NASDAQ:CPTN Cepton Q3 2023 Earnings Report Earnings HistoryForecast Cepton EPS ResultsActual EPS-$0.58Consensus EPS -$0.70Beat/MissBeat by +$0.12One Year Ago EPSN/ACepton Revenue ResultsActual Revenue$3.83 millionExpected Revenue$5.10 millionBeat/MissMissed by -$1.27 millionYoY Revenue GrowthN/ACepton Announcement DetailsQuarterQ3 2023Date11/9/2023TimeN/AConference Call DateThursday, November 9, 2023Conference Call Time5:30PM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Cepton Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 9, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Hello, and welcome to the Third Quarter 2023 Septum, Inc. Business Update and Earnings Call. All participants will be in listen only mode. After today's presentation, Please note this event is being recorded. I would now like to turn the conference over to Huo Zhu, Chief Financial Officer. Operator00:00:35Please go ahead. Speaker 100:00:38Thank you, and welcome to CEPTIONS' Q3 2023 earnings call and the business update. With me today are Junpei, Co Founder and Chief Executive Officer and Mitch Hortini, Chief Commercial Officer. During the call, we may refer to our unaudited GAAP and non GAAP measures in our earnings release. The non GAAP financial measures should not be considered Reconciliations for non GAAP measures are included in our earnings release. I'd like to remind everyone that comments made in this Conference call may include forward looking statements regarding the company's expected operational and financial performance for future periods. Speaker 100:01:24These statements are based on the company's current expectation and are subject to the Safe Harbor statements relating the forward looking statements contained in our earnings release and the slides that accompany this call. Actual results for future periods may differ materially from those expressed or implied by these forward looking statements due to a number of risks, uncertainties or other factors, including those Discussed in the earnings release or during today's call and those described in our filings with the U. S. SEC. We are not undertaking any commitments To update these statements as a result of future events, except as required by law. Speaker 100:02:02As a quick reminder, this call is Being recorded and you can find the earnings release and the slides that accompany this call as well as the webcast replay of this call at investors. Deptown.com. Now, I'd like to turn the call over to Jun. Speaker 200:02:17Thank you, Hall, and good afternoon, everyone. Thank you for joining We will provide you with a business update and review our Q3 financial results with you. Before that, I'd like to congratulate Mitch on his promotion to Chief Commercial Officer. He has been a critical part of our business development efforts and we look forward to his continued contributions in his new role. For the 2nd straight quarter, I'm proud to announce that we have delivered a new company record for quarterly product revenue. Speaker 200:02:57This quarter, we shipped the highest number of LiDAR units to our automotive end customers As we continue to deliver on milestones to prepare for start up production. For the 2nd straight quarter, We met our internal production targets. We're beginning to see our scale production efforts translate into revenue as we demonstrate our capability to meet demand of our customers. I'm proud to report that we have passed the final software milestone for launch of series production, fully integrating AUTOSAR And cybersecurity software under one of the most rigid set of requirements in the automotive industry. We're proud to be one of the first LiDAR companies in the industry that is series production qualified. Speaker 200:03:50While Saptown stands ready to meet startup production volume requirements, our lead OEM customer has experienced some recent automotive industry headwinds That was publicly known, which resulted in some vehicle launch delays. We're working through these and are confident our efforts in preparing For the anticipated production volume will be fully appreciated in the near future. On the smart infrastructure side, We have seen the smart tolling application flourish with the addition of a new tolling operator customer, while we continue to fulfill our existing smart toting contracts. In addition, we continue to support application For Smart Airports in partnership with the Indoor Labs. We expect these projects to mature into production orders For commercial deployment in the next few months. Speaker 200:04:42Moving on to technology, our software development work has become Increasingly important, matching our hardware development work with our customers. Through extensive collaboration with our automotive OEM customers, Our software teams have developed the best in class automotive software validation suite for Ethernet based sensors. In automotive application where our LiDAR is a key sensor modality, our domain expertise enables plug and play software solutions that can integrate into the broader ADAS stack. Our software development capabilities extends our Domain expertise to both the manufacturing production line as well as the quality control processes, so we have Visibility in all stages of a sensor's life cycle. As we have discussed in prior quarters, We're continuing to build our business and delivered yet another record setting quarter for revenue. Speaker 200:05:44Sabton remained steadfast In pursuing opportunities in automotive industry and remains in good position to win additional Series Production Award with sourcing decisions on the horizon. With that, I'll turn over to Mitch for details on our efforts with customer programs. Speaker 300:06:04Thank you, June. With our lead OEM customer, Septon has continued to deliver on software development, meeting software release milestones Fine tuning software validation tools for production readiness. The delay in launch of certain contracted vehicle models Was a result of the OEM wanting to fine tune products at the system and vehicle level. Additionally, our partner Kaledo Manufacturing Has publicly unveiled their automotive manufacturing line in Japan to support the production of our VISTA X90 Automotive grade behind the windshield lidar. Thanks to our continued development and scaling efforts, Our lidars are ready to go as we await further instructions from our OEM customer on vehicle rollouts and pursue new customer programs. Speaker 300:06:57On our RFI and RFQ activity, we remain in the final sourcing discussion for another major OEM's LiDAR sourcing decision For our long range LiDAR, the same as we have reported last quarter. This decision is expected by the end of the year It has been delayed somewhat as a result of macroeconomic headwinds in the automotive industry. We've also