CPTNW - Cepton Inc. (CPTN) Q1 2023 Earnings Call Transcript
2023-05-13 19:31:04 ET
Cepton, Inc. (CPTN)
Q1 2023 Results Conference Call
May 09, 2023 05:30 PM ET
Company Participants
Hull Xu - CFO
Jun Pei - Co-Founder and CEO
Mitch Hourtienne - SVP, Business Development
Conference Call Participants
Richard Shannon - Craig-Hallum
Gus Richard - Northland
Matthew Galinko - Maxim Group
Presentation
Operator
Good day, and welcome to Ceptons' First Quarter 2013 Earnings Call and Business Update. At this time, all lines in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Tuesday, May 9, 2023.
I would now like to turn the conference over to Hull Xu, Chief Financial Officer. Hull, please go ahead.
Hull Xu
Thank you, and welcome to Ceptons' first quarter 2023 earnings call and business update. With me today are Jun Pei, Co-Founder and Chief Executive Officer; and Mitch Hourtienne, Senior Vice President of Business Development.
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 as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. Reconciliations for non-GAAP measures are included in our earnings release.
I would 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. These statements are based on the Company's current expectation and are subject to the Safe Harbor statements, relating to 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 US SEC. We are not undertaking any commitment to update these statements as a result of future events except as required by law.
As a quick reminder, this call is being recorded, and you can find the earnings release and slides that accompany this call as well as a Webcast replay for this call at investors.cepton.com. Now I'd like to turn the call over to Jun.
Jun Pei
Thank you, Hull, and good afternoon, everyone. Thank you for joining Cepton's first quarter 2023 earnings call. We will provide a business update and review our first quarter financial results with you. I will start with an update on our series production execution. On the product side, we continue to ship preproduction units to Koito throughout the quarter. While the exact date of vehicle production launch is for the OEM to decide, our lidar remains on track to receive final validation from our OEM customer for production in saleable vehicles.
Our products are being evaluated across multiple vehicle models under our existing production award. As a result of our continued performance OEM customer and the versatility of our flagship Vista-X90 lidar products are for vehicle integration, we expect to receive additional vehicle models in the next couple of months to expand the coverage of our existing series production award.
We're encouraged by the commitment to our technology from our OEM customer. This is reflective of our efforts and dedication to enabling lidar as a critical component of automotive safety. In addition to hardware, our embedded software allows us to meet stringent automotive OEM requirement, such as cybersecurity, over-the-air updates, and functional safety. It also allows us to deliver additional custom features we delivered for our OEM customers. These capabilities were developed by our in-house software teams, and it is a tremendous value add for our OEM customers.
Software is subject to the same standard as hardware. And our OEM customer has some of the highest standards in the industry when it comes to the reliability and safe operation of their vehicles. We believe having the ability to deliver a combined hardware and software solution to our OEM customer under a series production environment, positions us beyond a simple lidar hardware provider. It actually positions us as a total lidar solution provider, and as a leader in driving market adoption to enable lidar for everyday vehicles.
As our products near the final stages towards the production validation, we're also working on increasing production capacity at our contract manufacturers and tier-1 partner facilities. We have mentioned in previous quarters that we work closely with our tier-1 partner Koito to enable the future scale of production of our lidar products.
Our continued efforts in scaling production include securing raw materials at scale and implementing production processes in both hardware and software to ensure we can deliver consistent quality at volume. For example, in this past quarter, we were able to increase the throughput by five times were one of the critical manufacturing steps. And we feel confident in meeting production milestones as we move towards SOP.
Following the announcement of our Vista-X120 Plus product earlier this year at CES, we unveiled the Vista-X90 Plus this quarter. X90 Plus carries over the same slim form factor improvements to our current X90, the product that is launching with our lead OEM program. These improvements enhance our advantages in vehicle integration placed behind the windshield and unlocks the placement in other areas of the vehicles such as the headlamps and [face shield]. Our X90 product is a direct result of working closely with our lead OEM customer to drive lidar adoption across the majority of the OEM customer suite.
Cepton is the first and only known lidar company to launch a high performance lidar in-passenger vehicles behind the windshield. It is not a trivial task, and it requires a huge competitive moat for the distant future. Our new X90 Plus will also feature our recently announced the point cloud process ASIC, the Komodo. Developed in-house, this new ASIC is designed to improve our point cloud quality, reduce power consumption, and at the same time, replace FPGA and other merchant silicon devices to drive cost savings.
