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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2024
or | | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-38791
LUMINAR TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter) | | | | | | | | | | | | | | |
Delaware | | 83-1804317 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
2603 Discovery Drive | Suite 100 | Orlando | Florida | 32826 |
(Address of Principal Executive Offices) | (Zip Code) |
(800) 532-2417
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
Title of each class | | Trading symbol(s) | | Name of each exchange on which registered |
Class A common stock, par value of $0.0001 per share | | LAZR | | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | | | | |
| Large accelerated filer | ☒ | Accelerated filer | ☐ | |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |
| | | Emerging growth company | ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of April 30, 2024, the registrant had 348,535,064 shares of Class A common stock and 97,088,670 shares of Class B common stock, par value $0.0001 per share, outstanding.
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
FORM 10-Q
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Form 10-Q”) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which involve substantial risks and uncertainties. These statements reflect the current views of management with respect to future events and our financial performance. These forward-looking statements include statements regarding product plans, future growth, sales estimates/Order Book numbers, market opportunities, strategic initiatives, industry positioning, customer acquisition and retention, revenue growth and anticipated impacts on our business of any future health epidemics and outbreaks. In some cases, you can identify these statements by forward-looking words such as “outlook,” “believes,” “expects,” “future,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words or phrases, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business.
These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including our history of losses and our expectation that we will continue to incur significant expenses, including substantial R&D costs, and continuing losses for the foreseeable future as well as our limited operating history which makes it difficult to evaluate our future prospects and the risks and challenges we may encounter; our strategic initiatives which may prove more costly than we currently anticipate and potential failure to increase our revenue to offset these initiatives; whether our LiDAR products are selected for inclusion in autonomous driving or Advanced Driving Assistance Systems (“ADAS”) by automotive original equipment manufacturers (“OEMs”) or their suppliers, and whether we will be de-selected by any customers; the lengthy period of time from a major commercial win to implementation and the risks of cancellation or postponement of the contract or unsuccessful implementation; potential inaccuracies in our forward looking estimates of certain metrics, including Order Book, our future cost of goods sold (“COGS”) and bill of materials (“BOM”) and total addressable market; the discontinuation, lack of success of our customers in developing and commercializing products using our solutions or loss of business with respect to a particular vehicle model or technology package and whether end automotive consumers will demand and be willing to pay for such features; our ability to successfully fund our growth if there are considerable delays in product introductions by us or our customers; our inability to reduce and control the cost of the inputs on which we rely, which could negatively impact the adoption of our products and our profitability; the effect of continued pricing pressures, competition from other LiDAR manufacturers, OEM cost reduction initiatives and the ability of automotive OEMs to re-source or cancel vehicle or technology programs which may result in lower than anticipated margins, or losses, which may adversely affect our business; the effect of general economic conditions, including inflation, recession risks and rising interest rates, generally and on our industry and us in particular, including the level of demand and financial performance of the autonomous vehicle industry and the decline in fair value of available-for-sale debt securities in a rising interest rate environment; market adoption of LiDAR as well as developments in alternative technology and the increasingly competitive environment in which we operate, which includes established competitors and market participants that have substantially greater resources; our ability to achieve technological feasibility and commercialize our software products and the requirement to continue to develop new products and product innovations due to rapidly changing markets and government regulations of such technologies; our ability to build, launch, receive regulatory approval, sell, and service insurance products as well as market and differentiate the benefits of LiDAR-based ADAS to consumers; our ability to manage our growth and expand our business operations effectively, including into international markets, such as China, which exposes us to operational, financial, regulatory and geopolitical risks; changes in our government contracts business and our defense customers’ business due to political change and global conflicts; adverse impacts due to limited availability and quality of materials, supplies, and capital equipment, or dependency on third-party service providers and single-source suppliers; the project-based nature of our orders, which can cause our results of operations to fluctuate on a quarterly and annual basis; whether we will be able to successfully transition our engineering designs into high volume manufacturing, including our ability to transition to an outsourced manufacturing business model and whether we and our outsourcing partners and suppliers can successfully operate complex machinery; whether we can successfully select, execute or integrate our acquisitions; whether the complexity of our products results in undetected defects and reliability issues which could reduce market adoption of our new products, limit our ability to manufacture, damage our reputation and expose us to product liability, warranty and other claims; our ability to maintain and adequately manage our inventory; our ability to maintain an effective system of internal control over financial reporting; our ability to protect and enforce our intellectual property rights; availability of qualified personnel, loss of highly skilled personnel and dependence on Austin Russell, our Founder, President and Chief Executive Officer; the impact of inflation and our stock price on our ability to hire and retain highly skilled personnel; the amount and timing of future sales and whether the average selling prices of our products could decrease rapidly over the life of the product as well as our dependence on a few key customers, who are often large corporations with substantial negotiating power; our ability to establish and maintain confidence in our long-term business
prospects among customers and analysts and within our industry; whether we are subject to negative publicity; the effects of COVID-19 pandemic or other infectious diseases, health epidemics, pandemics and natural disasters on Luminar’s business; interruption or failure of our information technology and communications systems; cybersecurity risks to our operational systems, security systems, infrastructure, integrated software in our LiDAR solutions; market instability exacerbated by geopolitical conflicts, including the Israel-Hamas war and the conflict between Russia and Ukraine, as well as trade disputes with China and including the effect of sanctions and trade restrictions that may affect supply chain or sales opportunities; and those other factors discussed in Part 1, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (our “2023 Annual Report”) under the heading “Risk Factors” and in subsequent reports filed with the SEC which we encourage you to carefully read. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. We undertake no obligation to update any forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date of this Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
WEBSITE AND SOCIAL MEDIA DISCLOSURE
We use our website (https://www.luminartech.com/) and various social media channels as a means of disclosing information about the Company and its products to its customers, investors and the public (e.g., @luminartech on Twitter, Luminartech on YouTube, and Luminar Technologies on LinkedIn). The information on our website (or any webpages referenced in this Quarterly Report on Form 10-Q) or posted on social media channels is not part of this or any other report that the Company files with, or furnishes to, the Securities and Exchange Commission (the “SEC”). The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands) | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| (Unaudited) | | |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 109,563 | | | $ | 139,095 | |
Restricted cash | 1,733 | | | 1,529 | |
Marketable securities | 108,768 | | | 150,727 | |
Accounts receivable | 29,034 | | | 14,124 | |
Inventory | 16,417 | | | 12,196 | |
Prepaid expenses and other current assets | 41,122 | | | 32,950 | |
Total current assets | 306,637 | | | 350,621 | |
Property and equipment, net | 62,127 | | | 66,300 | |
Operating lease right-of-use assets | 46,631 | | | 42,706 | |
Intangible assets, net | 21,994 | | | 22,994 | |
Goodwill | 7,390 | | | 7,390 | |
Other non-current assets | 23,166 | | | 22,356 | |
Total assets | $ | 467,945 | | | $ | 512,367 | |
| | | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | |
Current liabilities: | | | |
Accounts payable | $ | 27,359 | | | $ | 21,113 | |
Accrued and other current liabilities | 52,136 | | | 52,605 | |
Operating lease liabilities | 11,309 | | | 10,154 | |
| | | |
Total current liabilities | 90,804 | | | 83,872 | |
Warrant liabilities | 248 | | | 1,069 | |
| | | |
Convertible senior notes | 616,237 | | | 615,428 | |
Operating lease liabilities, non-current | 38,386 | | | 35,079 | |
Other non-current liabilities | 2,115 | | | 1,667 | |
Total liabilities | 747,790 | | | 737,115 | |
Commitments and contingencies (Note 14) | | | |
Stockholders’ deficit: | | | |
Class A common stock | 36 | | | 34 | |
Class B common stock | 10 | | | 10 | |
Additional paid-in capital | 1,998,063 | | | 1,927,378 | |
Accumulated other comprehensive income (loss) | (68) | | | 2 | |
Treasury stock | (312,477) | | | (312,477) | |
Accumulated deficit | (1,965,409) | | | (1,839,695) | |
Total stockholders’ deficit | (279,845) | | | (224,748) | |
Total liabilities and stockholders’ deficit | $ | 467,945 | | | $ | 512,367 | |
See accompanying notes to the unaudited condensed consolidated financial statements.