entered final sourcing discussions With a major trucking OEM for our short range lidar with the decision also expected by the end of the year. We hope to share more details in the upcoming months about production sourcing awards. On the Smart Infrastructure side, as June mentioned, we continue to ship against our largest commercial contract in the tolling application. Speaker 300:07:47This quarter, we added a new tolling operator customer, expanding our geographic reach of septon lidars Into new U. S. States as well as internationally. We are also happy to announce continued maturity of projects in the airport application With our partner, the Indoor Lab, with design wins at Tampa, New York's JFK, Denver and San Francisco airports. The initial use case of our LiDAR sensors will be security and passenger traffic management, but we'll be expanding into operations optimization And efficiency improvement for both indoor and outdoor applications. Speaker 300:08:28We started shipping sensors to fill these orders this quarter And we expect several other airports to enter the decision and deployment phases both domestically and internationally in coming quarters. I'll turn it back to Hol Speaker 200:08:43now. Thank you, Mitch. Speaker 100:08:46Starting with our 3rd quarter results. Total revenue for the quarter was $3,800,000 an increase of 112% compared to the prior year period and up 38% compared to our previous quarter. Product revenue was 3,800,000 A new record for the company this quarter, an increase of 114% compared to the prior year comparable period And up 37% compared to our previous quarter. Our strong product revenue growth was driven by an increase in Shipment volumes to the automotive OEM customers. There was minimal development revenue this quarter. Speaker 100:09:26We achieved positive gross margin of 13% on a GAAP basis, primarily driven by revenue mix shift Between automotive and smart infrastructure customers and the fixed cost leverage on a record level of unit shipments. 3rd quarter GAAP net loss was $11,300,000 or $0.71 per share basic and diluted. Non GAAP net loss was $9,200,000 or $0.58 per share basic and diluted. As a reminder, we completed our previously announced 1 for-ten reverse stock split this quarter, so all historical per share metrics have been adjusted For comparative purposes, 3rd quarter non GAAP adjusted EBITDA was negative 9,900,000 As of September 30, 2023, we had approximately $61,000,000 in cash and short term investments and no debt. As a result of our Veet OEM startup production delay, we are revising our full year guidance to reflect the impact on our business. Speaker 100:10:36We now expect our full year revenue to be between $9,000,000 $11,000,000 and we expect Our non GAAP operating expenses for the year to be below $15,000,000 driven by higher operating efficiencies and increased discipline And with that, I'd like to open up the call for questions. Operator00:11:00Thank you very much. We will now begin the question and answer session. Today's first question comes from Tom Narian with RBC Capital Markets. Please go ahead. Hi. Speaker 400:11:33Thanks for taking the question and congrats, Mitch. The first question is on, I guess the major OEM, they called out with the delay there. Just curious, I mean that OEM has also talked about in light of issues they've been having also with their robo taxi business and delays there. How convicted are you that, that business is just a matter of a delay as opposed to Something more serious, that's the first question. Speaker 300:12:19Yes. Thanks, Tom. This is Mitch. I can speak to that. So we can't get too far out in front of the OEM in terms of details. Speaker 300:12:28So we'll defer to them on Specific vehicle and feature details for the launch. The information we have now is it's a few months delay. This was indicated in GM's earnings release on October 24, they talked a little bit about the new software organization led by Michael Abbott And the fact that they're going to be doing some software fine tuning at the vehicle and system level, And we've reflected that in our Q4 revenue update today. Speaker 100:13:04Okay. Tom, this is a halt. Just to add to answer your question, you're asking how committed we are in terms of That program, from Septon's point of view, we are very committed to supporting GM in that program. So nothing on that has changed. Speaker 400:13:24Okay. And there's I mean, there's no indication on your end that there was a risk to that. It's more of a delay is the point, not a cancel, not like an about phase completely, right? Speaker 500:13:38Yes. It's Jun here. That is correct. And You can refer to GM's earnings call transcript for that. It's really meant to be a delay, yes. Speaker 400:13:49Okay. And then the other OEM, Mitch, you talked about, anything just to give a sense of what Order of magnitude or anything we can understand about that OEM Potential there? Speaker 300:14:09Yes. It's relatively the same size as our initial, may be even bigger than our initial OEM series production win. We advanced even further through the process through the quarter. I indicated there's been some small delays on the final decision because of some of the headwinds Out in the market that you're aware of, but we still expect a favorable decision before the end of this year. Speaker 400:14:41Okay. And my last one, on that macroeconomic backdrop, Obviously, EV slowdown and that there is a narrative that OEMs might, if Price mix falls in addition with higher labor costs that they may try to reduce content per vehicle. What is your sense of the appetite for LiDAR in the vehicle? Like Is there some concern is it more of a I mean, just kind of a narrative of what I've been asking before is like more of delays as opposed to outright Cancellation, it sounds like. I mean, how do you see this macro backdrop impacting? Speaker 400:15:22I mean, how committed do you think OEMs will be To LiDAR and those different technologies? Speaker 300:15:31Yes. Thanks, Tom. That's a good question. We're still very engaged with all of our target OEM customers. We believe this is more of a transitory impact, these delays As they reorg and figure out how they want to launch, I mean, let's remember LiDAR is part of the safety suite. Speaker 300:15:49There's no ending appetite for safety. So, with that comment, it's not tied strictly to EVs. Some of our contracted vehicles are also ICE Vehicles. So the need for increased safety is real and the investments by the OEMs continue to increase. And we don't see that going away. Speaker 300:16:12We think this is a delay as they reorganize and figure out How to launch? Speaker 100:16:19Yes. And I'll add, Tom, here since we're talking about the macro and the whole industry, automotive industry trend, Right. On the EV side, OEMs