Good day, and welcome to the Cepton, Inc. First Quarter 2024 Business Update and Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. .

It is now my pleasure to introduce your host, Dennis Chang, Interim Chief Financial Officer. Dennis, please go ahead. .

Thank you, and welcome to Cepton's First Quarter 2024 Earnings Call and Business Update. With me today are Jun Pei, Co-Founder and Chief Executive Officer; and Mitch Hourtienne, Chief Commercial Officer. .

During the call, we may refer to our unaudited GAAP and non-GAAP measures in our earnings release. The non-GAAP financial measures should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with U.S. GAAP. Reconciliations for non-GAAP measures are included in our earnings release. .

I would like to remind everyone that comments made in this conference call may include forward-looking statements regarding the company's expected operational and financial performance for future periods.

These statements are based on the company's current expectations, and are subject to the safe harbor statements relating to forward-looking statements contained in our earnings release and the presentation slides that accompany this call. .

Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks, uncertainties or other factors, including those discussed in the earnings release or during today's call, and those described in our filings with the U.S. Securities and Exchange Commission.

We are not undertaking any commitment to update these statements as a result of future events, except as required by law. .

As a quick reminder, this call is being recorded and you can find the earnings release and presentation slides that accompany this call as well as the webcast replay of this call at www.investors.cepton.com. Now I would like to turn the call over to Jun. .

Thank you, Dennis, and good afternoon, everyone. Thank you for joining Cepton's First Quarter 2024 Earnings Call. We will provide a business update and review our first quarter financial results with you. .

First, an update on our latest long-range lidar product, Cepton Ultra. As part of our ongoing efforts to advance automotive safety and efficiency through cutting-edge technology, I'm pleased to provide an exciting update on our Ultra lidar system.

We have successfully advanced the Ultra from its initial concept to the B sample stage, much quicker than anticipated and the performance of the Ultra B samples has exceeded our expectations.

This rapid progression is a testament to our robust R&D capabilities and deep technical expertise and achieving this key development milestone underscores our commitment to innovation and market leadership. .

in Japan, the United States and Europe. These live demonstrations not only validated our lidar systems performance under various conditions, but also showcased its versatility and robustness in real-world environments. The feedback from these global showcases has been overwhelmingly positive.

Affirming the Ultra's potential to transform automotive safety standards and its readiness for broader commercial deployment. .

Our Ultra product features our proprietary imaging technology, MagnoSteer, which allows for dynamic field of view, region of interest adjustment and high-resolution scanning. This technology has performed above expectations, offering enhanced adaptability and higher data fidelity in the B samples. .

The advancements in our Ultra lidar system marked a pivotal step forward in our mission to drive widespread adoption of lidar technology in automotive applications. As we continue to push the boundaries of what's possible, we remain focused on delivering products that not only meet but also exceed the rigorous demands of the automotive industry. .

I've always stated that technology advancements do not create value without commercial traction. Today, I'm proud to announce that we have secured a series production project with a global OEM in collaboration with Koito to supply our near-range lidar sensors.

This multiyear OEM project underscores our technology competitiveness and the trust that industry leaders place in our solutions. .

To jump start this project, Cepton has entered into a significant engineering services contract with Koito, which includes $10 million in fees for work to be performed in the second quarter of 2024.

This contract is designed to support the execution of the new OEM program and accelerate product development, ensuring that we meet and exceed the specific needs of our automotive customers. We expect to have positive cash flow for the 3 months ended Q2 2024, a significant achievement not only for our company but also within the lidar industry. .

With that, I'll turn it over to Mitch for more details on our efforts with customer programs. .

Thank you, Jun. Today, I'm excited to share significant developments in our business partnerships and new opportunities that highlight Cepton's growing influence in the global automotive market. .

As Jun announced, our significant NRE contract with Koito marks a huge milestone for Cepton on multiple fronts. First, we expand our series production awards beyond the North American continent with this win. Second, we demonstrate product scalability with this near-range lidar win.

And last, but certainly not least, we expect to become cash flow positive this quarter for the first time in the company's history, and we believe this is also a first within the lidar industry. .

Large global OEMs are very selective in these early days of lidar adoption, and we're proud to gain the trust of another global OEM. The commercials associated with this project are expected to be significant, starting with revenue this quarter. .

Beyond this win, we are actively expanding our market reach with submissions for RFQs from some of the world's largest automotive manufacturers. We've recently completed the final submission for an RFQ to a top 10 global automotive OEM for our long-range lidar technology, and we expect a formal decision before our next earnings call. .

This is a pivotal step towards securing a broader adoption of our lidar solutions in the automotive sector. We've also made our first RFQ submission to a top 3 global automotive OEM for both long-range and near-range lidar.