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share data)
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
Revenue: | | | | | | | |
Products | $ | 15,302 | | | $ | 7,367 | | | | | |
Services | 5,666 | | | 7,142 | | | | | |
Total revenue | 20,968 | | | 14,509 | | | | | |
Cost of sales: | | | | | | | |
Products | 24,507 | | | 19,203 | | | | | |
Services | 6,916 | | | 9,930 | | | | | |
Total cost of sales | 31,423 | | | 29,133 | | | | | |
Gross loss | (10,455) | | | (14,624) | | | | | |
Operating expenses: | | | | | | | |
Research and development | 67,750 | | | 69,052 | | | | | |
Sales and marketing | 14,515 | | | 13,729 | | | | | |
General and administrative | 33,049 | | | 44,490 | | | | | |
Total operating expenses | 115,314 | | | 127,271 | | | | | |
Loss from operations | (125,769) | | | (141,895) | | | | | |
Other income (expense), net: | | | | | | | |
Change in fair value of warrant liabilities | 821 | | | (1,054) | | | | | |
Interest expense | (2,757) | | | (1,665) | | | | | |
Interest income | 3,430 | | | 1,905 | | | | | |
Gain from acquisition of EM4, LLC (“EM4”) | 1,752 | | | — | | | | | |
Losses related to investments and certain other assets, and other income (expense) | (2,604) | | | (4,065) | | | | | |
Total other income (expense), net | 642 | | | (4,879) | | | | | |
Loss before provision for income taxes | (125,127) | | | (146,774) | | | | | |
Provision for income taxes | 587 | | | — | | | | | |
Net loss | $ | (125,714) | | | $ | (146,774) | | | | | |
| | | | | | | |
Net loss per share: | | | | | | | |
Basic and diluted | $ | (0.30) | | | $ | (0.40) | | | | | |
Shares used in computing net loss per share: | | | | | | | |
Basic and diluted | 424,929,163 | | | 370,742,917 | | | | | |
Comprehensive Loss: | | | | | | | |
Net loss | $ | (125,714) | | | $ | (146,774) | | | | | |
Net unrealized gain (loss) on available-for-sale debt securities | (70) | | | 2,226 | | | | | |
Comprehensive loss | $ | (125,784) | | | $ | (144,548) | | | | | |
See accompanying notes to the unaudited condensed consolidated financial statements.
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Deficit
(Unaudited)
(In thousands, except share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Class A Common Stock | | Class B Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Treasury Stock | | Accumulated Deficit | | Total Stockholders’ Deficit |
| | | | | | | | | | | | | | Shares | | Amount | | Shares | | Amount | | | | | |
Balance as of December 31, 2022 | | | | | | | | | | | | | | 291,942,087 | | | $ | 29 | | | 97,088,670 | | | $ | 10 | | | $ | 1,558,685 | | | $ | (4,226) | | | $ | (312,477) | | | $ | (1,268,426) | | | $ | (26,405) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuance of Class A common stock upon exercise of stock options and vesting of restricted stock units | | | | | | | | | | | | | | 4,715,737 | | | 1 | | | — | | | — | | | 1,038 | | | — | | | — | | | — | | | 1,039 | |
Issuance of Class A common stock under the Equity Financing Program | | | | | | | | | | | | | | 2,759,689 | | | — | | | — | | | — | | | 22,665 | | | — | | | — | | | — | | | 22,665 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Vendor payments under the stock-in-lieu of cash program | | | | | | | | | | | | | | 1,627,690 | | | — | | | — | | | — | | | 16,741 | | | — | | | — | | | — | | | 16,741 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Share-based compensation | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | 48,800 | | | — | | | — | | | — | | | 48,800 | |
Payments of employee taxes related to stock-based awards | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | (572) | | | — | | | — | | | — | | | (572) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other comprehensive income | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | — | | | 2,226 | | | — | | | — | | | 2,226 | |
Net loss | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (146,774) | | | (146,774) | |
Balance as of March 31, 2023 | | | | | | | | | | | | | | 301,045,203 | | | $ | 30 | | | 97,088,670 | | | $ | 10 | | | $ | 1,647,357 | | | $ | (2,000) | | | $ | (312,477) | | | $ | (1,415,200) | | | $ | (82,280) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2023 | | | | | | | | | | | | | | 344,606,104 | | | $ | 34 | | | 97,088,670 | | | $ | 10 | | | $ | 1,927,378 | | | $ | 2 | | | $ | (312,477) | | | $ | (1,839,695) | | | $ | (224,748) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuance of Class A common stock upon exercise of stock options and vesting of restricted stock units | | | | | | | | | | | | | | 5,993,324 | | | 1 | | | — | | | — | | | 372 | | | — | | | — | | | — | | | 373 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuance of Class A common stock under 401(k) Plan | | | | | | | | | | | | | | 1,500,000 | | | — | | | — | | | — | | | 2,550 | | | — | | | — | | | — | | | 2,550 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuance of Class A common stock under the Equity Financing Program | | | | | | | | | | | | | | 9,644,286 | | | 1 | | | — | | | — | | | 17,229 | | | — | | | — | | | — | | | 17,230 | |
Issuance of Class A common stock in settlement of certain claims | | | | | | | | | | | | | | 704,691 | | | — | | | — | | | — | | | 1,842 | | | — | | | — | | | — | | | 1,842 | |
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Vendor payments under the stock-in-lieu of cash program | | | | | | | | | | | | | | 151,206 | | | — | | | — | | | — | | | 2,220 | | | — | | | — | | | — | | | 2,220 | |
Milestone awards related to acquisition | | | | | | | | | | | | | | 2,709,457 | | | — | | | — | | | — | | | 5,635 | | | — | | | — | | | — | | | 5,635 | |
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Share-based compensation | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | 40,963 | | | — | | | — | | | — | | | 40,963 | |
Payments of employee taxes related to vested restricted stock units | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | (126) | | | — | | | — | | | — | | | (126) | |
Other comprehensive income | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | — | | | (70) | | | — | | | — | | | (70) | |
Net loss | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (125,714) | | | (125,714) | |
Balance as of March 31, 2024 | | | | | | | | | | | | | | 365,309,068 | | | $ | 36 | | | 97,088,670 | | | $ | 10 | | | $ | 1,998,063 | | | $ | (68) | | | $ | (312,477) | | | $ | (1,965,409) | | | $ | (279,845) | |
See accompanying notes to the unaudited condensed consolidated financial statements.