are definitely going into a price war, right, led by Tesla. And margin is going to compress because of that ASP is coming down and also the labor cost is going up. So if you think about where they make money is actually on the optional equipment. Speaker 100:16:52And for LiDAR, Safety is a necessity, but initially those are going to be optional equipment, Right. So that's actually where they could make some profit margin. Got it. Okay. Speaker 400:17:09Thanks a lot. Speaker 100:17:11Thanks, Tom. Operator00:17:13Thank you. The next question comes from Kevin Garrigan with Westpark Capital. Please go ahead. Speaker 300:17:33Yes. Hey, guys. I appreciate Speaker 600:17:34you taking my And congrats on the progress. So in your previous answer, you had mentioned that you're Seeing delays a lot with EVs, are the companies that are developing internal or the car OEMs Are doing more internal combustion engines, are they not nearly as delayed As automotive OEMs that are kind of focusing more on EV platforms? Speaker 300:18:07That's a good question, Kevin. This is Mitch. Yes, so the traditional OEMs Have both, right? They're transitioning from ICE to EV, but they're going to maintain the ICE vehicles. And Mary Barra talked about it in the GM earnings release about the traction they had gained in the luxury segment And that expands across ICE and EVs. Speaker 300:18:33So, I wouldn't say one way or the other, there has been delays On ICE versus EVs or traditional companies versus up and coming companies, I think this resorts back to the megatrend Hull was talking about. Speaker 500:18:48Yes. And so also just the macro events associated with the automobile industry that is pretty obvious in the last couple of months That is finally resolved, as you may be aware of. And all of these are not EV specific. So it Kind of across the board. So it's not one way or the other. Speaker 500:19:08It's really a macro effect here. Speaker 100:19:12And then I'll add to that EV, although it does kind of changes The OEMs priorities, right, EV has been the priority for quite some time, maybe And the recent headwind on EV, having some of the OEMs refocus their attention On ICE vehicles and bring those vehicles up to technology standard. So that internally would take some time. And the good thing With our award is that we are awarded both ICE vehicles platform and also EV platforms. Speaker 600:19:56Okay, perfect. No, I appreciate that color. And then, you mentioned you're fully integrating Cybersecurity software, how big of a talking point is cybersecurity in dealing with LiDAR systems and perception software? Speaker 300:20:12Yes. I mean cybersecurity is table stakes for launching a LiDAR for automotive. I mean it's similar to radar, cameras. Any element of perception that could pose a threat if it was accessed externally Go through very rigid cybersecurity requirements. Our lead OEM General Motors has a notable Requirement on that front, that's one of the most rigid in the industry, and that's what we talked about today, finally integrating all those requirements. Speaker 600:20:48Okay, perfect. I appreciate the color. Thanks, guys. Speaker 100:20:51Thanks, Kevin. Thank Operator00:20:53you. The next question is from Matthew Galinko with Maxim Group. Please go ahead. Speaker 700:21:00Hey, thanks for taking my question. Speaker 600:21:05I guess, With respect to your Speaker 700:21:09to the delay at your primary automotive customer, Does that change or does that delay any further decisions on new vehicle forums or programs at that OEM, or can you talk about how those conversations and decisions are progressing? Speaker 300:21:35Yes, Matt. Good question. This is Mitch. We have to defer to the OEM in that case. We can't get into too many specifics on vehicles. Speaker 300:21:48We've been concentrated on the contracted and awarded vehicles, of course, and we're still engaged With General Motors, right? We're still engaged with our target customers. So we're constantly talking about additional vehicles, additional programs, features. I think I have to just leave it at that. Speaker 500:22:08And the communication we have been getting from GM is really these Few months of delay based on basically their release and there is no discussion on the further vehicle platforms one way or the other. Speaker 700:22:25Got it. Okay. I guess two quick follow ups. One being, I guess, past the automotive Decision that you expect between now and the end of the year, are there any other programs that you're Far along in that you expect to be decided in 2024, or Is that sort of the end of the decisioning process for the time being? Speaker 300:23:03Yes. This is Mitch. There's one other major opportunity we've been working on, major European trucking OEM. That's for our short range LiDAR called Nova, and we're in the final phase of that RFQ and expect a decision before the end of the year. Speaker 700:23:25Got it. Okay. But for just automotive, the non truck, In 2024, that's pretty much all you're able to talk about today. Speaker 300:23:37Okay. You're asking other automotive long range in 2024. Speaker 400:23:43Yes. Speaker 300:23:43Yes, there's always OEMs in the pipeline. There's some in the RFI phase right now. I don't think there's anything as immediate as the couple we talked about today, but there will be additional Sourcing is next year for sure. Speaker 700:24:02Got it. All right. And last question for me is just on the Smart Infrastructure Opportunities, it sounds like you're building off that base and expanding out with it. Can you give us a maybe preliminary sense of what you have in the pipeline? What that Means as maybe baseline looking out to 2024, just given delays on the automotive side and I assume You're not really in a place to talk about that side of the business at this point. Speaker 700:24:37But on the Speaker 100:24:38infrastructure side, can you Speaker 700:24:38give us kind of a Can you give us kind of a preview of what we should expect for 2024? Speaker 300:24:47I think one comment I can make is we talked about our tolling customer that we landed earlier in 2020 3 multimillion dollar contract that we've been fulfilling this year. Today, we updated we have another major customer in the tolling space. We see the airport we're offering more details on the airport installations. I'll just say the size of the contracts are all in that multimillion dollar range, and we expect to be fulfilling multiple contracts 2024, whereas we just basically filled one major contract in 2023. Speaker 700:25:30Got it. All right. Thank you. Operator00:25:34Thank you. The next question comes Richard Shannon with Craig Hallum. Please go ahead. Speaker 800:25:40Well, thanks guys for taking my questions. Jumped on the call late here, so During the Q and A, and I want to follow-up on an answer