In the years ahead for production, where volume is high and on-time delivery is key, we are reducing reliance on the semiconductor supply chain with our own ASIC solutions. In addition, we expect to continue extending the technology leadership with our proprietary ASIC chipset. The accomplishments we have made to start out the year highlight our continued commitment and dedication to be allied our market leader. As our products mature, we continue to make improvements in embedded software and innovate at the chip level to solidify our technology leadership.
Transitioning from product development phase to the production phase stresses the importance of maintaining Cepton's standard quality at the volume demanded by our OEM customers. There are distinct challenges in maintaining the same level of precision and reliability in every lidar unit, when the volume scales to tens and hundreds of thousands. Our investment towards production readiness will prove to be the key areas of differentiation in both lead time and cost.
With that, I'll turn it over to Mitch for an update on our customer programs.
Mitch Hourtienne
Thank you, Jun. I'm happy to announce we recently hired a new Director of Customer Programs, Luis Gonçalves, who joined us from General Motors. He brings over a decade of automotive experience from global OEMs such as GM and Honda. And Luis will support our [Detroit] OEM program. As Jun indicated, our existing lead OEM series production program is expected to expand in the coming quarter, at least three additional vehicle models. This is the result of joint collaboration efforts between Cepton, Koito, and General Motors in product maturity, customized software development, and vehicle integration.
Beyond our current OEM business, we received an RFQ in the past quarter that we believe to be the top automotive OEM opportunity in terms of program volume this year. Cepton already has a rich history with its automotive OEM, and as such with selected to respond to this RFQ directly as a tier-1 technology supplier. This is a recognition of our maturity as a lidar company, and leverages all of the collaboration history with Koito manufacturing.
More importantly, the decision to have Cepton respond directly as a tier-1 technology supplier is made by the OEM in this case. It is not a self-proclaimed aspiration to become a tier-1. We believe this is how the lidar industry will continue to evolve, building trust, winning series production programs, executing and launching and allowing the OEM to help guide final supply chains for the future.
In addition to this opportunity, as a result of General Motors' recent sensor suite announcement for their Ultra Cruise program, where Cepton lidar is placed behind the windshield, executives from a global top-three European OEM visited our headquarters last month. And we are now in an advanced RFI phase for their future passenger vehicles. We look forward to sharing more information with you in the coming calls
Onto near range lidar products. Cepton is one of very few lidar companies with an automotive grade near range lidar product, that has a very large vertical field of view suitable for trucking applications. Over the past quarter, we have made strong progress with multiple top trucking OEM customers. We have progressed to the RFQ phase with a global top-three trucking OEM for our long-range lidar product called Nova.
Lastly, a word on the smart infrastructure segment. We started shipping units to our tolling customer, fulfilling the multimillion-dollar contract announced at the end of last year. While our NOVA product is suitable for trucking applications, it's also an ideal product for smart industrial applications, and we continue to ship our Nova sensors to support autonomous ground vehicle use cases.
Now, I'll turn the call back over to Hull.
Hull Xu
Thank you, Mitch. Starting with our first quarter results. Total revenue for the quarter was $1.5 million, same as the prior year period and a slight decrease compared to our previous quarter. Product revenue was $1.2 million, a slight decrease compared to the prior year period, but a 27% increase compared to our previous quarter. We also have development revenue of $0.2 million based on the timing of completion of our second projects.
While we are still early and achieving volume production for automotive programs, we have shipped a record number of lidar units per quarter and a record number of lidar units for automotive customers. We expect this trend to continue as we ramp production to fulfil purchase orders for our base series production program.
Gross margin was negative 5% for the quarter, primarily driven by revenue mix shift between automotive and smart infrastructure. As our sales volume shifts towards preproduction units and later production units for automotive, where ASP is slightly lower than that of smart infrastructure, we expect our gross margin to experience some pressure in the short term, until component volume pricing kicks in and fixed cost leverage can be realized as a result of increased volume
ASP on the Smart Infrastructure side is expected to remain at similar levels as that of last year. And development projects typically have higher margins, which should help with overall gross margin for the year. First quarter GAAP net loss was $14.7 million or $0.09 per share, basic and diluted. Non-GAAP net loss was $11.4 million, or $0.07 per share, basic and diluted. First quarter non-GAAP adjusted EBITDA was negative $11.6 million.
