 times more photons out into the environment.

So we’re doing better real-time mapping. But more importantly, we see the furthest with the highest degree of resolution because we’re operating at that 1550 nanometer wavelength for our laser, there’s no practical limitations on the amount of power we can put through that laser.

For other wavelengths, such as 905, there is, it’s actually regulated by the FDA because it can do damage, including blinding the human eye. And because of that, we’re able to see over 250 meters. And this isn’t like a bright white object on a sunny day. This is almost in every environment, every type of object.

And why 250 meters? Well, that gives you seven seconds of reaction time traveling at highway speeds, which is what you need to bring a vehicle to a complete stop. So when the OEM set their specs, that 250 meter is important for that reason. So not only are we putting more photons in the environment to kind of real-time map the environment in front of you, but we’re seeing very far, which is ultimately going to enable highway autonomy when you’re traveling at highway level speeds.

There are other OEMs who, you know, will take an interim step if you’re not focused on traveling at highway level speeds and you want modest improvements to an ADAS system, you can get by with a 905 LiDAR. But if you want to have that next gen system, which is ultimately going to enable that highway autonomy and traveling at those speeds, you’re going to need our LiDAR because of the distance that we’ve seen.

I mean take Mercedes, for example. Mercedes is using today a 905 LiDAR for their next gen system, which they’re designing around Luminar. There’s a reason why they kind of pivoted to our technology. So when we look at the, you know, the new business opportunity for us, I’d really put it in three categories.

It’s, you know, growing with our existing customers. And you kind of seen us already do that with Volvo, Polestar and Mercedes. We typically awarded a small piece of business and then once you’re in there and execute you grow. Two, it’s winning new customers that really haven’t chosen or selected a LiDAR supplier yet.

And then the third is really working with those OEMs that are using a 905 supplier today and then getting in there and talking about their product roadmaps for their next gen systems. Because if you do want to enable the technology that Mercedes, Volvo, Nissan and others are doing it, you need to, you know, keep up. And so we, you know, we’re really seeing commercial momentum on all three of those fronts.

Chris McNally

Okay. So, Tom, you definitely started reading my mind because you kind of that tips off into the next two questions. So I’m going to take them in two parts. The first is I feel like you mentioned sort of the desire for, you know, more than evolutionary. So the ability to go to level three through 1550 and then the second where the opportunity of the market may be which OEM. So first on the level three, I mean outside of Volvo, who has level, like you said, level three, level four ambitions. We see Daimler, right? So Daimler coming with a quote unquote level three product as the first gen. But we have all seen the limitations, right? It’s going to have its work on slow speed. It’s going to have lower ODD. It’s not, you know, robust that it’s going to work for all your highway needs. And then that’s where Luminar comes in for the next generation. Is that a fair assessment that it fits into that third bucket of by moving from 905 to 1550 the ODD of that system, the robustness of that system goes up so that you can actually offer more practical consumer cases.

Tom Fennimore

Yeah it’s the true highway level speeds. The Mercedes you know the Germans like to drive on their auto bonds and so you can’t really limit their, you know, their autonomy to 35 or 40 miles an hour, right. They want to go at traditional highway level speeds.

That is why seeing over 250 meter is important. And that’s where in our conversations, the OEMs ultimately want to go. And so the more that we continue to execute and not only win new customers, but ultimately start producing these things in scale, it takes a lot of the risk off the table for the OEMs, right? They see other OEMs not only using us, but giving us more business.

You know, the more that we go from showing them how good our technology is to actually producing these things in scale. As you can imagine, the momentum with our OEM customers increase. Chris, there’s one thing I want to kind of provide a little clarity on because I know you’re using like L2, L3.

We kind of simplify it a little bit because I think these different L numbers have gotten a little confusing. And as I said, you now see things like L2 plus and L2 plus, plus. We kind of look at it as the systems that our LiDAR enables. They do one of two things. They either are assisting the driver, right.

Helping them be better drivers, increasing the safety or you’re actually enabling autonomy and there it’s eyes off, hands off drivers completely out of the loop.

Chris McNally

Out of the loop.

Tom Fennimore

Yes, right. When you kind of think about it, it’s that simple, right? Are you assisting the driver, which you’re doing from everything from L0 to L2 plus, plus, you know, and there’s different barriers of that. Or is the system driving itself? And then what you need to layer on top of that is the domain. And the domain for autonomy, the least complicated for that to solve is the highway part of it.