that I don't think I heard the question very clearly. Sorry, if I'm repeating this. But I think you talked about an award here, and I think it's referring to the one you listed on the front page of your press release About final sourcing decisions for another major vehicle OEM award, is that the one that you're referring to when you said it's Perhaps a bigger size of initial at the initial start of ramp than your current one? And is that the one you expect to be decided before the end of this calendar year? Speaker 300:26:18Hey, Richard, this is Mitch. Yes, you're exactly right. That's the one we were talking about. Speaker 800:26:24Okay. And are you aware of whether you are the only one at this stage or there's still competition present? Speaker 300:26:33I can't comment on if there are others. We know it's down to the final stage. We've been in Process for 6 months now. So at this stage, there's likely no more than 1 or 2 company. Speaker 800:26:49Okay. Fair enough then. I want to follow-up on the industry dynamic here in terms of software integration on the broader sensor including LiDAR that seems to be presenting some issues across the industry and wondering if you're seeing any further signs of that and of those Issues that have come up here, those generally been solved and are you seeing any delays in sourcing decisions because of this dynamic? Speaker 300:27:18Yes. I think one thing June talked about today is the integration of Ethernet based sensors. So most LiDARs have an Ethernet output. A lot of the newest radars have an Ethernet output. So we've developed a suite of software validation tools, working on the GM program, that's really state of the art, But that's a big challenge to overcome. Speaker 300:27:41Outside of that, there's the perception software side, which we're not taking care of For this particular OEM contract, so I think that's another area that's challenging. And I think what you're seeing today isn't much different From some of the other news that you're talking about from other OEMs over the past year. Speaker 500:28:01Yes. So the ADAS software integration is indeed challenging, but It's not really specific to LiDAR. In fact, Saptown, we make LiDAR and we try to make our LiDAR with these Ethernet based tools validation Procedures to make it certainly not the bottleneck of the entire stack of ADAS and we actually very much in that, but there is there are certainly challenges in the entire Stack integration As you can see in the industry, but it's part of the growing pain and it will be over in a few months. Speaker 800:28:36Okay, fair enough. One last question for me and I'll jump online here. Another interesting passage here in your press release is about technology, the fact you're on track to launch your next gen long range LiDAR. What's your timeframe for And assuming everything stays on track here, what would be the first time you'd be like a C sample and then getting to production? Is this something that could happen in Calendar 'twenty six or is it farther out than that? Speaker 300:29:03Yes. The next gen sample will definitely be ready for calendar year 'twenty six And beyond, we're already starting to demonstrate to some of the lead candidate OEMs and we'll continue that process Through the first half of next year, and even working with Cahuito on some of their customers on that. Speaker 800:29:25Okay, fair enough. That's all for me guys. Thank you. Operator00:29:30Thank you. The next question is a follow-up from Tom Narian with RBC Capital Markets. Please go ahead. Speaker 400:29:37Hey guys, thanks for taking the follow-up. I actually just had a follow-up on Something Paul was saying about safety. And I was just wondering if right now it's an optionality You were talking about, but I wonder if you could kind of flip the script maybe. And is this something that maybe you guys could lobby or maybe the greater LiDAR industry could Lobby regulators to potentially mandate something like Use of LiDAR in addition to radar camera, but just like Level 2 plus Level 3, even further Offerings, is that something that you guys do lobbying regulators? Or do you see that as a potential Catalyst for you guys down the road, we've all seen the numbers on safety. Speaker 400:30:29The test lab Steve notoriously gives those stats. I think their product is like 5 times safer than the regular car on the road. So yes, just on that greater topic of Lobbying regulators to make this mandatory, is that something that you think could happen? Yes. Thanks. Speaker 100:30:47Yes, definitely. Thanks for the questions. That's a great point. In fact, I did have a meeting with the Department of Transportation Officials Speaker 500:30:57maybe a couple Speaker 100:30:57of months ago about some of these topics. It's broader. But all centered around safety, whether it's vehicle service safety or infrastructure safety. But absolutely, we do see LiDAR taking The path of cameras and seat belts and airbags in the safety of vehicles over Time. So, and that's exactly what we're driving toward. Speaker 100:31:27And the prerequisite of that also is one of economics too, right? So the cost has to come down over time and that's exactly what we are working on. Performance Goes up, cost goes down over a period of time. Got it. Thanks a lot. Speaker 100:31:46Of course. Operator00:31:49Thank you. This concludes our question and answer session. And I would now like to hand the call back to CEO, Junpei for closing remarks. Speaker 500:31:57Yes. Again, thank you very much for joining us summarizing this record revenue quarter. We look forward to meet again next time to tally up this exciting year of 2023 and share more exciting news. Thank you. Operator00:32:14The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCepton Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Cepton Earnings HeadlinesKoito Manufacturing Completes Acquisition of LiDAR Innovator Cepton, Inc.January 7, 2025 | tipranks.comCEPTON INVESTOR ALERT by the Former Attorney General of Louisiana: Kahn Swick & Foti, LLC Investigates Adequacy of Price and Process in Proposed Sale of Cepton, Inc. - CPTNDecember 6, 2024 | businesswire.comURGENT: Someone's Moving Gold Out of London...People who don’t understand the gold market are about to lose a lot of money. Unfortunately, most so-called “gold analysts” have it all wrong… They tell you to invest in gold ETFs - because the popular mining ETFs will someday catch fire and close the price gap with spot gold. April 27, 2025 | Golden Portfolio (Ad)Cepton (NASDAQ: CPTN) Advances Lidar Commercialization Amid Acquisition by Koito, OEM PartnershipsNovember 12, 2024 | theglobeandmail.comCepton Inc. Faces Operational Challenges Amid Koito Merger ConstraintsNovember 10, 2024 | markets.businessinsider.comCepton reports Q3 results, moves forward on merger with KoitoNovember 8, 2024 | proactiveinvestors.comSee More Cepton Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Cepton? