Cepton Inc (CPTN) 2022 Q2 法說會逐字稿

Good day, and welcome to the second-quarter 2022 Cepton, Inc. business update and earnings conference call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Hull Xu, Chief Financial Officer. Hull, please go ahead.

Thank you. And welcome, everyone, to Cepton's second-quarter 2022 earnings call and business update. With me today is June Pei, our Co-Founder and CEO; and Mitch Hourtienne, Senior Vice President of Business Development.

During the call, we may refer to our unaudited GAAP financials 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 expectations and are subject to the Safe Harbor statements relating to forward-looking statements containing 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 the webcast replay of this call at investors.cepton.com. Now, I would like to turn the call over to Jun.

Thank you, Hull. And good afternoon, everyone. Thank you for joining Cepton's second-quarter earnings call. We will provide a business update and review second-quarter 2022 financial results with you. Joining us today is also Mitch Hourtienne, SVP of Business Development, who will share updates on our exciting projects underway with automotive and the smart infrastructure customers.

I'll start off with an update on our OEM series production execution. We continue to ramp D-sample shipments to KOITO for final assembly, calibration, test, and delivery to multiple vehicle manufacturing plants across multiple states in the US. As a reminder, D-sample represents the final stage in hardware validation with production intent.

In the second quarter, multiple Cepton teams visited KOITO's manufacturing facility in Japan in support of production readiness. Seeing the automated production line at KOITO in action was truly a significant milestone for us as it represents our company's journey to lidar commercialization and how close we are to achieving our goal of making Cepton lidars available in everyday consumer vehicles.

As we recently announced, we're expanding collaboration efforts with KOITO to extend beyond our current OEM series production program. This will cover both long-range and near-range lidar products, and both companies will jointly undertake go-to-market activities initially targeting Japanese automotive OEMs.

KOITO has been a key partner in the commercialization and manufacturing of Cepton's lidar technology. And we anticipate the extended partnership will bolster production capabilities and accelerate time to market. This expanded partnership further demonstrates that lidar is an integral part of automotive safety and that we are well on our way to transform Cepton's technological innovations into commercially viable and scalable products.

We also recently announced the selection of Fabrinet as a supplier of key sub-modules for our flagship OEM series production program. Fabrinet will also be our supplier for full turn-key lidar solutions targeting the non-automotive end markets, as well as selected the automotive applications. Cepton launched the initial production of our Vista-X90 lidar at Fabrinet Thailand facility back in September 2021. And we are excited to see our partnership advanced to be ready for scale production.

Securing our manufacturing capabilities and capacity remains our top priority in tight supply environment. And our recent partnership activity reflects the progress towards being production ready by the end of the year. More broadly on automotive, we expanded our office in Detroit to serve as our company's automotive hub in North America. This office will accommodate the team's rapid growth and support existing active engagement with OEM customers. Our expanding presence in Detroit deepens our relationship with OEM customers and our field engineers are actively involved in deploying radars as a standard automotive component for safety.

Our lidar's unique balance of performance, cost, and reliability continues to drive progress with top 10 automotive OEMs. One question many followers of the lidar market has continued to ask is when will we see lidar unsalable vehicles? While we can't provide specific names, a couple of our awarded vehicle models started taking orders recently and consumer demand for those vehicles were extremely strong.

Our unique ability to place Cepton lidar behind the windshield as a result of our lidar's small form factor and low power consumption continues to be a point of differentiation separating Cepton from its competitors. The already positive reception for these models and Cepton's growing presence with OEMs creates a favorable outlook for our products.

On the technology side, we achieved the ISO-26262 ASIL-B certification on our first ASIC. Our in-house ASIC development capabilities remain as an important piece of our technology roadmap as we tape out our second ASIC towards the end of the year to drive further performance enhancement and cost reductions. Our software development team continues to make progress on our open-source software development kit. And we look forward to share more exciting news in the future quarters.

As you can see, Cepton has expanded its capabilities beyond lidar design and development. Our lidar solutions are designed and refined based on continuous OEM inputs while working with our Tier 1 partners to ensure scale production readiness. We expect to be one of the first to commercialize lidar technology in everyday consumer cars.

Now, I'll turn it over to Mitch.

Thank you, Jun. On our automotive programs, we received our first firm production order from KOITO for our OEM series production program. This is a major commercial milestone on our path to production deliveries next year. During several trips to Japan, our engineering teams implemented production software on KOITO's manufacturing line in preparation for this OEM series production and completed the initial OEM site audit of KOITO's manufacturing facility.

As June said, we remain committed and on track to being production ready by the end of this year. Additionally, we reviewed our technology roadmap with other top automotive OEMs in Japan, and we received very positive feedback. Our efforts to reduce size, focus on vehicle integration behind the windshield, and ability to tailor performance to application-specific needs are key differentiation factors for Cepton.

Recently, we hosted three top 10 OEMs for technical reviews here at our San Jose headquarters to progress ongoing RFI projects. Consensus feedback was that Cepton has clearly been heads down executing a real automotive lidar product the past few years. And we are very well positioned for additional OEM programs.