As OEMs expand their use of lidar and next-generation ADAS offerings to include both long-range and near-range lidar, Cepton is in a very unique position offering both products, positioning us well for further market share gains. .

As our lidar hardware solutions are hardened for automotive deployments, our software ecosystem is also expanding. Last week, Cepton announced StudioViz, our lidar simulator aim to accelerate OEM development and reduce data collection costs.

Our solution stands out from the pack as we include manufacturing variances into the simulator, a key ingredient that stems from our long-standing work with Koito manufacturing. .

StudioViz is just one pillar of our software ecosystem development kit, which will further expand in the coming months and years as we further understand OEM challenges and work to include more efficient solutions and value in Cepton products.

We're excited to continue our global road show of our highly successful Ultra product and to execute our new OEM series production win. So stay tuned for more good news from Cepton in the coming quarters. Next, I'll turn it back to Dennis. .

Thank you, Mitch. Starting with our first quarter results. .

Total revenue for the quarter was $1.9 million, consisting of $1.1 million in product revenue and $0.8 million in development revenue. Total revenue increased by 31% compared to $1.5 million in the prior year comparable period. First quarter GAAP net loss was $6.8 million or $0.43 loss per share, basic and diluted.

Non-GAAP net loss was $8.3 million or $0.52 loss per share, basic and diluted. First quarter non-GAAP adjusted EBITDA was negative $8.9 million. .

During the first quarter, we recorded a $4.0 million gain from the GM project cancellation recoveries. This was the initial payments received from Koito and the cost recovery process is ongoing. As of March 31, 2024, we had approximately $49.2 million in cash and cash equivalents.

Our full year 2024 guidance for revenue is expected to be between $15 million and $25 million. Our operating expenses are expected to be below $50 million. We look forward to seeing everyone at our annual shareholders meeting scheduled on June 17. .

And with that, I'd like to open up the call for questions. .

[Operator Instructions] Our first question comes from the line of Matthew Galinko with Maxim Group. .

Maybe firstly, just on the $4 million gain.

I just wanted to -- on the GM cost recovery, I just wanted to clarify, is that a -- was that a cash payment or it was cash received in the first quarter?.

Yes, the $4 million is a cash payment. It has been received in the first quarter. .

Got it. Okay.

And then secondly, can you help us frame for the new production win, and congratulations on that, when should we expect or when could we start to expect production revenue from that? Is that 2026 event? Or is there anything more you could say about that?.

Matt, this is Mitch. Yes, that's a good question. So we noted that we'll begin collecting development revenues this quarter and then sample product revenues are also starting this quarter. For the high-volume production revenue, most of these programs are typically sourced 2.5 years to 3 years ahead of the start of production.

And that's the case in this project as well. .

And one last follow-up question on that would be, I guess, given the $10 million component of that, that sounds like it's hitting in the second quarter 2024.

Is there -- do you expect there to be subsequent development revenue around that project in the balance of the year? Or is that going to be kind of a onetime thing that maybe we get other slabs of it in future periods prior to high-volume production? Or help us frame if that's a onetime thing?.

Yes. Again, this is Mitch. It's not a onetime payment. The development and the milestones will continue, up until that start of production, as I indicated, 2.5 years to 3 years from now. It will probably be a bit more lumpy compared to product sales.

But you can see a pretty significant portion this quarter, and then there will be follow-on development revenue as part of this project. .

Our next question comes from the line of Shadi Mitwalli with Craig-Hallum. .

This is Shadi Mitwalli on for Richard Shannon. I want to start off with a clarification question.

The new auto award mentioned in the PR and then on the call, is this the same one mentioned end of March?.

Yes. .

Yes, it is. .

Great.

And then this $10 million fee, it sounds like most of it is going to be recognized in 2Q and then the rest of it throughout fiscal 2024? Or is it all going to be recognized in our Q2?.

Yes. Actually, all of it is recognized within Q2. And then my answer to the previous question, there will be subsequent development revenues on top of the $10 million in the second half of the year. .

Okay. That makes sense.

And then with the guidance given of $15 million to $25 million for the year, you already know about $12 million of that, to make up the rest of that $3 million to $13 million in revenues, I believe you can give some more color on whether this will be made up of primarily NRE or product sales?.

Yes, it's a good question, Shadi. It will be a mix of both. As we indicated in the call, we're working on 2 or 3 other OEM projects, both of those will have significant NRE contracts as well as early sample sales. The details are not signed yet by the customer or by Cepton.

And so that's why we have a bit of a range on the forecast, as we finalize the timing and the category of those payments. .

