Cepton Inc (CPTN) 2022 Q4 法說會逐字稿

Good day, everyone, and welcome to the Q4 2022 Cepton, Inc.'s 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, the CFO. Please go ahead, sir.

Thank you, and welcome to Cepton's fourth-quarter and full-year 2022 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 expectations and are subject to the Safe Harbor statements related 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 those 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 fourth-quarter and full-year 2022 earnings call. We will provide a business update, review fourth-quarter and full-year 2022 financial results, and provide our view for 2023.

Starting with our business update, over the past year, we have shared with you quarterly updates on our progress towards series production. Rather than hearing from me this quarter, I will point towards -- to our OEM customer's announcement, notably General Motors' announcement of its Ultra Cruise ADAS system on March 7, last Tuesday.

GM offered the most comprehensive look into the role of lidar in their sensor suite in the deployment of their next-generation ADAS system designed to enable hands-free driving in 95% of all driving scenarios. Highlighting our unique lidar integration behind the windshield, our lidar produced an accurate three-dimensional view of the scene, enabling more precise object detection even in inclement weather conditions. Our lidar sensor is a key enabler to safely deploy GM's next-generation ADAS offering.

At the end of last year, we began shipping preproduction units to our OEM customers. This year, we look to start of series production. We are excited to move yet another step closer to commercialization of our products.

At CES this year, we unveiled our next-generation lidar, the Vista-X120 Plus. Recognized by the CES Innovation Award program, the X120 Plus has a 30 degree wider field of view, and 20% reduction in size, and 50% reduction in height compared to our X-90, which is our flagship line, are selected for the series production. This new sensor builds on our core MMT technology for superior resolution and offers additional vehicle integration options with a slim design.

Many OEM customers, both existing and new, are interested in testing and evaluating our new sensor for their next-generation vehicle platforms. We have shipped the first samples to our global top 10 OEMs for evaluation, and we expect the Vista-X120 Plus series of products to be a major contender for upcoming automotive production programs.

At the end of last year, we successfully taped out our next generation ASIC chip, and we expect the first samples to be available starting early this year. This new image processing ASIC is complementary to our existing industry-leading signal processing ASIC. The combination of both will be featured in our new Vista-X120 Plus, working in unison to improve performance and significantly reduce costs.

Our proprietary ASIC extends a unique differentiation to our products, offering signal-level compute, moving up to point-level compute, and eventually frame-level compute capabilities. In the year ahead, we look forward to sharing with you our full ASIC chipset roadmap.

With our leadership team, it is my pleasure to announce the appointment of Dr. Dongyi Liao as the Chief Technology Officer of Cepton. Dongyi previously served as our Senior Vice President of Applications since 2017 and is responsible for all software efforts of the company. We look forward to his contributions to expanding the value of software in the growing deployment of our lidar.

Mark McCord, our current CTO will continue with the company to serve as the Chair of Cepton's newly created Technical Advisory Board, and will remain in charge of our intellectual property portfolio. Please join me in congratulating both Dongyi and Mark in their new roles.

2023 will be a landmark year for Cepton as we look to transition into series production. Staying true to our principles that our sensors must achieve a balance of performance, cost, and reliability is ever more important. As our sensors enter mainstream vehicles, we are hyper-focused on delivering auto-grade quality at scale volume costs.

Our Tier-1 partner, Koito, brings decades of volume manufacturing expertise to complement our technology. In the year end, our collaboration efforts will not only focus on series production execution, but winning additional automotive OEM programs, which Mitch will share more details with you next.

Thank you, Jun. Starting with our automotive programs, as Jun indicated, preproduction shipments started at the end of the previous year and have expanded to multiple vehicles in multiple vehicle manufacturing sites. We are in advanced discussions to expand our existing business award to additional vehicle models.

GM kicked off the announcement of the CELESTIQ late last year, and followed up with a comprehensive announcement of the sensor suite in the Ultra Cruise system a week ago. We expect more announcements across additional models in the year ahead.

Over the past year in the automotive industry, we've seen accelerated investments and focus on L2+ ADAS offerings as a result of Level 4 programs being pushed out. Of course, I'm always speaking about our target customers, leading global top 10 automotive OEMs. We expect additional OEMs to take a similar approach to GM on L2+ or L3 system deployments with announcements in the near future.

We remain in a very good position for additional production awards with our target OEMs. We're in advanced discussions with several global top 10 OEMs at this stage. As we have seen across the lidar industry over the past year, the competitive landscape is a smaller list of lidar companies that have existing automotive production awards.