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
Cash flows from operating activities: | | | |
Net loss | $ | (125,714) | | | $ | (146,774) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Depreciation and amortization | 8,066 | | | 2,987 | |
Amortization of operating lease right-of-use assets | 2,010 | | | 1,610 | |
Amortization of premium (discount) on marketable securities | (870) | | | (743) | |
Loss on marketable securities | 2,320 | | | 3,033 | |
Change in fair value of private warrants | (821) | | | 1,054 | |
Vendor stock-in-lieu of cash program | 4,034 | | | 5,684 | |
Gain from acquisition of EM4 | (1,752) | | | — | |
Amortization of debt discount and issuance costs | 809 | | | 809 | |
Inventory write-offs and write-downs | 16,903 | | | 5,451 | |
| | | |
Share-based compensation | 44,465 | | | 55,954 | |
| | | |
| | | |
Product warranty and other | (1,684) | | | 586 | |
Changes in operating assets and liabilities: | | | |
Accounts receivable | (13,846) | | | (9,877) | |
Inventories | (17,586) | | | (11,578) | |
Prepaid expenses and other current assets | (7,495) | | | 9,932 | |
Other non-current assets | (1,071) | | | (4,156) | |
Accounts payable | 6,128 | | | 11,191 | |
Accrued and other current liabilities | 7,445 | | | 11,651 | |
Other non-current liabilities | (2,570) | | | (1,488) | |
Net cash used in operating activities | (81,229) | | | (64,674) | |
Cash flows from investing activities: | | | |
| | | |
| | | |
Acquisition of EM4 (net of cash acquired) | (4,727) | | | — | |
Acquisition of Seagate’s lidar business | — | | | (12,608) | |
Purchases of marketable securities | (48,827) | | | (81,623) | |
Proceeds from maturities of marketable securities | 88,990 | | | 148,345 | |
Proceeds from sales/redemptions of marketable securities | 274 | | | 20,165 | |
| | | |
Purchases of property and equipment | (1,284) | | | (11,680) | |
| | | |
| | | |
Net cash provided by investing activities | 34,426 | | | 62,599 | |
Cash flows from financing activities: | | | |
Net proceeds from issuance of Class A common stock under the Equity Financing Program | 17,230 | | | 22,665 | |
| | | |
Proceeds from exercise of stock options | 371 | | | 1,036 | |
| | | |
Payments of employee taxes related to stock-based awards | (126) | | | (572) | |
| | | |
| | | |
Net cash provided by financing activities | 17,475 | | | 23,129 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | (29,328) | | | 21,054 | |
Beginning cash, cash equivalents and restricted cash | 140,624 | | | 71,105 | |
Ending cash, cash equivalents and restricted cash | $ | 111,296 | | | $ | 92,159 | |
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Supplemental disclosures of noncash investing and financing activities: | | | |
| | | |
Operating lease right-of-use assets obtained in exchange for lease obligations | $ | 3,842 | | | $ | 1,211 | |
| | | |
Purchases of property and equipment recorded in accounts payable and accrued liabilities | 299 | | | 7,978 | |
Vendor stock-in-lieu of cash program—advances for capital projects and equipment | — | | | 2,520 | |
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| | | |
See accompanying notes to the unaudited condensed consolidated financial statements.
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1. Organization and Description of Business
Luminar Technologies, Inc. (together with its wholly-owned subsidiaries, the “Company” or “Luminar”) is incorporated in Delaware. Luminar is a global automotive technology company ushering in a new era of vehicle safety and autonomy. Over the past decade, Luminar has been building from the chip-level up, its light detection and ranging sensor, or LiDAR, which is expected to meet the demanding performance, safety, reliability and cost requirements to enable next-generation safety and autonomous capabilities for passenger and commercial vehicles as well as other adjacent markets. The Company’s Class A common stock is listed on the NASDAQ under the symbol “LAZR.”
The Company is headquartered in Orlando, Florida and has personnel that conducts the Company’s operations from various locations in the United States and internationally including Germany, Sweden, Mexico, China and India.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”) filed with the SEC on February 28, 2024. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses, and related disclosures. The significant estimates made by management include inventory reserves, useful life of long-lived assets, valuation allowance for deferred tax assets, valuation of warrants issued in a private placement (“Private Warrants”), valuation of contingent consideration payable, and assets acquired in mergers and acquisitions including intangible assets, forecasted costs associated with non-recurring engineering (“NRE”) services, restructuring costs and stock-based compensation expense. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. Actual results could differ from those estimates.