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Cepton and other key companies, straight to your email. Email Address About CeptonCepton (NASDAQ:CPTN) provides lidar-based solutions for automotive, smart cities, smart spaces, and smart industrial applications in the United States, Japan, China, and internationally. The company offers autograde lidar sensors, including Cepton Ultra, a slimmest lidar with MagnoSteer technology and proprietary ASIC chipset, enabling a combination of 300-meter range at 10% reflectivity and 0.05° resolution; Vista-X, a compact lidar solution with a range of up to 200m for long-range applications in ADAS L2+/L3, AV L4/L5, and suitable for smart infrastructure applications; and Nova, an extremely-small form factor lidar solution with a range of up to 30m for near-range applications in ADAS L2+/L3, AV L4/L5, and suitable for smart infrastructure applications. It also provides industrial grade lidar sensors, such as Vista-P, a compact lidar solution with a range of up to 200m for long-range applications in ADAS L2+/L3, AV L4/L5, and smart infrastructure applications; and Sora-P, an ultra-high scan rate, compact, and quasi line-scanning lidar solution that delivers high-fidelity profiling of objects moving at high speeds for free flow tolling and other industrial applications. The company was founded in 2016 and is headquartered in San Jose, California.View Cepton ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 9 speakers on the call. Operator00:00:00Hello, and welcome to the Third Quarter 2023 Septum, Inc. Business Update and Earnings Call. All participants will be in listen only mode. After today's presentation, Please note this event is being recorded. I would now like to turn the conference over to Huo Zhu, Chief Financial Officer. Operator00:00:35Please go ahead. Speaker 100:00:38Thank you, and welcome to CEPTIONS' Q3 2023 earnings call and the business update. With me today are Junpei, Co Founder and Chief Executive Officer and Mitch Hortini, Chief Commercial Officer. During the call, we may refer to our unaudited GAAP and non GAAP measures in our earnings release. The non GAAP financial measures should not be considered Reconciliations for non GAAP measures are included in our earnings release. I'd like to remind everyone that comments made in this Conference call may include forward looking statements regarding the company's expected operational and financial performance for future periods. Speaker 100:01:24These statements are based on the company's current expectation and are subject to the Safe Harbor statements relating the forward looking statements contained in our earnings release and the slides that accompany this call. Actual results for future periods may differ materially from those expressed or implied by these forward looking statements due to a number of risks, uncertainties or other factors, including those Discussed in the earnings release or during today's call and those described in our filings with the U. S. SEC. We are not undertaking any commitments To update these statements as a result of future events, except as required by law. Speaker 100:02:02As a quick reminder, this call is Being recorded and you can find the earnings release and the slides that accompany this call as well as the webcast replay of this call at investors. Deptown.com. Now, I'd like to turn the call over to Jun. Speaker 200:02:17Thank you, Hall, and good afternoon, everyone. Thank you for joining We will provide you with a business update and review our Q3 financial results with you. Before that, I'd like to congratulate Mitch on his promotion to Chief Commercial Officer. He has been a critical part of our business development efforts and we look forward to his continued contributions in his new role. For the 2nd straight quarter, I'm proud to announce that we have delivered a new company record for quarterly product revenue. Speaker 200:02:57This quarter, we shipped the highest number of LiDAR units to our automotive end customers As we continue to deliver on milestones to prepare for start up production. For the 2nd straight quarter, We met our internal production targets. We're beginning to see our scale production efforts translate into revenue as we demonstrate our capability to meet demand of our customers. I'm proud to report that we have passed the final software milestone for launch of series production, fully integrating AUTOSAR And cybersecurity software under one of the most rigid set of requirements in the automotive industry. We're proud to be one of the first LiDAR companies in the industry that is series production qualified. Speaker 200:03:50While Saptown stands ready to meet startup production volume requirements, our lead OEM customer has experienced some recent automotive industry headwinds That was publicly known, which resulted in some vehicle launch delays. We're working through these and are confident our efforts in preparing For the anticipated production volume will be fully appreciated in the near future. On the smart infrastructure side, We have seen the smart tolling application flourish with the addition of a new tolling operator customer, while we continue to fulfill our existing smart toting contracts. In addition, we continue to support application For Smart Airports in partnership with the Indoor Labs. We expect these projects to mature into production orders For commercial deployment in the next few months. Speaker 200:04:42Moving on to technology, our software development work has become Increasingly important, matching our hardware development work with our customers. Through extensive collaboration with our automotive OEM customers, Our software teams have developed the best in class automotive software validation suite for Ethernet based sensors. In automotive application where our LiDAR is a key sensor modality, our domain expertise enables plug and play software solutions that can integrate into the broader ADAS stack. Our software development capabilities extends our Domain expertise to both the manufacturing production line as well as the quality control processes, so we have Visibility in all stages of a sensor's life cycle. As we have discussed in prior quarters, We're continuing to build our business and delivered yet another record setting quarter for revenue. Speaker 200:05:44Sabton remained steadfast In pursuing opportunities in automotive industry and remains in good position to win additional Series Production Award with sourcing decisions on the horizon. With that, I'll turn over to Mitch for details on our efforts with customer programs. Speaker 300:06:04Thank you, June. With our lead OEM customer, Septon