We have gained trust across the industry having gone through an extensive development process and launch efforts with General Motors. This entire process spans over three years in both hardware and software development, establishing Cepton as one of a few auto-grade lidar suppliers for automotive OEMs.

In 2023, we will direct efforts in winning series production awards toward our newly launched Vista-X120 Plus product. Our public launch in January has received a lot of interest among the OEMs hoping to deploy lidar in the next-gen vehicle platforms.

Turning to smart infrastructure, we recently announced a multimillion dollar contract from a leading US highway tolling systems operator. We believe our contract is the largest commercial deployment of lidar to date for this application, with the potential to scale across more highways in the US and outside the US for future deployments.

Our strategy to partner and work with systems integrators in targeted applications helps us extend our reach across smaller end customers in a more fragmented market. We will continue to focus on executing our strategy in our target applications, including airports, in the year ahead.

Finally, we have a new autonomous ground vehicle project with a top 10 automotive OEM to announce. Cepton is supporting the safe deployment of level four autonomous ground vehicles with our Nova near range lidar. Details of this customer and application will be forthcoming soon. So stay tuned. I'll turn it back to Hull now.

Thank you, Mitch. Starting with our fourth quarter results, total revenue for the quarter was $1.6 million, a 23% increase compared to the prior year period. Fourth-quarter product revenue was $1 million, consistent with the prior year period. And in the fourth quarter, we had development revenue of $0.6 million based on timing of achieving milestones on those projects. Our gross profit margin improved in the fourth quarter to 35%, primarily driven by revenue mix shift between product and development revenues.

Fourth-quarter GAAP net loss was $15.3 million, or $0.10 per share, basic and diluted. Fourth-quarter non-GAAP net loss was $13.4 million, or $0.09 per share, basic and diluted. Fourth quarter non-GAAP adjusted EBITDA was negative $12.3 million.

We achieved full-year revenue of $7.4 million, meeting our revenue guidance and represents a 65% increase compared to the prior year. While our development revenue was consistent year over year, our product revenue was $5.6 million, a 92% increase compared to the prior year, reflecting our ongoing commercialization efforts of our products.

Full-year gross profit margin was slightly positive at 2.6% and is consistent with the prior year. Our full-year GAAP operating expenses were $61.6 million, meeting our operating expense guidance. Excluding transactional costs, onetime, and noncash items, our operating expense for the year was $50.6 million, well under our OpEx guide.

Full-year GAAP net income was $9.6 million, or $0.06 per share, basic and diluted. Full year non-GAAP net loss was $53.2 million, or $0.36 per share, basic and diluted. Non-GAAP adjusted EBITDA for the year was negative $50.3 million.

As of December 31, 2022, we had available liquidity of approximately $134 million. Total available liquidity consists of approximately $36 million in cash and short-term investments, and a commitment to purchase up to $98 million in equity from Lincoln Park Capital. In January, we closed a $100 million preferred stock investment from Koito after obtaining shareholder approval for the transaction.

As a reminder, the preferred stock will be convertible beginning one year after the issuance date at an initial conversion price of $2.585, and will carry a dividend rate of 4.25% paid-in-kind or 3.25% if paid in cash. At close, we used the proceeds from the transaction to repay our outstanding term loan from Koito, increasing our cash and cash equivalents to approximately $89 million.

Including the commitment to purchase up to $98 million in equity from Lincoln Park Capital, our available liquidity increases to approximately $187 million, which we believe provides sufficient cash and available liquidity to support the launch and ramp of our current series production award.

Turning to 2023 guidance, we are expecting full-year revenue between $15 million and $20 million, weighted in the back half of the year as we launch series production and unit volume begins to ramp. We expect gross margin to be positive for the year. On the cost side, we expect full-year operating expenses to be in line with that of 2022 or between $55 million and $65 million.

We have many notable achievements in our first year as a public company. With the closing of the Koito preferred stock transaction, we believe we have sufficient financial resources to fund our next stage of growth as we look to launch series production this year. We look forward to connecting with investors at our Annual Stockholders Meeting to be held in May with details of the event to follow. Now I'd like to open up the call for questions.

(Operator Instructions) Tom Narayan, RBC.

Yes, thanks. Tom Narayan, RBC. Thanks for taking the questions. First, congratulations on the GM press announcement. My first question has to do with the 2023 guidance. You have $7.2 million in revenue in '22, increasing what it looks like to $15 million to $20 million in 2023.