Segment Information
The Company has determined its operating segments using the same indicators which are used to evaluate its performance internally. The Company’s business activities are organized in two operating segments:
(i) “Autonomy Solutions” which includes manufacturing and distribution of LiDAR sensors that measure distance using laser light to generate a 3D map, non-recurring engineering services related to the Company’s LiDAR products, development of software products that enable autonomy capabilities for automotive applications, and licensing of certain information. In June 2022, the Company acquired certain assets from Solfice Research, Inc. (“Solfice” or “Civil Maps”). In January 2023, the Company acquired certain assets from Seagate Technology LLC and Seagate Singapore International Headquarters Pte. Ltd. (individually and collectively, “Seagate”). Assets purchased from both, Civil Maps and Seagate have been included in the Autonomy Solutions segment.
(ii) “Advanced Technologies and Services (“ATS”)” which includes development of application-specific integrated circuits, pixel-based sensors, advanced lasers, as well as designing, testing and providing consulting services for non-standard integrated circuits. In August 2021 and in April 2022, the Company acquired Optogration, Inc. (“Optogration”) and Freedom Photonics LLC (“Freedom Photonics”), respectively. Operations of Optogration and Freedom Photonics have been included in the ATS segment. In March 2024, the Company acquired EM4, LLC (“EM4”) and included operations of EM4 in the ATS segment.
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Concentration of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, debt securities and accounts receivable. The Company’s deposits exceed federally insured limits. Cash held by foreign subsidiaries of the Company as of March 31, 2024 and December 31, 2023 was not material.
The Company’s revenue is derived from customers located in the United States and international markets. One customer, Scale AI, Inc., accounted for 69% and 71% of the Company’s accounts receivable as of March 31, 2024 and December 31, 2023, respectively.
Significant Accounting Policies
The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023. There has been no material change to the Company’s significant accounting policies during the three months ended March 31, 2024.
Recent Accounting Pronouncements Not Yet Effective
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires a public company to enhance the transparency and decision usefulness of income tax disclosures to provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. ASU 2023-09 will be effective for the Company for the annual period beginning January 1, 2025 with early adoption permitted. The Company is currently evaluating this guidance and the impact it may have on its financial statement disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires a public company to enhance disclosures about significant segment expenses and provide incremental segment information on an annual and interim basis to enable investors to develop more decision-useful financial analyses. ASU 2023-07 will be effective for the Company for fiscal year beginning January 1, 2024, and interim periods within fiscal year beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating this guidance and the impact it may have on its financial statement disclosures.
Note 3. Business Combinations and Acquisitions
Acquisition of EM4
On March 18, 2024 (the “Acquisition Date”), the Company completed its acquisition of EM4, a designer, manufacturer and seller of packaged photonic components and sub-systems for industrial markets. The EM4 acquisition is expected to accelerate the Company’s strategy to package lasers, detectors and ASICs.
The Company acquired 100% of the membership interests of EM4 from G&H Investment Holding, Inc. (“G&H”), for an aggregate purchase price of approximately $4.5 million in cash, net of working capital adjustments, and up to $6.75 million in contingent future payments to G&H subject to the achievement of certain financial performance targets. The fair value of the contingent consideration at the Acquisition Date was estimated to be $0.1 million. The Company utilized a Monte Carlo simulation model to estimate the probability-weighted fair value of the contingent consideration. This transaction has been accounted for as a business combination. The acquisition related costs incurred as part of the transaction were not material.
Recording of Assets Acquired and Liabilities Assumed
Price allocation includes preliminary estimates of deferred tax balances, certain tax liabilities, for which the Company is in the process of collecting documentation to ascertain potential amounts, and fair value of certain working capital components. Preliminary estimates of fair values included in the condensed consolidated financial statements are expected to be finalized within a one-year measurement period following the acquisition date after which any subsequent adjustments will be reflected in the consolidated statements of operations.
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table summarizes the preliminary purchase price allocation to assets acquired (in thousands):
| | | | | | | | |
| | Preliminary Recorded Value |
| | |
| | |
Cash and cash equivalents | | $ | 557 | |
Accounts receivable | | 1,064 | |
Contract asset | | 1,644 | |
Inventories, net | | 3,539 | |
Prepaid expenses and other current assets | | 252 | |
Property plant and equipment | | 1,888 | |
| | |
| | |
| | |
Operating lease right-of-use assets | | 2,072 | |
| | |
| | |
| | |
Total assets acquired | | 11,016 | |
Current liabilities | | (3,148) | |
Operating lease liabilities, non-current | | (1,628) | |
Total liabilities assumed | | (4,776) | |
Net assets acquired | | $ | 6,240 | |
| | |
Since the consideration paid by the Company to acquire EM4’s business was lower than the estimated fair value of net assets acquired, the Company recognized a $1.8 million gain from the acquisition of EM4. The following factors contributed towards the purchase price paid by the Company being lower than the estimated fair value of the net assets acquired: (a) EM4 had historically been incurring losses and G&H viewed it as non-core; (b) although G&H pursued a competitive auction process for the business, the ultimate timeline to completion was drawn-out due to the complexity of the transaction structure; and (c) during the later stages of the sale process, after the Company was selected as the winning bidder, EM4’s business was impacted by the cancellation of certain material government programs as well as delays in certain other purchase orders, which also served to significantly reduce the estimated probability of the contingent future payments to G&H.
The results of operations related to EM4 are included in our condensed consolidated statements of operations beginning from the Acquisition Date. The impact of the acquisition on the consolidated financial results of the Company for the three months ended March 31, 2024 was not material.
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 4. Revenue
The Company’s revenue is comprised of sales of LiDAR sensors hardware, components, NRE services and licensing of certain information available with the Company.