has continued to deliver on software development, meeting software release milestones Fine tuning software validation tools for production readiness. The delay in launch of certain contracted vehicle models Was a result of the OEM wanting to fine tune products at the system and vehicle level. Additionally, our partner Kaledo Manufacturing Has publicly unveiled their automotive manufacturing line in Japan to support the production of our VISTA X90 Automotive grade behind the windshield lidar. Thanks to our continued development and scaling efforts, Our lidars are ready to go as we await further instructions from our OEM customer on vehicle rollouts and pursue new customer programs. Speaker 300:06:57On our RFI and RFQ activity, we remain in the final sourcing discussion for another major OEM's LiDAR sourcing decision For our long range LiDAR, the same as we have reported last quarter. This decision is expected by the end of the year It has been delayed somewhat as a result of macroeconomic headwinds in the automotive industry. We've also entered final sourcing discussions With a major trucking OEM for our short range lidar with the decision also expected by the end of the year. We hope to share more details in the upcoming months about production sourcing awards. On the Smart Infrastructure side, as June mentioned, we continue to ship against our largest commercial contract in the tolling application. Speaker 300:07:47This quarter, we added a new tolling operator customer, expanding our geographic reach of septon lidars Into new U. S. States as well as internationally. We are also happy to announce continued maturity of projects in the airport application With our partner, the Indoor Lab, with design wins at Tampa, New York's JFK, Denver and San Francisco airports. The initial use case of our LiDAR sensors will be security and passenger traffic management, but we'll be expanding into operations optimization And efficiency improvement for both indoor and outdoor applications. Speaker 300:08:28We started shipping sensors to fill these orders this quarter And we expect several other airports to enter the decision and deployment phases both domestically and internationally in coming quarters. I'll turn it back to Hol Speaker 200:08:43now. Thank you, Mitch. Speaker 100:08:46Starting with our 3rd quarter results. Total revenue for the quarter was $3,800,000 an increase of 112% compared to the prior year period and up 38% compared to our previous quarter. Product revenue was 3,800,000 A new record for the company this quarter, an increase of 114% compared to the prior year comparable period And up 37% compared to our previous quarter. Our strong product revenue growth was driven by an increase in Shipment volumes to the automotive OEM customers. There was minimal development revenue this quarter. Speaker 100:09:26We achieved positive gross margin of 13% on a GAAP basis, primarily driven by revenue mix shift Between automotive and smart infrastructure customers and the fixed cost leverage on a record level of unit shipments. 3rd quarter GAAP net loss was $11,300,000 or $0.71 per share basic and diluted. Non GAAP net loss was $9,200,000 or $0.58 per share basic and diluted. As a reminder, we completed our previously announced 1 for-ten reverse stock split this quarter, so all historical per share metrics have been adjusted For comparative purposes, 3rd quarter non GAAP adjusted EBITDA was negative 9,900,000 As of September 30, 2023, we had approximately $61,000,000 in cash and short term investments and no debt. As a result of our Veet OEM startup production delay, we are revising our full year guidance to reflect the impact on our business. Speaker 100:10:36We now expect our full year revenue to be between $9,000,000 $11,000,000 and we expect Our non GAAP operating expenses for the year to be below $15,000,000 driven by higher operating efficiencies and increased discipline And with that, I'd like to open up the call for questions. Operator00:11:00Thank you very much. We will now begin the question and answer session. Today's first question comes from Tom Narian with RBC Capital Markets. Please go ahead. Hi. Speaker 400:11:33Thanks for taking the question and congrats, Mitch. The first question is on, I guess the major OEM, they called out with the delay there. Just curious, I mean that OEM has also talked about in light of issues they've been having also with their robo taxi business and delays there. How convicted are you that, that business is just a matter of a delay as opposed to Something more serious, that's the first question. Speaker 300:12:19Yes. Thanks, Tom. This is Mitch. I can speak to that. So we can't get too far out in front of the OEM in terms of details. Speaker 300:12:28So we'll defer to them on Specific vehicle and feature details for the launch. The information we have now is it's a few months delay. This was indicated in GM's earnings release on October 24, they talked a little bit about the new software organization led by Michael Abbott And the fact that they're going to be doing some software fine tuning at the vehicle and system level, And we've reflected that in our Q4 revenue update today. Speaker 100:13:04Okay. Tom, this is a halt. Just to add to answer your question, you're asking how committed we are in terms of That program, from Septon's point of view, we are very committed to supporting GM in that program. So nothing on that has changed. Speaker 400:13:24Okay. And there's I mean, there's no indication on your end that there was a risk to that. It's more of a delay is the point, not a cancel, not like an about phase completely, right? Speaker 500:13:38Yes. It's Jun here. That is correct. And You can refer to GM's earnings call transcript for that. It's really meant to be a delay, yes. Speaker 400:13:49Okay. And then the other OEM, Mitch, you talked about, anything just to give a sense of what Order of magnitude or anything we can understand about that OEM Potential there? Speaker 300:14:09Yes. It's relatively the same size as our initial, may be even bigger than our initial OEM series production win. We advanced even further through the process through the quarter. I indicated there's been some small delays on the final decision because of some of the headwinds Out in the market that you're aware of, but we still expect a favorable decision before the end of this year. Speaker 400:14:41Okay. And my last one, on that macroeconomic backdrop, Obviously, EV slowdown and that there is a narrative that OEMs might, if Price mix falls in addition with higher labor costs that they may try to reduce content per vehicle. What is your sense of the appetite for LiDAR in the vehicle? Like Is there some concern is it more of a I mean, just kind of a narrative of what I've been asking before is like more of delays as opposed