Could you help us maybe understand what is driving the incremental revenue to guidance here? Maybe just a further breakout? Is this assuming new auto OEM wins beyond GM, or is it mostly GM? And is there maybe organic growth in smart infrastructure as well?

Yes. Happy to do that, Tom. Thanks for the question. Yes, let me provide a little bit more color on our guidance. So the short of it is that it's primarily driven by the GM program. So just to provide some numbers behind it. So for 2022, in terms of unit shipments, we shipped about 1,500 units. And that's 45% to automotive and 55% to smart infrastructure.

Right now, we have six months of visibility into the program. When you have series production programs, you do have a little bit more visibility. So, in our hands right now, we have purchase orders of over 10,000 units. So that's going forward to six months. So in relation to last year's unit shipments, this is a significant increase in terms of units. So that's just automotive. Actually, that's just the GM program in automotive.

And turning to smart infrastructure, we announced that we had won this multimillion dollar contract from an electronic tolling provider in the US. The bulk of that will occur this year. So that also gives us a lot of confidence in our guidance. Did I answer your question, Tom?

Yes. And then -- it sounds like there's not -- you're not assuming new OEM revenues beyond GM for the auto piece for '23 in the guidance.

We will have some. But not meaningful as it compares to the GM program, right. So when we win additional large programs with automotive OEMs, the real ramp isn't going to be immediate. It's going to take a couple of years to work through. So the real ramp this year is going to be just GM and then next year will be even higher.

But in the meantime, we are in late stages of discussion with other large global top 10 OEMs, and there will be some revenue towards those maybe in forms of NREs. But volume wise, they will not be able to -- will not be able to match the GM program.

Got it. And then my second one, if I could. There seems to be a handful of winners today in the lidar space. It seems like there -- it's kind of solidifying before us today, like who's kind of winning. And you guys are in there with GM. Just curious how you see the industry in, let's say, five years from now? Do you see consolidation happening maybe with a couple of dominant players? Or do you see just many, many players with equal market share across OEMs? Just how do you see this playing out in your eyes?

Yes. Thanks, Tom. Jun here. I'll start the question and maybe follow that with some additional comments from Mitch. The consolidation is already happening as you can see it in this industry. But the plain fact is, the winners right now with a well-defined automotive program will continue to be the winners because we go through all those sophisticated processes of bringing an automotive component into marketplace.

So yes indeed, it is not a winner-takes-all position, but for sure it will be concentrated into a small group of people that basically can be counted by one hand.

Yes, Tom, this is Mitch. I'll just add, once you see the vehicles on the road, which Hull just talked about, we have orders for over 10,000 units this year. So that puts them on the road late this year, early next year. That's really the final proof point, right, for these companies that have made some claims of design wins and projections. So that's what we're working towards.

Once you're integrated into the vehicle, especially like we are behind the windshield, it's very hard for any competitor to get to that location or replace that socket. So these design wins with OEMs are really on the order of 5 to 10 years minimum.

Right. And so sorry, last one I have is, in an environment where, let's say, lidar becomes required for vehicles for safety, kind of like how we are with airbags, rear view mirrors, that sort of thing. Do you view that as a positive or a negative in that could that create an incentive for tons of competitors to come into the space or perhaps it becomes more commoditized where pricing comes down?

How do you see that world developing? Or is it just great for you guys because it's a -- not winner take all, but the better guys win out, and you guys could be beneficiaries of that?

Well having -- if it's already a common place to have lidar in cars, if that's what you're referring to, and to the extent they could be even regulated into a car safety device, I think that's always a good thing for us.

We're one of the front runners in the lidar business. And when you use the word commoditize, actually in automotive business, like Mitch said, it is really, really hard to get into a socket there. Has to go through a very long process to get yourself established. So having a foothold into this space, as long as the space is expanding, we're going to enjoy that benefit.

Yes, I think I'd just add -- it will follow a similar path as radar and camera. It took them 15 to 20 years to establish a so-called commoditized, where OEMs had a handful of qualified suppliers to choose from. So I think we're very far from that situation, I would say at least 10 to 15 years. So these winners that launch are going to be the winners for the next decade.

And I'll add that on the ASP front, I think, Tom, that was part of your question also. We do expect ASP to come down as this becomes proliferated, right. And as a technology company in the Valley, and that's what we're good at, which is doing our engineering work to bring the cost down. And I'll point to the fact that we are -- we have already taped out our second ASIC, which will dramatically reduce some of the component cost in our current version in our next-generation products.

Great. Thanks a lot, and I'll turn it over.