Disaggregation of Revenues
The Company disaggregates its revenue from contracts with customers by (1) geographic region based on a customer’s billed to location, and (2) type of good or service and timing of transfer of goods or services to customers (point-in-time or over time), as it believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors. Total revenue based on the disaggregation criteria described above, as well as revenue by segment, are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
| Revenue | | % of Revenue | | Revenue | | % of Revenue |
Revenue by primary geographical market: | | | | | | | |
North America | $ | 20,337 | | | 97 | % | | $ | 13,198 | | | 91 | % |
Asia Pacific | 81 | | | — | % | | 592 | | | 4 | % |
Europe and Middle East | 550 | | | 3 | % | | 719 | | | 5 | % |
Total | $ | 20,968 | | | 100 | % | | $ | 14,509 | | | 100 | % |
Revenue by timing of recognition: | | | | | | | |
Recognized at a point in time | $ | 15,304 | | | 73 | % | | $ | 7,358 | | | 51 | % |
Recognized over time | 5,664 | | | 27 | % | | 7,151 | | | 49 | % |
Total | $ | 20,968 | | | 100 | % | | $ | 14,509 | | | 100 | % |
Revenue by segment: | | | | | | | |
Autonomy Solutions | $ | 16,320 | | | 78 | % | | $ | 10,673 | | | 74 | % |
ATS | 4,648 | | | 22 | % | | 3,836 | | | 26 | % |
Total | $ | 20,968 | | | 100 | % | | $ | 14,509 | | | 100 | % |
Volvo Stock Purchase Warrant
The Company had previously issued certain stock purchase warrants (“Volvo Warrants”) to Volvo Car Technology Fund AB (“VCTF”) in connection with an engineering services contract. The Volvo Warrants vest and become exercisable in two tranches based on satisfaction of certain commercial milestones. The fair value of the first tranche of the Volvo Warrants was recorded as a reduction in revenue in 2021. The second tranche of the Volvo warrants will be recorded as reduction in revenue to be amortized over sales of a certain number of the Company’s sensors to Volvo for use in their commercial vehicles, which commenced in the second quarter of 2024.
Contract assets and liabilities
Changes in the Company’s contract assets and contract liabilities primarily result from the timing difference between the Company’s performance and the customer’s payment based on contractual terms. Contract assets primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed. Contract liabilities consist of the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration from the customer. Customer advance payments represent required customer payments in advance of product shipments. Customer advance payments are recognized in revenue as or when control of the performance obligation is transferred to the customer.
The opening and closing balances of contract assets were as follows (in thousands):
| | | | | | | | | | | |
| |
| March 31, 2024 | | December 31, 2023 |
Contract assets, current | $ | 14,580 | | | $ | 14,132 | |
Contract assets, non-current | 3,827 | | | 2,471 | |
Ending balance | $ | 18,407 | | | $ | 16,603 | |
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The significant changes in contract assets balances consisted of the following (in thousands):
| | | | | | | | | | | |
| |
| March 31, 2024 | | December 31, 2023 |
Beginning balance | $ | 16,603 | | | $ | 17,970 | |
Amounts billed that were included in the contract assets beginning balance | (2,518) | | | (10,965) | |
Contract assets from acquisition of EM4 (See Note 3) | 1,644 | | | — | |
Revenue recognized for performance obligations that have been satisfied but for which amounts have not been billed | 2,678 | | | 9,598 | |
Ending balance | $ | 18,407 | | | $ | 16,603 | |
The opening and closing balances of contract liabilities were as follows (in thousands):
| | | | | | | | | | | |
| |
| March 31, 2024 | | December 31, 2023 |
Contract liabilities, current | $ | 2,341 | | | $ | 3,127 | |
Contract liabilities, non-current | 525 | | | 805 | |
Ending balance | $ | 2,866 | | | $ | 3,932 | |
The significant changes in contract liabilities balances consisted of the following (in thousands):
| | | | | | | | | | | |
| |
| March 31, 2024 | | December 31, 2023 |
Beginning balance | $ | 3,932 | | | $ | 3,008 | |
| | | |
Revenue recognized that was included in the contract liabilities beginning balance | (1,570) | | | (2,125) | |
Increase due to cash received and not recognized as revenue and billings in excess of revenue recognized during the period | 504 | | | 3,049 | |
Ending balance | $ | 2,866 | | | $ | 3,932 | |
Remaining Performance Obligations
Revenue allocated to remaining performance obligations was $8.9 million as of March 31, 2024 and includes amounts within contract liabilities. The Company expects to recognize approximately 94% of this revenue over the next 12 months and the remainder thereafter.
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 5. Investments
Debt Securities
The Company’s investments in debt securities consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
| | Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
U.S. treasury securities | | $ | 17,189 | | | $ | — | | | $ | (2) | | | $ | 17,187 | |
U.S. agency and government sponsored securities | | 2,523 | | | — | | | (1) | | | 2,522 | |
Commercial paper | | 19,007 | | | — | | | — | | | 19,007 | |
Corporate bonds | | 65,996 | | | 10 | | | (75) | | | 65,931 | |
Certificate of deposit | | 500 | | | — | | | — | | | 500 | |
| | | | | | | | |
Total debt securities | | $ | 105,215 | | | $ | 10 | | | $ | (78) | | | $ | 105,147 | |
Included in cash and cash equivalents | | $ | 1,739 | | | $ | — | | | $ | — | | | $ | 1,739 | |
Included in marketable securities | | $ | 103,476 | | | $ | 10 | | | $ | (78) | | | $ | 103,408 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| | Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
U.S. treasury securities | | $ | 86,764 | | | $ | 20 | | | $ | — | | | $ | 86,784 | |
U.S. agency and government sponsored securities | | 2,732 | | | — | | | — | | | 2,732 | |
Commercial paper | | 10,144 | | | — | | | — | | | 10,144 | |
Corporate bonds | | 44,924 | | | 9 | | | (27) | | | 44,906 | |
| | | | | | | | |
Total debt securities | | $ | 144,564 | | | $ | 29 | | | $ | (27) | | | $ | 144,566 | |
Included in cash and cash equivalents | | $ | 1,595 | | | $ | — | | | $ | (1) | | | $ | 1,594 | |
Included in marketable securities | | $ | 142,969 | | | $ | 29 | | | $ | (26) | | | $ | 142,972 | |
The following table presents the gross unrealized losses and the fair value for those debt securities that were in an unrealized loss position for less than 12 months as of March 31, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value |
U.S. treasury securities | | $ | (2) | | | $ | 9,263 | | | $ | — | | | $ | — | |
U.S. agency and government sponsored securities | | (1) | | | 1,522 | | | — | | | 741 | |
| | | | | | | | |
Corporate bonds | | (75) | | | 37,552 | | | (27) | | | 30,621 | |
| | | | | | | | |
Total | | $ | (78) | | | $ | 48,337 | | | $ | (27) | | | $ | 31,362 | |
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Equity Investments
The Company’s equity investments consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | |
| Condensed Consolidated Balance Sheets Location | | March 31, 2024 | | December 31, 2023 |
Money market funds(1) | Cash and cash equivalents | | $ | 83,433 | | | $ | 101,842 | |
Marketable equity investments(1) | Marketable securities | | 5,360 | | | 7,755 | |
Investment in non-marketable securities(2) | Other non-current assets | | 10,000 | | | 10,000 | |
Non-marketable equity investment measured using the measurement alternative(2) | Other non-current assets | | 4,000 | | | 4,000 | |
Total | | | $ | 102,793 | | | $ | 123,597 | |
(1) Investments with readily determinable fair values.