On the smart infrastructure side, projects continue to mature beyond the proof-of-concept phase into lidar deployment. To name a few examples of projects we're working on, our products are being implemented for smart tolling stations in the Midwest, obstacle detection for railway applications, both domestically and abroad in China, as well as security and monitoring at domestic airports.

The smart infrastructure market is much more fragmented than automotive. And we've begun to see some customers push out their deployment timelines as a result of the recent economic conditions. Despite this, our products are still favored in their target applications, and we're confident the long-term demand remains strong.

Next, I'll turn it back over to Hull.

Thank you, Mitch. Starting with our second quarter results. Total revenue for the quarter was $2.6 million, up 186% year-over-year and 72% sequentially, and consists of $1.4 million product revenue and $1.1 million development revenue. The increase in revenue for the quarter was driven primarily by development revenue as we achieved incremental milestones on outstanding projects.

Our gross profit was slightly negative for the quarter, primarily driven by the effects of supply chain shortages and a mix shift between automotive and smart infrastructure revenue, resulting in lower overall ASPs. Excluding the supply chain effects, our gross profit would have been slightly positive.

GAAP net income was $0.8 million or $0.01 per share, basic and diluted. Non-GAAP net loss was $14.5 million or $0.09 per share, basic and diluted. Weighted average basic shares outstanding for the first quarter was $154.1 million and [161.8] million shares on a diluted basis. Non-GAAP adjustments include a $15.6 million gain on remeasurement of earn-out shares' liability, stock-based compensation of $2.2 million, and a $1.9 million gain on remeasurement of our warrant liabilities.

Adjusted EBITDA was negative $13.7 million. As of June 30, 2022, we had available liquidity of approximately $146 million. Total available liquidity consists of approximately $31 million in cash and short-term investments. $15 million remaining on the Trinity loan facility and a commitment to purchase up to $100 million in equity from Lincoln Park Capital.

Turning to full-year guidance, we are revising our revenue guidance for full-year 2022 to between $7 million and $9 million. Most of the decline is driven by smart infrastructure projects being pushed out and our desire to focus on automotive program execution instead of incurring substantial cost overrun in order to meet smart infrastructure demands.

In automotive, we remain on track as we continue to focus on OEM series production execution and winning additional programs. On the operating cost side, we continue to expect our full year operating expenses to be between $55 million and $65 million. Our focus remains on executing the programs in front of us.

In automotive, we continue to ship production samples and support other ongoing programs for the remainder of the year. Based on initial production orders we received, we expect our next year's unit volume contribution from automotive to more than double this year's total volume.

Now I'd like to open up the call for questions.

(Operator Instructions) Joseph Spak, RBC Capital Markets.

Thanks so much. A couple of questions here. First, I think previously, you mentioned -- you thought there was an expectation that could be gross margin positive in the back half. Hull, given some of the shifts you just talked about, what's sort of the current outlook here for the rest of the year?

For the year, we are still expecting a positive gross margin. Although not hugely positive, but in the mid-single digit range.

Okay. And then I was wondering if you could help us out with some units and ASPs because you mentioned a couple of things here. One, you mentioned that the mix between auto and infrastructure sort of weighed on it. So it would be helpful to have some sort of context there in terms of how many units may be between each of those two end markets. And then you went on to say 2023 auto more than 2x total 2022. But I think having a sort of base to help ground people would be helpful.

Yes. First question is on ASP. So, we generally have slightly lower ASPs on automotive and smart infra. Can think of it as automotive, at least in the near term being maybe two-third of ASP of smart infra.

And the second question was automotive volume for next year. We're not providing obviously a full-year guidance for next year, but some color on based on the production order. So we do expect our unit volume from automotive for next year to more than double this year's total volume.

Right. Can you just -- can you tell us how many total units you shipped in this quarter?

Total units shipped in the quarter were about 400.

Okay. Maybe one last one if I could. You mentioned a couple of talks with customers, and it sounds encouraging. If you could -- obviously, the first GM Ultra Cruise vehicles was sort of a big win. Any progress on commercial talks with the sort of the second wave of Ultra Cruise and sort of confidence in being sole sourced for such a program?

Yes, definitely, Joe. This is Mitch Hourtienne. I can take that one. Yes, we're still still very much engaged with GM as our lead OEM customer. The discussions are all -- have a positive trend to them. Extension of the duration, additional models, additional applications for lidar. We can't get into specifics there, but it's all in the positive direction.

I'll just say, other OEMs are progressing just as we have expected, despite the macroeconomic environment, we're traditionally working with top 10 global OEMs here in North America and Japan, and their strategies are still very much intact. So the progress has been really good with the top 10 OEMs, and specifically with GM.

Yes. Thank you.

Matthew Galinko, Maxim Group.

Hi. Good afternoon, and thanks for taking my questions. Maybe if we could go into the kind of delays from smart infra. Is there any flavor to the types of projects that are getting pushed out or, any other differences between regions where you're seeing delays, or is it pretty broad-based? And I guess what gives you confidence that you'll continue to have that business that comes back?