(Operator Instructions) Samik Chatterjee, JPMorgan.

Hey, guys. Thank you for taking my question. I guess if I can start, I think you mentioned -- Hull, you mentioned the visibility that you have in relation to production, the series production, with about six months of visibility, and 10,000 units as the order pipeline there.

Just wondering if that -- we should read that as the 10,000 unit volume in terms of series production over a six-month period, and does that give you a little more visibility about what the take rate on the options that the OEM is planning for in relation to ADAS related to their vehicles? Does that give you any more details in terms of what the OEM is thinking about in relation to attach of that ADAS solution on the vehicle -- on the platforms you're on? And I have a quick follow-up as well. Thank you.

Hey, Samik. This is Mitch Hourtienne. I think I can offer some color on that. So the units that Hull was talking about, we have orders for that. That just covers the first couple of platforms at GM. And so there will be a mix of take rates, whether it's the high-end luxury vehicle, could be up to 100%, versus the mid-grade models, which don't start until next year where the take rate could be a little bit lower, but they're higher volume platforms.

So yes, I think we're getting more insight obviously as we get the firm orders. But I don't think there's anything surprising so far or different from our original assumptions from the nine vehicle platforms at GM.

Okay. So I mean just to clarify, you're implying that that 10,000 is a pretty high take rate on the platforms you are launching on initially in 2023.

Yes, on the first few vehicles, yes.

Yes. And then just secondly, I think most of your peers who have reported this earning season have been setting milestones in terms of number of OEMs, number of wins they expect to get through in 2023. Wondering -- I know you've talked about expansion of the opportunity with GM being -- for something you're targeting for 2023. But any milestones in terms of new customer additions, et cetera, that you're targeting for 2023 that we should be tracking you against? Just any color on that front?

Yes. So once again this is Mitch. I'll answer that and then you can add any comments. But we always have the goal of adding additional OEMs. But more than that this year I'd say, as Hull mentioned, we're in late stages at two OEMs right now in the top 10. And so we do really expect them to make decisions within the next six months or so.

Of course, no lidar company can dictate the timing from an OEM. And if you look at our target customers, there have been a lot of changes. GM's revealed more details on Ultra Cruise. So that's a public validation. Ford shut down Argo three, four months ago, but they also said they are doubling down on ADAS. And so we expect next gen BlueCruise next.

[Hani] or Honda announced a joint venture with Sony. So that's a step in adopting new ADAS tech. And then Toyota just changed CEOs. So there's a lot of movement at the OEMs that sometimes delays some of their sourcing decisions here. But we're very much in the discussion. And I would even expand that to Korea and Europe. We're in the discussion in all the major sourcings.

Thank you. Thanks for taking my questions.

Richard Shannon, Craig Hallum.

Well, thanks, guys, for taking my question. I think I'm going to follow up on the very first question asked here regarding the 2023 revenue profile here. Hull, I think you mentioned this being a back-end loaded year. Maybe you can give more clarity to that, like how much bigger will the second half than the first half, or some way just to get a sense of what you're expecting here.

Yes, so the ramp does take a little bit of a non-linear fashion. So I'd say the back end is probably twice as much as the first half.

Okay. And then in terms of your lead OEM here, can you clarify or characterize how many models that you're shipping into now? Or at least are covered in that 10,000 units in your order book?

Yes, the preproduction shipments right now are going into multiple vehicle models. It's more than two. And the hard orders that we have, yes, they also cover the same number of models. So two or three models. But they're all staged in timing, right? Like they don't launch the same month.

Right. I figured they'd be staged throughout the year or so. Okay, that's helpful in understanding this dynamic here.

Let's see here. I think on the last earnings call, you had talked about a couple of RFIs that you're hoping to go to RFQ. I didn't hear you talk about language to that effect here. I think, Mitch, you just used some different language to maybe describe those situations.

Then you also mentioned a relationship in the advanced engagement stage that appeared to be without competition. So I guess in the first two RFIs, have those officially moved to RFQs or not? And then any statements you can make on that advance engagement that didn't have any competition, that would be great, please.

Sure. Sure. Yes, there has been some progress on both of those. So on the first point on RFIs, yes, we've advanced to the RFQ phase with another major OEM recently. So we're very much in the RFQ phase with them.

The second point, this has evolved into the point that I made about advanced discussions about additional vehicle models and extended duration, that that's where we're at with our lead OEM, General Motors.

Okay. And I know you mentioned -- someone mentioned on the last earnings call about that. So there hasn't been -- there's been discussions, but you haven't extended beyond. I think you mentioned the past [model year 27]. So it's still in model year 27 then?