(2) Investment in privately held company without readily determinable fair value.
The Company assesses its non-marketable equity investments quarterly for impairment. Adjustments and impairments are recorded in other income (expense), net on the condensed consolidated statements of operations.
Note 6. Financial Statement Components
Cash and Cash Equivalents
Cash and cash equivalents consisted of the following (in thousands): | | | | | | | | | | | |
| |
| March 31, 2024 | | December 31, 2023 |
Cash | $ | 24,391 | | | $ | 35,659 | |
Money market funds | 83,433 | | | 101,842 | |
U.S. treasury securities | 1,739 | | | — | |
| | | |
Commercial paper | — | | | 497 | |
Corporate bonds | — | | | 1,097 | |
Total cash and cash equivalents | $ | 109,563 | | | $ | 139,095 | |
Inventory
Inventory comprised of the following (in thousands):
| | | | | | | | | | | |
| |
| March 31, 2024 | | December 31, 2023 |
Raw materials | $ | 7,699 | | | $ | 5,614 | |
Work-in-process | 3,960 | | | 2,521 | |
Finished goods | 4,758 | | | 4,061 | |
Total inventories, net | $ | 16,417 | | | $ | 12,196 | |
The Company’s inventory write-downs were $16.9 million and $5.5 million for the three months ended March 31, 2024 and 2023, respectively. The write-downs were primarily due to obsolescence charges as a result of change in product design, lower of cost or market assessment, yield losses, and other adjustments.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
| | | | | | | | | | | |
| |
| March 31, 2024 | | December 31, 2023 |
Prepaid expenses | $ | 20,144 | | | $ | 12,434 | |
Contract assets | 14,580 | | | 14,132 | |
Advance payments to vendors | 1,256 | | | 3,038 | |
| | | |
Other receivables | 5,142 | | | 3,346 | |
Total prepaid expenses and other current assets | $ | 41,122 | | | $ | 32,950 | |
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Property and Equipment
Property and equipment consisted of the following (in thousands):
| | | | | | | | | | | |
| |
| March 31, 2024 | | December 31, 2023 |
Machinery and equipment | $ | 60,159 | | | $ | 58,815 | |
Computer hardware and software | 7,768 | | | 7,025 | |
Land | 1,001 | | | 1,001 | |
Leasehold improvements | 22,620 | | | 22,531 | |
Vehicles, including demonstration fleet | 2,026 | | | 2,207 | |
Furniture and fixtures | 928 | | | 900 | |
Construction in progress | 1,443 | | | 2,256 | |
Total property and equipment | 95,945 | | | 94,735 | |
Accumulated depreciation and amortization | (33,818) | | | (28,435) | |
Total property and equipment, net | $ | 62,127 | | | $ | 66,300 | |
Property and equipment capitalized under finance lease were not material.
Depreciation and amortization expense associated with property and equipment was $7.1 million and $1.9 million for the three months ended March 31, 2024 and 2023, respectively.
The Company continually evaluates opportunities for optimizing its manufacturing processes and product design. In 2023, the Company finalized and committed to a plan to change its sourcing of certain sub-assemblies and components from one supplier to another which requires the Company to abandon certain equipment located at the legacy supplier. As a result, the Company has reduced the useful lives of the long-lived assets within the impacted asset group in line with when these assets are expected to be abandoned. The Company expects the transition to the new supplier to be completed in 2024. The reduction in the estimated useful lives of the impacted assets resulted in the Company recording $2.1 million of incremental accelerated depreciation charges in the three months ended March 31, 2024.
Intangible Assets
The following table summarizes the activity in the Company’s intangible assets (in thousands):
| | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 | | |
Beginning of the period | $ | 22,994 | | | $ | 22,077 | | | |
Additions | — | | | 8,240 | | | |
Amortization | (1,000) | | | (4,323) | | | |
Impairment | — | | | (3,000) | | | |
End of the period | $ | 21,994 | | | $ | 22,994 | | | |
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Intangible assets were acquired in connection with the Company’s acquisition of Optogration in August 2021, Freedom Photonics in April 2022 and Solfice in June 2022. The components of intangible assets were as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| Gross Carrying Amount | | Accumulated Amortization | | Impairment | | Net Carrying Amount | | Weighted Average Remaining Period (Years) | | Gross Carrying Amount | | Accumulated Amortization | | Impairment | | Net Carrying Amount | | Weighted Average Remaining Period (Years) |
Customer relationships | $ | 3,730 | | | $ | (1,683) | | | $ | — | | | $ | 2,047 | | | 3.5 | | $ | 3,730 | | | $ | (1,479) | | | $ | — | | | $ | 2,251 | | | 3.7 |
Customer backlog | — | | | — | | | — | | | — | | | — | | 650 | | | (650) | | | — | | | — | | | — |
Tradename | 620 | | | (370) | | | — | | | 250 | | | 2.0 | | 620 | | | (339) | | | — | | | 281 | | | 2.3 |
Assembled workforce | — | | | — | | | — | | | — | | | — | | 130 | | | (130) | | | — | | | — | | | — |
Developed technology | 20,150 | | | (4,953) | | | — | | | 15,197 | | | 5.4 | | 20,150 | | | (4,188) | | | — | | | 15,962 | | | 5.5 |
IPR&D | 4,500 | | | — | | | — | | | 4,500 | | | — | | 7,500 | | | — | | | (3,000) | | | 4,500 | | | — |
Total intangible assets | $ | 29,000 | | | $ | (7,006) | | | $ | — | | | $ | 21,994 | | | 5.1 | | $ | 32,780 | | | $ | (6,786) | | | $ | (3,000) | | | $ | 22,994 | | | 5.2 |
Amortization expense related to intangible assets was $1.0 million and $1.1 million for the three months ended March 31, 2024 and 2023, respectively.