And I’m going to dramatically oversimplify here, but when you’re on the highway, if you stay in your lane and you don’t hit anything in front of you, you’re generally fine, right? I know it’s a lot more complicated, but that — but stay in your lane. Don’t hit anything in front of you.

The challenge is, is that you need that long range sensor to know if there’s anything in front of you for up to 250 meters. And so once you get the sensor in place, solving the highway autonomy issue from a software perspective is a lot less complicated than solving it for the city, because in the city, you’re going to have kids running out in the street, you’re going to have bicyclists, you’re going to have dogs, right?

You’re going to have a lot more other stuff that is coming at you in an unpredictable way and that, you know, the software algorithm that you need for that is a lot more complex to solve. But on the highway, you know, it’s easier. And that’s why you see folks like Volvo focusing on it as well as Mercedes.

You can call that L3, you can call that L4 whatever you want. But is the system driving itself? And that’s what our technology enables by being able to see 250 meters plus.

Chris McNally

Tom, I completely appreciate the clarification and you know that I guess what we always are curious about? And it gets to the robustness of the resolution of 1550. Is Daimler in that out of the loop however you want to define? Hands off, eyes off. Will they be able to willing to take the liability? Because ultimately once you take the driver out of the loop, who is in the loop, it’s the machine. And that’s where the liability would fall. But obviously that’s when they need the most important sensors if they ever want to increase that ODD. So appreciate that clarification. The second one, actually I could see already some questions coming in about geography. If we think about that third bucket and I’ll even use the second bucket of new LiDAR and the change from 905. We see a lot of early adoption for highway assist programs, whatever, again, whatever we want to call that. But they are using 905 in China. Now because of the price of the cars, my question is, do you still see China as a huge opportunity in the middle sort of the mass market your BYD level or are you mostly for now while the price of the system comes down seeing the opportunities in the upper end of the Chinese market because it seems universal that from an advanced ADAS perspective that China seems to be leading then Europe and then maybe the US after that?

Tom Fennimore

Well, China is definitely putting the, if you actually look year-to-date, China has sold a lot of vehicles with LiDARs on them and you know we just got done spending two weeks over there as soon as the travel restrictions were lifted we headed over there because as you said, we’re seeing a ton of business opportunity.

We initially launched with Psych in terms of putting our LiDAR in the vehicles, but that market has really changed a lot over the last few years. And you have these very successful EV start-ups for lack of a better word like Xiaopeng or Li Auto or NIO. And one of the ways that they try to differentiate themselves to a very tech savvy Chinese consumer is by putting the latest technology on their vehicles, of which LiDAR is one.

Now, sometimes that can go too extreme. While we were over there, there are certain OEMs who, you know, put four or five LiDAR on the vehicle for no other reasons than saying, hey, look, my car is better because there’s four or five on them. There was one OEM who was working with another LiDAR provider where they actually have a hole in their car that they’re selling today because the LiDAR wasn’t ready and it was something that they’re going to do an aftermarket installation.

So I think there was this big rush to get LiDARs on the vehicles to increase your technology brand. But I’m not too sure that the software was necessarily ready to go to get the maximum benefit on it. And now you’re kind of seeing an EV price war started by Tesla and you’re seeing some of the pressure that’s having on that.

So I think it’s making them revisit their LiDAR strategy, which is actually good for us because instead of putting four or five or however many LiDARs on the vehicle, if you put one Luminar LiDAR on there with the right software enabled package, you’re going to get that significantly better ADAS system as well as that highway autonomy potential that we talked about.

Having said all that, I would say, over the next, call it, a couple of years plus or minus, where our price point is today for our LiDAR was in that thousand dollar plus or minus range. We are focusing on that high end of the local market. Remember, half of the Chinese market today is foreign brands.

So we’re naturally going to be there and need to be there because Volvo, Mercedes, Nissan, Polestar, all those customers. China, our big important markets for them and sometimes the biggest. So we need to be there. And then right now, our strategy for the local players is to focus on the high end ones.

But we’re also revisiting our product strategy after that trip and figuring out ways how do we kind of maybe design a product that doesn’t necessarily have all the bells and whistles for the China market, but maybe have a more appropriate cost point?

Look, if you want to put the cheapest LiDAR you can on a vehicle just to say you have a LiDAR on the vehicle for marketing purposes, that’s not the business we want. The business we want are those that want to create the safest car as well as to enable the best autonomy out there.