to outright Cancellation, it sounds like. I mean, how do you see this macro backdrop impacting? Speaker 400:15:22I mean, how committed do you think OEMs will be To LiDAR and those different technologies? Speaker 300:15:31Yes. Thanks, Tom. That's a good question. We're still very engaged with all of our target OEM customers. We believe this is more of a transitory impact, these delays As they reorg and figure out how they want to launch, I mean, let's remember LiDAR is part of the safety suite. Speaker 300:15:49There's no ending appetite for safety. So, with that comment, it's not tied strictly to EVs. Some of our contracted vehicles are also ICE Vehicles. So the need for increased safety is real and the investments by the OEMs continue to increase. And we don't see that going away. Speaker 300:16:12We think this is a delay as they reorganize and figure out How to launch? Speaker 100:16:19Yes. And I'll add, Tom, here since we're talking about the macro and the whole industry, automotive industry trend, Right. On the EV side, OEMs are definitely going into a price war, right, led by Tesla. And margin is going to compress because of that ASP is coming down and also the labor cost is going up. So if you think about where they make money is actually on the optional equipment. Speaker 100:16:52And for LiDAR, Safety is a necessity, but initially those are going to be optional equipment, Right. So that's actually where they could make some profit margin. Got it. Okay. Speaker 400:17:09Thanks a lot. Speaker 100:17:11Thanks, Tom. Operator00:17:13Thank you. The next question comes from Kevin Garrigan with Westpark Capital. Please go ahead. Speaker 300:17:33Yes. Hey, guys. I appreciate Speaker 600:17:34you taking my And congrats on the progress. So in your previous answer, you had mentioned that you're Seeing delays a lot with EVs, are the companies that are developing internal or the car OEMs Are doing more internal combustion engines, are they not nearly as delayed As automotive OEMs that are kind of focusing more on EV platforms? Speaker 300:18:07That's a good question, Kevin. This is Mitch. Yes, so the traditional OEMs Have both, right? They're transitioning from ICE to EV, but they're going to maintain the ICE vehicles. And Mary Barra talked about it in the GM earnings release about the traction they had gained in the luxury segment And that expands across ICE and EVs. Speaker 300:18:33So, I wouldn't say one way or the other, there has been delays On ICE versus EVs or traditional companies versus up and coming companies, I think this resorts back to the megatrend Hull was talking about. Speaker 500:18:48Yes. And so also just the macro events associated with the automobile industry that is pretty obvious in the last couple of months That is finally resolved, as you may be aware of. And all of these are not EV specific. So it Kind of across the board. So it's not one way or the other. Speaker 500:19:08It's really a macro effect here. Speaker 100:19:12And then I'll add to that EV, although it does kind of changes The OEMs priorities, right, EV has been the priority for quite some time, maybe And the recent headwind on EV, having some of the OEMs refocus their attention On ICE vehicles and bring those vehicles up to technology standard. So that internally would take some time. And the good thing With our award is that we are awarded both ICE vehicles platform and also EV platforms. Speaker 600:19:56Okay, perfect. No, I appreciate that color. And then, you mentioned you're fully integrating Cybersecurity software, how big of a talking point is cybersecurity in dealing with LiDAR systems and perception software? Speaker 300:20:12Yes. I mean cybersecurity is table stakes for launching a LiDAR for automotive. I mean it's similar to radar, cameras. Any element of perception that could pose a threat if it was accessed externally Go through very rigid cybersecurity requirements. Our lead OEM General Motors has a notable Requirement on that front, that's one of the most rigid in the industry, and that's what we talked about today, finally integrating all those requirements. Speaker 600:20:48Okay, perfect. I appreciate the color. Thanks, guys. Speaker 100:20:51Thanks, Kevin. Thank Operator00:20:53you. The next question is from Matthew Galinko with Maxim Group. Please go ahead. Speaker 700:21:00Hey, thanks for taking my question. Speaker 600:21:05I guess, With respect to your Speaker 700:21:09to the delay at your primary automotive customer, Does that change or does that delay any further decisions on new vehicle forums or programs at that OEM, or can you talk about how those conversations and decisions are progressing? Speaker 300:21:35Yes, Matt. Good question. This is Mitch. We have to defer to the OEM in that case. We can't get into too many specifics on vehicles. Speaker 300:21:48We've been concentrated on the contracted and awarded vehicles, of course, and we're still engaged With General Motors, right? We're still engaged with our target customers. So we're constantly talking about additional vehicles, additional programs, features. I think I have to just leave it at that. Speaker 500:22:08And the communication we have been getting from GM is really these Few months of delay based on basically their release and there is no discussion on the further vehicle platforms one way or the other. Speaker 700:22:25Got it. Okay. I guess two quick follow ups. One being, I guess, past the automotive Decision that you expect between now and the end of the year, are there any other programs that you're Far along in that you expect to be decided in 2024, or Is that sort of the end of the decisioning process for the time being? Speaker 300:23:03Yes. This is Mitch. There's one other major opportunity we've been working on, major European trucking OEM. That's for our short range LiDAR called Nova, and we're in the final phase of that RFQ and expect a decision before the end of the year. Speaker 700:23:25Got it. Okay. But for just automotive, the non truck, In 2024, that's pretty much all you're able to talk about today. Speaker 300:23:37Okay. You're asking other automotive long range in 2024. Speaker 400:23:43Yes. Speaker 300:23:43Yes, there's always OEMs in the pipeline. There's some in the RFI phase right now. I don't think there's anything as immediate as the couple we talked about today, but there will be additional Sourcing is next year for sure. Speaker 700:24:02Got it. All right. And last question for me is just on the Smart Infrastructure Opportunities, it sounds like you're building off that base and expanding out with it. Can you give us a maybe preliminary sense of what you have in the pipeline? What that Means as maybe baseline looking out to 2024, just given delays on the automotive side and I assume You're not really in a place to talk about that