As of March 31, 2024, the expected future amortization expense for intangible assets was as follows (in thousands): | | | | | | | | |
Period | | Expected Future Amortization Expense |
2024 (remaining nine months) | | $ | 3,001 | |
2025 | | 4,001 | |
2026 | | 3,354 | |
2027 | | 3,138 | |
2028 | | 1,646 | |
Thereafter | | 2,354 | |
IPR&D | | 4,500 | |
Total | | $ | 21,994 | |
Goodwill
The carrying amount of goodwill allocated to the Company’s reportable segments was as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Autonomy Solutions | | ATS | | Total |
Balance as of December 31, 2022 | $ | 687 | | | $ | 18,129 | | | $ | 18,816 | |
Goodwill related to acquisition of Seagate’s lidar business | 1,063 | | | — | | | 1,063 | |
Impairment of goodwill related to Freedom Photonics | — | | | (12,489) | | | (12,489) | |
Balance as of December 31, 2023 | $ | 1,750 | | | $ | 5,640 | | | $ | 7,390 | |
Balance as of March 31, 2024 | $ | 1,750 | | | $ | 5,640 | | | $ | 7,390 | |
During the year ended December 31, 2023, the Company recognized impairment charges of $12.5 million and $3.0 million related to goodwill and IPR&D related to Freedom Photonics. These impairment charges were due to events which occurred during the fourth quarter of 2023, including a decision to delay development activities on certain new products resulting from an increase in focus on supporting the product roadmap of the Autonomy Solutions segment, and a lowering of the growth outlook for the business due to less than anticipated traction in sales of new products. Total life-to-date goodwill impairment charge recorded by the ATS reportable segment was $12.5 million and no impairment charge has been recorded by the Autonomy Solutions reportable segment.
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
In relation to the goodwill, the Company engaged third-party valuation specialists and used industry accepted valuation models and criteria that were reviewed and approved by various levels of management. The Company assessed the fair value of the Freedom Photonics reporting during the fourth quarter of 2023, using the discounted cash flow method under the income approach, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows. The significant assumptions used in the assessment of the reporting unit included revenue growth rates, profit margins, operating expenses, capital expenditures, terminal value and a discount rate. As a result of this assessment, the Company concluded that the carrying value of the Freedom Photonics reporting unit exceeded the estimated fair value by $12.5 million, which was recorded as a noncash impairment charge to goodwill.
In relation to the intangibles, the significant assumptions used in the assessment of the IPR&D intangible asset included revenue growth rates, a discount rate and a royalty rate. Based on this assessment, the Company recorded a $3.0 million noncash impairment charge related to the IPR&D intangible asset.
Other Non-Current Assets
Other non-current assets consisted of the following (in thousands):
| | | | | | | | | | | |
| |
| March 31, 2024 | | December 31, 2023 |
Security deposits | $ | 2,604 | | | $ | 2,410 | |
Non-marketable equity investment | 14,000 | | | 14,000 | |
| | | |
| | | |
Contract assets | 3,827 | | | 2,471 | |
Other non-current assets | 2,735 | | | 3,475 | |
Total other non-current assets | $ | 23,166 | | | $ | 22,356 | |
Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of the following (in thousands):
| | | | | | | | | | | |
| |
| March 31, 2024 | | December 31, 2023 |
Accrued compensation and benefits | $ | 17,533 | | | $ | 20,658 | |
Accrued expenses | 19,605 | | | 14,723 | |
Contract losses | 8,195 | | | 8,790 | |
Warranty reserves | 1,443 | | | 4,154 | |
Contract liabilities | 2,341 | | | 3,127 | |
Accrued interest payable and other liabilities | 3,019 | | | 1,153 | |
| | | |
| | | |
| | | |
Total accrued and other current liabilities | $ | 52,136 | | | $ | 52,605 | |
During the three months ended March 31, 2024 and 2023, the Company recorded $2.3 million and $3.3 million, respectively, in cost of sales (services) estimated losses expected to be incurred on NRE projects with certain customers. The estimated contract losses recorded in the three months ended March 31, 2024 and 2023 were primarily driven by changes in scope of project deliverables agreed upon with a customer.
Note 7. Debt
Convertible Senior Notes and Capped Call Transactions
In December 2021, the Company issued $625.0 million aggregate principal amount of 1.25% Convertible Senior Notes due 2026 in a private placement, which included $75.0 million aggregate principal amount of such notes pursuant to the exercise in full of the option granted to the initial purchasers to purchase additional notes (collectively, the “Convertible Senior Notes”). The interest on the Convertible Senior Notes is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2022. The Convertible Senior Notes will mature on December 15, 2026, unless repurchased or redeemed earlier by the Company or converted pursuant to their terms.
The total net proceeds from the debt offering, after deducting fees paid to the initial purchasers paid by the Company, was approximately $609.4 million.
Each $1,000 principal amount of the Convertible Senior Notes is initially convertible into 50.0475 shares of the Company’s Class A common stock, par value $0.0001, which is equivalent to an initial conversion price of approximately $19.98 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events prior to the maturity date but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
occur prior to the maturity date or if the Company delivers a notice of redemption in respect of some or all of the Convertible Senior Notes, the Company will, under certain circumstances, increase the conversion rate of the Convertible Senior Notes for a holder who elects to convert its Convertible Senior Notes in connection with such a corporate event or convert its Convertible Senior Notes called for redemption during the related redemption period, as the case may be. The Convertible Senior Notes are redeemable, in whole or in part (subject to certain limitations), at the Company’s option at any time, and from time to time, on or after December 20, 2024, and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Convertible Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if certain liquidity conditions are satisfied and the last reported sale price per share of the Class A common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice, and (2) the trading day immediately before the date the Company sends such notice. If the Company undergoes a fundamental change (as defined in the indenture governing the Convertible Senior Notes) prior to the maturity date, holders may require the Company to repurchase for cash all or any portion of their Convertible Senior Notes in principal amounts of $1,000 or a multiple thereof at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Senior Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Holders of the Convertible Senior Notes may convert their Convertible Senior Notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2026, in multiples of $1,000 principal amount, only under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on March 31, 2022, if the last reported sale price per share of the Class A common stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of Convertible Senior Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Class A common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of specified corporate events or distributions on the Class A common stock; and (4) if the Convertible Senior Notes are called for redemption. On or after June 15, 2026, holders may convert all or any portion of their Convertible Senior Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its Class A common stock or a combination of cash and shares of its Class A common stock, at the Company’s election. As of March 31, 2024, the conditions allowing holders of the Convertible Senior Notes to convert were not met.
The Company currently intends to settle the principal amount of its outstanding Convertible Senior Notes in cash and any excess in shares of the Company’s Class A common stock.