Yes, yes, that's right.

Okay. Okay. That is helpful. Maybe one or two other ones here. I guess just a question on the OpEx guide here, keep it in the similar range as last year. I guess in the context of thinking about where you're able to compete well, I know you've done pretty well with Asia -- in Asia at least with your Tier 1s there. But you also mentioned, Mitch, I think some engagements and you're competitive in Korea and Europe as well. Had announced, I think a few months ago, opening up your office in Munich.

But with your OpEx, you're staying flat. How do you manage being competitive across the world, especially with at least one of your lidar peers here in the public market spending at rates well above what you are? How do you -- how are you able to do that with keeping your OpEx flat this year?

Yes. So I think one of the operative word is focus. So we are very much focused on the top 10 global OEMs. While maybe others could say they've got wins with other OEMs, but we're really just top 10. So I think you know, North America is our key geography. And Japan, because of our relationship with Koito, we're very much plugged in there.

Europe, we've had an office for a little while now. And we've actually gotten quite a bit more activity in Europe in recent months. I think that's owing to the success we've had with GM. Maybe Mitch can talk about some of the European OEM tractions.

Yes, I think, Richard, we can do a lot more with a lot less than the competition because of our relationship with Koito and General Motors. So Koito is doing a lot more on the front end business development, especially in Japan and the Asia region. So we can rely on them.

And now with General Motors divulging a lot more details about this system, especially where lidar is, other OEMs are viewing these public announcements and understand more about Cepton's solutions. So you're right, we are doing more with less, but that's because we have two big companies we're working on this with.

Okay. I think that's all the questions from me. I will jump out of line, guys. Thank you very much.

[Tasos Tasos], Growth Capital.

Hello guys. Just a couple of questions from me. I just wanted to ask. When do you expect to see the first batch of GM cars using Cepton's lidar at actual dealerships?

That's a good question, Tasos. So this is Mitch. Yes, I mean, GM revealed publicly the first CELESTIQ last July on stage. But you know that's not at a dealership. So the target is before the end of the year that these vehicles will be at dealerships. Of course, we're relying on General Motors hitting their own internal milestones. But I believe that's already what they've revealed. This is a model year '24 vehicle.

Yes. And I'll just refer back to the numbers and the POs that we have in hand, over 10,000 units that we have in hand, and that we need to ship this year. Actually, the final number will be well over 10,000. So if you put two and two together, they wouldn't be ordering that many units if only a handful of CELESTIQs are on the road.

Okay. Thanks for that. That gives a lot of color. The other thing I wanted to ask is regarding the latest share price pressure. Can you comment at all if this was related at all to the SVB situation or the Signature Bank situation? Can you comment at all?

We can't really comment on our own share price. But with regards to SVB, we could share some information. So SVB has been the company's operating bank ever since we were a private company. And several years back, the company did have a small loan with SVB, which was paid back a long time ago. But that was in the filing when we went through the process.

So I'm not sure if that's related or not. But as of now, it shouldn't be of a concern. SVB is probably the safest place to put our funds. But we already have other bank accounts open with national banks that can take over in terms of operational needs. And we're doing that already.

Okay. Thanks a lot.

Thanks.

Matthew Galinko, Maxim.

Hey, good afternoon, thanks for taking my questions. Maybe if we could start with the -- I guess, the guidance. You talked about having about six-month visibility with your primary customer. So how do you think about fourth quarter, and 2023 beyond the six-month window. How are you constructing or thinking about how that factors into the guidance provided?

Sure. So what we have visibility into is until September, right. So in terms of the POs that we have received. And I would expect the second half to be -- to have more volume than the first half. So we expect right now the last quarter will be higher volume than the previous quarters.

Yes, that's right. And one of the OEM checkpoints is demonstrating capacity, so the capacity we're putting in place is obviously much larger than the actual unit shipments we're making this year.

Got it. Okay. And then, I think you mentioned the potential to expand within your current tolling system win. What's the timeline for potential expansion? I think you mentioned that most of the revenue in that deal, or at least the initial phase, is in 2023. So when and how would we see expansion within that win?

Yes, that tolling win covers, I believe, three or four highway sections across a couple different states. It's roughly an 18-month long project if you look at it from first install to final install. But we already have the customer, right? So the next acquisition should be quicker. Those should be on the order to three to six months to win additional projects there.

I would add that this initial order probably covers 10% of the highways that this operator has. So there's quite a bit of potential once this launches and there's follow-on projects to do.