As of March 31, 2023, we had approximately $80 million in cash and short-term investments, and none of that is held at regional banks. As a reminder, our cash position increased from the closing of the $100 million preferred stock investment from Koito that closed in January this year. We look forward to seeing everyone at our Annual Meeting scheduled on May 18 at 9:00 am Pacific time.
And with that, I'd like to turn the call over for questions.
Question-and-Answer Session
Operator
[Operator Instructions] One moment please for your first question. Your first question comes from the line of Richard Shannon, Craig-Hallum. Your line is now open.
Richard Shannon
Hi, guys. Thanks for taking my question. I have to apologize for getting on late here a number of calls aftermarket today. I got on late and I didn't hear anything about a change -- or any discussion on the guidance that you gave last quarter about revenues and OpEx, did that change, Hull?
Hull Xu
No, no changed for the year.
Richard Shannon
Okay, perfect. That's what I thought, just want to make sure here. I came in during, I think it was Mitch's commentary on some of these bullet points in the press release here that probably missed and some key detail here, but I guess the first bullet here about executing RFQ response. And I think I understand that this is unusual for a component supplier, it's really more for tier-1 here. I just want to make sure that I'm gathering all the importance of this. Maybe if you can talk about how long you've been engaged with this customer? Is that something rather new or have been working on for a while?
Mitch Hourtienne
Yes. Thanks, Richard. This is Mitch. So in case you missed my section, this is an RFQ that we've been prepping for a long time. I stated this -- Cepton already has a rich history with this automotive OEM. We were selected to respond directly as a tier-1 technology supplier, kind of validating our maturity as a lidar company. And we believe this to be the biggest open automotive opportunity this year to bid on.
Richard Shannon
Okay. So, assuming I think you said in the last call, we expected the one or more awards to be given this or I think within six months, I assume that this is one of those things. Is that right, Mitch1?
Mitch Hourtienne
That's correct, yes.
Richard Shannon
Okay. Maybe just stepping back a bit here on the automotive side. Can you tell us where you sit in terms of how many RFIs and RFQs you're currently in process with?
Mitch Hourtienne
Yes, we're always in various stages of the RFI phase with most of the top-10 automotive OEMs. RFQs, we really only talk about or give dedicated airtime to them once they get to a critical milestone, like we are today with this top-10 OEM. But I would say, within the top 10, there's probably two or three RFQs open and five to seven RFIs open.
Richard Shannon
Okay. That is fair enough. Maybe let's ask about the visibility with your primary, your first big automotive customer. I think you mentioned in the last call, you had six months of rolling visibility here. Wondering how if you can kind of update us on what that looks like today as, have you seen increases to that? Or just kind of characterize what the change has been since the last call?
Hull Xu
Thanks, Richard. So, we do have over 10,000 units of purchase orders. So, that's plenty of visibility for us to execute on, which we are very focused on executing or n fulfilling those units. You'll see higher volume ramp towards the second half of this year as we work out the logistics with the suppliers and contract manufacturers as well with Koito.
Richard Shannon
Okay. And with this visibility here set at over 10,000 units, I think, that's a number you may have used on the last call. Does this assume the same number of vehicles you're shipping into or has there been an increase in that as well?
Hull Xu
This assumes the same number of vehicles we're shipping into. The vehicles that are already planned to have started production in 2024 hasn't changed from our OEM customer. Mitch did mention that we have commitment from the OEMs to add additional vehicles, right now at least three into the overall program. And those vehicles are not expected to have SOP in 2024.
Richard Shannon
Okay. Fair enough. And that's a good perspective. Maybe last question, I'll jump out of line here. On the last call, you talked about having a win with a top-10 global OEM for an autonomous ground vehicle. And I haven't seen any news out there that suggests who that might be -- maybe I will start off here and then your press release, you talked about shipping these samples to an autonomous ground vehicle customer. Is that one of the -- is one of those customers the one you referred to in the last earnings call? And is there any way you can help us think about who that might be?
Mitch Hourtienne
Yes, that's right. I mean we can't disclose the name yet. But I think in Q4 of this year, there will be some more public disclosures about the project and how Cepton's supporting this OEM customer. It is a Level four autonomous ground vehicle use case. It's been exhibited at a couple industry shows or it's starting to be exhibited at a couple of industry shows, but exact details are looking like Q4 this year.