Chris McNally

That’s perfect. And then Tom, one last one for me, and I know Doug is going to focus a little bit on production. I mean, is it again, round numbers when we think about that ’26, ’27 target, is it crazy to think that if we were to divide into three buckets of China, Europe, US with I don’t know 90% of your business being auto that it would be China then Europe then US sort of I don’t know 40%, 30%, 20% type split?

Tom Fennimore

Yeah, I think that’s a fair way when you just kind of look at what I would say is you can look at the customers that we have today and you can look at their geographic distribution and you’re probably getting there. And what I would say is because the China market is moving very quickly, the Western OEMs need to react as well.

They can’t lose market share with this, the tech savvy Chinese consumer, if they don’t have LiDAR on their vehicles, right. They’re going to lose business to Xiaopeng, NIO, Li Auto and others there. And so I would say what we’re seeing is if you just look at the volume distribution, geographic volume distribution by our customers, it’s probably, I would say over the next few years is going to be more weighted to China largely because of the demand pressures that our Western competitors are seeing over in China.

Doug Dutton

Sure. Okay. Tom, so I have a question for you.

Tom Fennimore

That’s also I would say part of a reason why, you know, we also, you know, recently announced our second plant and manufacturing partner TPK is to make sure that we can adequately serve that market.

Doug Dutton

That’s great. So it’s a perfect segue into my question here. I actually have just wanted to hear a little bit about how?

Tom Fennimore

Hey, Doug, if you’re talking, I apologize for some reason, I can’t hear you.

Doug Dutton

Oh, do you want to take this one? Isaac, can you hear me?

Unidentified Analyst

Yeah, I could hear you on this.

Chris McNally

No, no worries, Tom. I’ll take it. Essentially, could we talk about?

Tom Fennimore

No. I can’t hear you, Chris.

Chris McNally

Oh, that’s weird. Aileen, can you hear me?

Aileen Smith

Yeah, I can hear you. Tom, do you want to try dialing in on the phone line?

Chris McNally

Hey, Tom. Can you hear us right now or no? No. [Technical Difficulty]

Tom Fennimore

The laser is something we’ve designed ourselves and gas material which allows us to operate at that 1550 is, can you guys hear me or no? Okay. Which operates at the 1550, that is, we built that technology with a company called OptoGration.

We purchased them in 2021. And then the ASIC, we purchased a company back in 2017 called Black Forest Engineering. And so because we uniquely designed each of those components and brought them in-house, it enables three things. One, it allows us to actually ramp up to series production with less risk because these were smaller suppliers that really didn’t have that scale.

And it gives us a little more control over that. Two, it expands our competitive moat because we own this technology and, you know, no other LiDAR company or competitor can get their hands on it. But the third thing, which is something we really didn’t realize till we brought all three of them in-house is there are a fair amount of technology synergies.

As we’re designing our next gen products, bringing all three of them, and they’re all, you know, advanced PhDs, founders and everything, having them sit at the same table and design the next generation LiDAR. We’re seeing significant synergies there that is going to enable even better performance, better cost, but also faster time to market.

Okay. The next question is about our production ramp cost curve and auto validation grade. So the way that we discussed this at Luminar Day is really I kind of put two benchmarks out there. When do we cross that 100,000 unit production run rate and when do we kind of cross that million unit production run rate.

The 100,000 unit production run rate we’re going to cross sometime next year after the Volvo launch. That is going to be done entirely out of our Mexico plant, this new dedicated facility that we’re building, that new facility, it is technically producing sensors today. I would say we’re kind of completing the finishing touches on the construction as well as the production validation testing, but that is producing sensors and we’re looking to ramp that up to produce it at the rate that Volvo and our other customers want.

The next level is that million unit which we talked about in that we expect to cross in 2026, 2027. What I would say is we have over 75% of that business booked today. And I would say the other 25% is from high probability business that we’re in active discussions on. So that is, you know, we expect to get to that level in the ’26, ’27 timeframe.

The exact timing will be when all of those 20 plus vehicle lines actually launch. And that production is going to be a mix in Mexico and then this new plant in China that we announced a few weeks ago.

Chris McNally

And for those on the line, I’m feeding Tom the question.

Tom Fennimore

Next question is AI. Oh, I’m sorry. We can — do you want me to do the AI one now or the ’23 product?