side of the business at this point. Speaker 700:24:37But on the Speaker 100:24:38infrastructure side, can you Speaker 700:24:38give us kind of a Can you give us kind of a preview of what we should expect for 2024? Speaker 300:24:47I think one comment I can make is we talked about our tolling customer that we landed earlier in 2020 3 multimillion dollar contract that we've been fulfilling this year. Today, we updated we have another major customer in the tolling space. We see the airport we're offering more details on the airport installations. I'll just say the size of the contracts are all in that multimillion dollar range, and we expect to be fulfilling multiple contracts 2024, whereas we just basically filled one major contract in 2023. Speaker 700:25:30Got it. All right. Thank you. Operator00:25:34Thank you. The next question comes Richard Shannon with Craig Hallum. Please go ahead. Speaker 800:25:40Well, thanks guys for taking my questions. Jumped on the call late here, so During the Q and A, and I want to follow-up on an answer that I don't think I heard the question very clearly. Sorry, if I'm repeating this. But I think you talked about an award here, and I think it's referring to the one you listed on the front page of your press release About final sourcing decisions for another major vehicle OEM award, is that the one that you're referring to when you said it's Perhaps a bigger size of initial at the initial start of ramp than your current one? And is that the one you expect to be decided before the end of this calendar year? Speaker 300:26:18Hey, Richard, this is Mitch. Yes, you're exactly right. That's the one we were talking about. Speaker 800:26:24Okay. And are you aware of whether you are the only one at this stage or there's still competition present? Speaker 300:26:33I can't comment on if there are others. We know it's down to the final stage. We've been in Process for 6 months now. So at this stage, there's likely no more than 1 or 2 company. Speaker 800:26:49Okay. Fair enough then. I want to follow-up on the industry dynamic here in terms of software integration on the broader sensor including LiDAR that seems to be presenting some issues across the industry and wondering if you're seeing any further signs of that and of those Issues that have come up here, those generally been solved and are you seeing any delays in sourcing decisions because of this dynamic? Speaker 300:27:18Yes. I think one thing June talked about today is the integration of Ethernet based sensors. So most LiDARs have an Ethernet output. A lot of the newest radars have an Ethernet output. So we've developed a suite of software validation tools, working on the GM program, that's really state of the art, But that's a big challenge to overcome. Speaker 300:27:41Outside of that, there's the perception software side, which we're not taking care of For this particular OEM contract, so I think that's another area that's challenging. And I think what you're seeing today isn't much different From some of the other news that you're talking about from other OEMs over the past year. Speaker 500:28:01Yes. So the ADAS software integration is indeed challenging, but It's not really specific to LiDAR. In fact, Saptown, we make LiDAR and we try to make our LiDAR with these Ethernet based tools validation Procedures to make it certainly not the bottleneck of the entire stack of ADAS and we actually very much in that, but there is there are certainly challenges in the entire Stack integration As you can see in the industry, but it's part of the growing pain and it will be over in a few months. Speaker 800:28:36Okay, fair enough. One last question for me and I'll jump online here. Another interesting passage here in your press release is about technology, the fact you're on track to launch your next gen long range LiDAR. What's your timeframe for And assuming everything stays on track here, what would be the first time you'd be like a C sample and then getting to production? Is this something that could happen in Calendar 'twenty six or is it farther out than that? Speaker 300:29:03Yes. The next gen sample will definitely be ready for calendar year 'twenty six And beyond, we're already starting to demonstrate to some of the lead candidate OEMs and we'll continue that process Through the first half of next year, and even working with Cahuito on some of their customers on that. Speaker 800:29:25Okay, fair enough. That's all for me guys. Thank you. Operator00:29:30Thank you. The next question is a follow-up from Tom Narian with RBC Capital Markets. Please go ahead. Speaker 400:29:37Hey guys, thanks for taking the follow-up. I actually just had a follow-up on Something Paul was saying about safety. And I was just wondering if right now it's an optionality You were talking about, but I wonder if you could kind of flip the script maybe. And is this something that maybe you guys could lobby or maybe the greater LiDAR industry could Lobby regulators to potentially mandate something like Use of LiDAR in addition to radar camera, but just like Level 2 plus Level 3, even further Offerings, is that something that you guys do lobbying regulators? Or do you see that as a potential Catalyst for you guys down the road, we've all seen the numbers on safety. Speaker 400:30:29The test lab Steve notoriously gives those stats. I think their product is like 5 times safer than the regular car on the road. So yes, just on that greater topic of Lobbying regulators to make this mandatory, is that something that you think could happen? Yes. Thanks. Speaker 100:30:47Yes, definitely. Thanks for the questions. That's a great point. In fact, I did have a meeting with the Department of Transportation Officials Speaker 500:30:57maybe a couple Speaker 100:30:57of months ago about some of these topics. It's broader. But all centered around safety, whether it's vehicle service safety or infrastructure safety. But absolutely, we do see LiDAR taking The path of cameras and seat belts and airbags in the safety of vehicles over Time. So, and that's exactly what we're driving toward. Speaker 100:31:27And the prerequisite of that also is one of economics too, right? So the cost has to come down over time and that's exactly what we are working on. Performance Goes up, cost goes down over a period of time. Got it. Thanks a lot. Speaker 100:31:46Of course. Operator00:31:49Thank you. This concludes our question and answer session. And I would now like to hand the call back to CEO, Junpei for closing remarks. Speaker 500:31:57Yes. Again, thank you very much for joining us summarizing this record revenue quarter. We look forward to meet again next time to tally up this exciting year of 2023 and share more exciting news. Thank you. Operator00:32:14The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by