And is your sense that there's a period of performance that they're going to want to -- they'd want to see how it works at that scale before moving through more of the -- of that portfolio? Or I guess what's stopping them from moving more quickly through the next 10% or more?

Yes, the performance has already proven. All the commercials are proven. So the value is obviously recognized by the three different states. But it's really a state-by-state decision. The end customer, the Department of Transportation within each state. And as you know, some states are more aggressive adopting new tech. Some lag. Some have expedited processes. Some have slower processes. So the main gating item is just additional states adopting the technology and the process of sourcing this.

Yes, I think the final piece is probably the capital that's available to these operators. And as the infrastructure bill funding gets rolled out, that will probably help a bit as well.

All right. Thank you.

Thanks, Matt.

Richard Shannon, Craig Hallum.

Great. Thank you. Maybe one or two questions here. Hull, I think you mentioned is your guidance for gross margin something to be positive here. What do you think help us think through this as we go throughout the year?

Obviously, we know there's a mix of auto and infrastructure and some product and some NRE type of stuff here. But as we gain some volumes here, how do we think about the exit rate of your product gross margins? I don't know if you want to quantify or qualify in some way, but love to get a sense of the exit velocity on that number?

Yes. Thanks, Richard. Good question. A tough one to answer. As you mentioned, there is a mix of product revenue versus development revenue, right? So development revenue typically -- right now, it's running at around 50% or more. And the future also depends on is it more software development or something else.

Product revenue, it really depends on the cost -- bond cost and also the ASP. ASP for automotive, we're launching below 1,000. As it scales, we're targeting ASP to be somewhere near 500 or below. But that will take a couple of years before we reach that volume.

And then smart infrastructure ASP is quite a bit higher than automotive. For example, last year, our smart infrastructure ASP somewhere around 4,000 to 4,500. And we do expect that to come down a little bit. But gradually, very gradually. We do expect smart infrastructure ASP this year to be still quite a bit higher than that of automotive. So all of these play into the gross margin picture. And I think what we guided to is what we can -- or we feel confident saying right now.

Okay. I think that would be my only question. Thanks much.

Thanks.

Gus Richard, Northland.

Yes, thanks for taking my question. And just to follow on Richard's question, can you give us a rough idea of what the mix is going to be this year between NRE auto and infrastructure?

Yes. So in our guidance, there's not a lot of NRE right now. So additional NRE will be upside. So essentially, the majority of the guide is product revenue. And then in terms of auto versus smart infra, I'd say it's maybe three-to-one kind of relationship, three for auto, one for smart infra in terms of revenue.

Got it. And then your OpEx is expected to be flat, and then I'm assuming R&D will be flat. And I'm just wondering is that because you had a tape-out last year and you don't have a major tape-out this year? How do you hold the R&D flat?

Well, this has been always -- Jun here, Gus. This has been always a very efficient operating place in terms of R&D budget. And we actually have continuous tape-outs for our new ASIC chips. So our new product as you also call it tape-out. But is -- again, is extremely efficient operation here.

We actually do not expect any slowdown in our research and development. There is -- as you heard from the CES, there is a new product that just came out with a lot of improvement, a lot of changes, some of them even goes beyond our MMT technology. All of these came out of the existing budget. So we're just going to charge forward as is. There is no reason to waste more money if we can just make the best use of what we have now.

And I -- this is Mitch. I'll just add. We're building upon something that we're already launching, right? So our incremental investments on new products like we launched at CES are only a fraction OpEx wise of the original product because we can reuse ASICs and software from our GM development.

Got it. Okay. Very, very helpful. And then last one for me. I think you mentioned you're working on a Level 4 ground vehicle. Any color as to what kind of ground vehicle that is? Is it a -- any color there?

A little bit. Yes, I mean, it operates in remote sites outside. It will be -- more details will be revealed. It's at a trade show this week being demonstrated. So that's why we couldn't comment more details until it gets revealed this week. But yes, it's a subsidiary of a top 10 auto company, a Level 4 autonomous ground vehicle that basically takes supplies and materials to remote construction sites.

Got it. That's helpful. That's it for me. Thank you.

As we have no further questions, this concludes the question-and-answer session. I would like to turn the conference back over to Jun Pei for any closing remarks.

Okay. Just to wrap it up, it's another quarter of good progress on our OEM program execution, and certainly a very good past year for Cepton. As we move forward with higher speed and higher intensity, please pay attention to us as we strive to bring additional levels of safety to the automotive industry. Thank you.

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