Chris McNally

Yeah, do the AI one first.

Tom Fennimore

Okay. So let me do, let me talk a little bit about artificial intelligence. And we talked a little bit about this at Luminar Day. We are in an exclusive relationship with Scale AI, which is one of the leading AI and ML companies out there.

We’re working on a variety of things with them, but let me talk specifically about what we’re working with them on and how we’re using artificial intelligence. So in our — what we call proactive safety system that we’re developing and this is where we’re looking for to really develop that next generation of ADAS.

What our LiDAR does is we map the environment, as I mentioned earlier, you know, in 3D level data real-time. And so we know where every object is. Now, the way that I would say you kind of do the binary algorithm, it’s pretty simple, right? You look at the trajectory, the vehicle, if there’s an object in the way and you know the velocity and the distance you look at that, okay, I’m going to hit the drivers and react and stop vehicle.

That’s kind of what I would say the traditional approach to designing these systems. What we’re doing with artificial intelligence is we’re trying to build in a predictive algorithm for how those objects are going to move to make the system better. So if it’s a parked car you know exactly where the parked car is going to be. If it’s a parked car driving on a highway, that is relatively predictable.

But once you get into a more urban environment and you have people, you have bicyclists, you have animals, though their behavior is unpredictable, right? They’re not going to walk in you know or their distance isn’t going to change in predictive ways. And so what we’re doing is we’re trying to develop, we’re working with Scale to develop AI algorithms to add a predictive element into our proactive safety module.

So not only are we kind of measuring the distance and you’re at this velocity I need to stop the car, but we’re trying to constantly assess how the environment in front of us is changing so we can make the system even better. Okay. What’s next for Luminar? You know, look over the next six to 12 months, what we’re focused on as a company is to keep our head down and execute.

If and when we successfully launch Volvo, that’s really a game changer for us. You know, as I said earlier, we believe we have the best technology in the industry and you can look at our partners who are using our technology as validation for that statement. One of the biggest questions we get not only from investors, but also our customers is, okay, we get this.

You know, you guys, we test your technology, you like it. You’ve shown that you can actually get these on vehicles that you did with Shanghai Auto. Can you actually produce these in Scale? And look, I can show you, I can take you down to Mexico. I can show you our plant. I can walk you to our supply base and do all that. But ultimately, until we do it, they’re still going to be doubt out there.

And so a year from now, we’re not only going to continue that to technology today, but I’m very confident we’re going to make, you know, have some exciting new next generation technologies unveiled. We’re going to continue to we’re going to reach that series production level where we’re producing six figures of these run rates. We have a great team.

We’re going to have the balance sheet to get us to profitability. We’re going to be a year from now on the verge of profitability with a very credible path to get to us. And so today, if you’re an OEM who wants to put LiDAR on the vehicle, you need to talk to us.

A year from now, particularly on a relative basis, when you look at other — some of the other LiDAR companies there that have constrained balance sheet, it’s going to be a, you know, we believe that we are going to win more than our fair share of business as a result of being in series production, showing we can make these in high volume, having the best technology and having the staying power of the balance sheet, plus the right team to deliver. So that is our plan for the next six to 12 months.

But the most critical element of it is executing and that’s what we’re focusing on. We’re going to continue to win our fair share of business over the next six to 12 months. As I said, from each of those three categories, new customers, you know, existing customers. And then, you know, customers have already chose a LiDAR that want to upgrade. And so we’re going to continue to win that.

But I think six to 12 months from now, you’re going to really see a scenario developed where we’re going to win more than our fair share of market share, continue to win even more than our fair share there. So I think we are now up on time.

So, Chris, I don’t know if we’re able to fix the audio issues, but I’ll hand it back over to you.

Chris McNally

Thank you. Well, Tom, for those on the line, apology for the last five minutes of the tech issue. But I think the message of Luminar and their win momentum and basically what the next year means for series production is super clear. So for those on the line if you want to learn more about Luminar, please come into us. I’m also very willing to send put you in contact with Aileen and Tom and the team at Luminar. For those, there was a lot of questions online. If we didn’t get to all of them again feel free to contact us. And Aileen, please mention to Tom, we say thank you and our apologies for the last five, ten minutes of tech. We’ll get that figured out.

Aileen Smith

I will definitely pass along the message. Thanks, guys.

Chris McNally

Thanks so much. Tom, thank you very much. Bye, guys.