Jun Pei
Yes, I would add that I mean, it is a top, global top-10 automotive OEM that has a significant play in power products.
Richard Shannon
Okay. And is this customer -- is Koito evolved with this customer, with both with this level four autonomous vehicle and their higher volume passenger vehicles as well?
Mitch Hourtienne
Yes, they are.
Richard Shannon
Okay. Good to know. I will jump at one of your guys. Thank you.
Mitch Hourtienne
Thanks, Richard.
Operator
Your next question comes from the line of Gus Richard, Northland. Your line is now open.
Gus Richard
Yes, thanks for taking my questions. Just in terms of GM and start of production, when do you anticipate that to occur?
Mitch Hourtienne
Yes. I think GM publicly stated in their March press release around the Ultra Cruise sensor suite, that they're aiming to actually have these saleable vehicles to the consumers in December of this year. That's for the lead Celestiq vehicle. Beyond that, the additional vehicle models will continue to launch in first half of 2024. And then the remaining in second half of 2024, first half of 2025.
Gus Richard
Okay. And at the end of 2024, you should be in four vehicles. Am I doing the math right there?
Mitch Hourtienne
At least four, yes.
Gus Richard
Got it. And then, just turning to the infrastructure business. You announced the win this quarter, and I'm just wondering how many states -- how much of that quarter have you shipped in, do you expect any follow-ons?
Mitch Hourtienne
Yes, definitely. We started shipping against that order in April. So there's a regular shipment every month for this tolling operator. It's going across three states initially. But there are many more that they're bidding on, and we expect to expand through early next year to additional states.
Gus Richard
Okay. Just rough numbers, what percentage of the US population does that cover, roughly?
Hull Xu
Well, I think I'd say 10% is what we have.
Mitch Hourtienne
Yes. I mean, there's a populist east coast state there, I think we listed the states --
Hull Xu
Yes, the 10% is probably the coverage of what we have with that operator in terms of equipping the toll roads with lidar, right. So, there's still a vast majority of toll roads that's not equipped with lidar in this first phase.
Gus Richard
Right. Got it. All right, Super helpful. That's it for me. Thank you.
Hull Xu
Thanks, Gus.
Operator
Your next question comes from the line of Matthew Galinko, Maxim Group. Your line is now open.
Matthew Galinko
Hey, guys. Thanks for taking my question. Just was curious about what the pipeline looks like for the part infrastructure business out of this point beyond the highway win you discussed previously?
Mitch Hourtienne
Yes. Definitely we're still supporting, you know, dozens of different applications. I would say there's a increasingly more applications that are starting to ramp now beyond just proof-of-concept. Previously, we've talked about airports. We expect those to be officially announced and ramp later this year. The autonomous ground vehicle use case as a result of our Nova near range lidar product, and we've begun collaborating with Koito on that, because there's a lot of interest in the short-range lidar for various applications.
Hull Xu
And to just put a little bit more finer details on that. For this year, we expect smart infrastructure in terms of revenue will be in a single digit millions area -- towards mid-single digits. And we do expect next year to be in the double digits area millions.
Matthew Galinko
Got it. Thanks. And then maybe just, if you could touch on what you're seeing in the competitive environment, now in the RFPs you're responding to on the automotive side, on the Smart Infrastructure side as well?
Mitch Hourtienne
Yes. On the automotive side, it's really Cepton and one competitor in most accounts. I would say, there's never more than one or two serious competitors in automotive because they have a pretty lengthy vetting process with their RFIs. Once they get to RFQ, they have it narrowed down to one or two companies.
On the smart infrastructure side, we're still seeing where directional lidars are replacing spinning lidars in applications. So, in that case, some of the spinning lidars companies are being conquested with directional lidars. I think there's a few more competitors within smart infrastructure as lidar companies trying to pivot to that space, if they didn't get an automotive program.
Matthew Galinko
Got it. Thank you.
Hull Xu
Thanks, Matt.
Operator
[Operator Instructions] There are no further questions at this time. Please continue.
Jun Pei
Okay. Thank you for joining us today. We are really looking forward to this new year, and a lot of excitement in the automotive business. We'll report to you next quarter, hopefully with a lot more exciting news. Thank you.
Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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Cepton, Inc. (CPTN) Q1 2023 Earnings Call Transcript