Thanks, Matt. This is Mitch Hourtienne again. I'll take that one, too. So I did mention a few specific applications domestic airports here in the US. So we're finding that while our solution is favored, there's more of -- more time being spent in the POC phase, and the actual deployment afterwards is taking a bit longer.

Similarly, another application has electronic tolling stations in different states here in the US starting out in the Midwest. But there's additional states coming online. And anytime you're dealing with a government entity or large infrastructure like airports, these projects can take a bit longer. But we do say that the end demand remains the same. We're still positive on the end demand. But from POC to mass deployment, it's taking a bit longer than what we expected.

Got it. Thanks. And is there visibility? And I know you said it's pretty opaque, I think. But are there any factors, or do you have any visibility at all as to when that might move as a 2023 event, or is it something that could get pushed out multiple years?

I don't think it's a multiple-year pushout. It's big -- it was a bit difficult to predict the phases of the deployment. So we have good visibility and then the application all the way down to what they're using our lidar for in the tolling stations, the airports, these applications. We know how many they're using per site. It's just predicting the phases of that rollout. Again, you're going across multiple states. You're going across multiple airports that have different strategies themselves. So it's more on the order of quarters versus years.

Got it. Thank you. I'll jump back in the queue.

Our next question will come from Richard Shannon, Craig-Hallum.

Hi, guys. Thanks for taking my questions. Also, apologize, I've had a spotty cell reception here. So I've missed out on some blocks of comments here. But I guess the first question I have is regarding the guidance for the year down to the $7.9 million range here. If I understood correctly, a lot of it or most of it's coming from smart infrastructure considering impact from automotive in that in any way.

Hey, Richard. Thanks for the question. Yes, you're right. The most of the decline is from smart infra. We're not seeing any significant impact from the automotive.

Okay. Unfortunately, I just went out and half of your answer there. So I didn't catch that. I don't know how to fix this, so I apologize. I'll ask another question then probably get a line or read the transcripts over here. But --

No worries. I just said that there's no significant impact from automotive, primarily from our infra.

Okay. I did catch all that. Thanks, Hull.

My second question here is on the comments. And I think that's part of the one of the earlier questions regarding your comment about next year in automotive volumes doubling. I'm assuming that means on a unit basis. Wonder if you could kind of characterize what you mean there.

I would guess I would expect at an early-stage ramp period to be able to do well more than double. So I wonder if you can give us any context, or is there any upside, any sort of limit that you could see next year like tripling or some way you could characterize that, please?

Sure, sure. So that comment is primarily based on the initial production order that we received from KOITO that there is definitely upside to that. And as you know, in automotive, we have a little bit longer visibility than we do in smart infra. Smart infra, we have maybe around couple of quarters and automotive will have a little bit longer.

Okay, okay. Fair enough then. And then just in terms of cash burn here in the second half of the year, Hull. What should we expect here? I probably am not able to do the math real quick on your revenue and OpEx numbers for the second half. But maybe if you can just give us a sense of what you're expecting there, please.

Sure. Our total OpEx for the year remains anywhere between $55 million to $65 million for the year. And for the gross profit over the year is essentially roughly zero, right? So there's not a lot of growth -- gross profit contribution to profitability. So we were done with half a year. So the second half, it's essentially half of OpEx.

Got it. Okay. All right, that's all for me then. Thank you.

Gus Richard, Northland.

Yes, thanks for taking my question. Just -- you mentioned early in the call that you are shipping D-samples to multiple OEMs. I was just wondering if you could give sort of how many and potentially how many programs that might address.

Yes. Just to clarify, we said multiple OEM vehicle factories across multiple states. Yes. So it's all the same OEM.

Okay. Got it, got it. And then you also come moving some production over to Fabrinet and also for some of your markets. Is that mostly infrastructure? And you mentioned some vehicle types of applications. I was just wondering if you could provide any color onto what's going on there.

Yes. Just so Fabrinet will supply a key submodule as part of our automotive OEM program. So supplying that to KOITO. KOITO remains the Tier 1 for the OEM. But in addition to that workstream, we're also working with Fabrinet on other applications, including smart infrastructure customers and potentially other automotive applications outside of the initial OEM series production win.

And I'll just add that for those other applications, Fabrinet will be doing the full turn-key units as opposed to supplying sub-module.

Okay. And the other automotive applications, I'm assuming those wouldn't be a mainstream type of program, but something more unique like autonomous golf cart or something.

That's a safe assumption for today, yes.

Got it right. All right, that's it for me. Thank you.

Thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to Jun Pei for any closing remarks.

Okay. Thanks, everyone, for spending time with us today. As you have heard, from ramping up D-samples to production line readiness at KOITO, we're getting closer and closer to having llidars into everyday vehicles and Cepton is going to be a big part of it. And we're certainly excited and looking forward to giving you guys more updates in the coming quarters. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may disconnect.