The Convertible Senior Notes are senior unsecured obligations and will rank equal in right of payment with the Company’s future senior unsecured indebtedness; senior in right of payment to the Company’s future indebtedness that is expressly subordinated to the Convertible Senior Notes; effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.
The Company has classified the Convertible Senior Notes as a non-current liability under the guidance in ASC 470-20, as amended by ASU 2020-06. Debt discount and issuance costs aggregating approximately $16.2 million were initially recorded as a reduction to the principal amount of the Convertible Senior Notes and is being amortized as interest expense on a straight line basis over the contractual terms of the notes. The Company estimates that the difference between amortizing the debt discounts and the issuance costs using the straight line method as compared to using the effective interest rate method is immaterial.
The net carrying amount of the Convertible Senior Notes was as follows (in thousands): | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
Principal | $ | 625,000 | | | $ | 625,000 | |
Unamortized debt discount and issuance costs | (8,763) | | | (9,572) | |
Net carrying amount | $ | 616,237 | | | $ | 615,428 | |
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table sets forth the interest expense recognized related to the Convertible Senior Notes (in thousands): | | | | | | | | | | | | | | | |
| | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
Contractual interest expense | $ | 1,948 | | | $ | 1,926 | | | | | |
Amortization of debt discount and issuance costs | 809 | | | 809 | | | | | |
Total interest expense | $ | 2,757 | | | $ | 2,735 | | | | | |
The remaining term over which the debt discount and issuance costs will be amortized is 2.7 years.
In connection with the offering of the Convertible Senior Notes, the Company entered into privately negotiated capped call option transactions with certain counterparties (the “Capped Calls”). The Capped Calls each have an initial strike price of approximately $19.98 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Convertible Senior Notes. The Capped Calls have initial cap prices of $30.16 per share, subject to certain adjustment events. The Capped Calls are generally intended to reduce the potential dilution to the Class A common stock upon any conversion of the Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Convertible Senior Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The Capped Calls expire on April 6, 2027, subject to earlier exercise. The Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event, a tender offer, and a nationalization, insolvency or delisting involving the Company. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including changes in law, failure to deliver, and hedging disruptions. The Capped Calls are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost of $73.4 million incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheet.
Credit Facility
In February 2024, the Company entered into two non-recourse loan and securities pledge agreements (the “Loan Agreements”) with The St. James Bank & Trust Company Ltd. (the “Lender”), pursuant to which the Company may borrow up to an aggregate of $50.0 million. Any loans made by the Lender under the Loan Agreements would be collateralized by shares of the Company’s Class A common stock or stock the Company holds of another company. The Loan Agreements require the Company to pay an up-front structure fee of 1.5% on any amounts borrowed, and any outstanding amounts would bear interest at 8.0% per annum. The Company did not borrow any amounts from the credit facility and had no outstanding balance as of March 31, 2024.
Note 8. Fair Value Measurements
As of March 31, 2024, the Company carried cash equivalents, marketable investments and Private Warrants that are measured at fair value on a recurring basis. Additionally, the Company measures its equity-settled fixed value awards at fair value on a recurring basis. See Note 11 for further information on the Company’s fixed value equity awards.
Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 — Observable inputs, which include unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 inputs, such as quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined by using pricing models, discounted cash flow methodologies or similar techniques.
The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.
Marketable investments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations, alternative pricing sources or U.S. Government Treasury yield of appropriate term. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. The Company performs routine procedures such as comparing prices obtained from independent source to ensure that appropriate fair values are recorded.
Given that the transfer of Private Warrants to anyone outside of a small group of individuals constituting the sponsors of Gores Metropoulos, Inc. (“Gores”) would result in the Private Warrants having substantially the same terms as warrants issued in connection with the initial public offering of Gores (“Public Warrants”), management determined that the fair value of each Private Warrant is the same as that of a Public Warrant, with an insignificant adjustment for short-term marketability restrictions. As of March 31, 2024, management determined the fair value of the Private Warrants using observable inputs in the Black-Scholes valuation model, which used the remaining term of warrants of 1.67 years volatility of 88.89% and a risk-free rate of 4.73%. Accordingly, the Private Warrants are classified as Level 3 financial instruments.
The following table presents changes in Level 3 liabilities relating to Private Warrants measured at fair value (in thousands): | | | | | | | | |
| | Private Warrants |
Balance as of December 31, 2023 | | $ | 1,069 | |
| | |
| | |
Change in fair value of outstanding warrants | | (821) | |
Balance as of March 31, 2024 | | $ | 248 | |
The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value (in thousands) Measured as of March 31, 2024: |
| Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | | | | | | |
Cash equivalents: | | | | | | | |
Money market funds | $ | 83,433 | | | $ | — | | | $ | — | | | $ | 83,433 | |
U.S. treasury securities | 1,739 | | | — | | | — | | | 1,739 | |
| | | | | | | |
| | | | | | | |
Total cash equivalents | $ | 85,172 | | | $ | — | | | $ | — | | | $ | 85,172 | |
Marketable investments: | | | | | | | |
U.S. treasury securities | $ | 15,448 | | | $ | — | | | $ | — | | | $ | 15,448 | |
U.S. agency and government sponsored securities | — | | | 2,522 | | | — | | | 2,522 | |
Commercial paper | — | | | 19,007 | | | — | | | 19,007 | |
Corporate bonds | — | | | 65,931 | | | — | | | 65,931 | |
Certificate of deposit | — | | | 500 | | | — | | | 500 | |
| | | | | | | |
Marketable equity investments | 5,360 | | | — | | | — | | | 5,360 | |
Total marketable investments | $ | 20,808 | | | $ | 87,960 | | | $ | — | | | $ | 108,768 | |
Liabilities: | | | | | | | |
| | | | | | | |
Private Warrants | $ | — | | | $ | — | | | $ | 248 | | | $ | 248 | |
| | | | | | | |
LUMINAR TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value (in thousands) Measured as of December 31, 2023: |
| Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | | | | | | |
Cash equivalents: | | | | | | | |
Money market funds | $ | 101,842 | | | $ | — | | | $ | — | | | $ | 101,842 | |
| | | | | | | |
| | | | | | | |
Commercial paper | — | | | 497 | | | — | | | 497 | |
Corporate bonds | — | | | 1,097 | | | — | | | 1,097 | |
Total cash equivalents | $ | 101,842 | | | $ | 1,594 | | | $ | — | | | $ | 103,436 | |
Marketable investments: | | | | | | | |
U.S. treasury securities | $ | 86,784 | | | $ | — | |