Our next question comes from the line of Kevin Garrigan with WestPark Capital. .

Yes. Let me ask a few questions and congrats on the progress. First, I know you guys have previously had 1 GM, but this automotive win in OEM seems a little more secure, if you will. But I'd love to just get your thoughts on how important it is to get that first design win or just to secure a design win.

And is it kind of way you are in a better position to win these other RFPs that you're fighting for?.

Yes, definitely good question, Kevin. Since I'm kind of on the forefront of the customer side, I'll answer you first. This is Mitch. Yes, there's a lot of lessons learned from the GM program that go into our product evolution, you show that -- you see that showing up in our new Ultra product.

So all of the design and manufacturing lessons learned are built into our Ultra product. You see it in our new software ecosystem product called StudioViz that we announced last week. Again, this is pretty unique in the industry in that it takes into account all the manufacturing variances of building a lidar. .

And then I think maybe one of the last, but not least, important lesson learned is the supply chain. We have -- we're carrying over some of the suppliers that worked really well on the GM project and find new suppliers as their product has evolved. So yes, it puts us in a very competitive position for these new RFQs. .

Yes. Maybe I can just add a couple of sentence over that. We're the few lidar companies that had a B sample ready for automotive deployment. And in that from hardware to software is a complete suite that can be ported over with minor modifications for future projects.

And this elevate us into a very different position in terms of future RFQs and design wins. So it is a big deal, really, given the history we've worked on. There's really no wasted work there. .

Yes. No, that makes a ton of sense, and I appreciate all that color. Okay. Perfect. And then my second question, looking at your StudioViz simulation platform, it seems like there's a couple other lidar companies that have also come out with some simulation platform.

Was this kind of something that OEMs were asking a lot of the lidar companies to provide to kind of speed up lidar development?.

Yes, definitely, some OEMs asked for this, although I'll say many do not necessarily ask for these. It usually comes later on in the development after you win a program, it's a realization that this should have been available earlier or used earlier by the OEM. And so that's a big lesson learned from our first program.

We did develop a customized simulator for the first OEM award. But rather than repeating that and doing a custom for each customer, we've come out with this product, which incorporates a lot of the lessons learned and can be used across the customer base. .

Okay. Got it. Got it. That makes sense. And then just last question, if I can. So we've heard a few of your competitors speak about the recent NHTSA ruling for automatic emergency braking systems. I'd love to hear your, guys, thoughts on it and kind of what you think it means for the lidar industry. .

Yes. That's a good point. We didn't talk about that today. I did see it was talked about quite a bit last week by our competitors. It's a huge hallmark for the industry to adopt new technologies like lidar. I mean, camera and radar, ultrasonic, these are all proliferated about as much as they can be across the automotive landscape to reduce accidents.

So I think it's a key recognition by regulators that pedestrian deaths still aren't going down and that it won't be tolerated forever, right? There are new technologies like lidar becoming available. It's becoming cost-effective. It's becoming easier to integrate onto the vehicles. So this is just another tailwind for our industry right now. .

And our next question comes from the line of Gus Richard with Northland Capital. .

Last call, the OEMs sort of hit the pause button on automation, if you will. And just wondering for a number of different reasons.

Could you kind of talk about the sense of urgency or the progress these guys are making on moving towards adopting lidar? What has changed in the last 180 days?.

Yes, I'll start with that one, Gus. Good question. I think, first of all, there's still a strong appetite for lidar from the OEMs. You see that in our RFQ and RFI updates as well as broadly within the industry.

I do think, and we just talked about the legislation, one of the emphasis points for the adoption of lidar is becoming more towards safety versus autonomy.

And I think that's something that maybe has shifted a little bit the past 6 months to 1 year, as we talk about automatic emergency braking and systems like this that can reduce accidents and deaths.

This is becoming a key focal point of the industry versus hands-free driving and some of the more convenient features that these systems were aimed at 3 years, 4 years ago. .

Got it.

And then any update on GM and after the rescope, are they going to move forward? What are their plans for using your lidar?.

Yes, it's a good question. We can't go into too many details on what GM strategy is. I know it's been a bit quiet on their front, the past 6 months.

I wouldn't really say it's because of their autonomy systems, I think they're still working on these systems, but they obviously, the downturn in the EV cycle is probably impacting some of their priorities. .

We're showing off the Ultra product to all of the OEMs, that includes General Motors. All of the lessons learned from our last 4 years of working with them, puts us in a very good position. So once they announce their next consumer products, they use lidar, and we're confident they will, that we're really well positioned to support them again. .

Got it. And then I guess the last one for me, and I'm not sure you can provide much of an update, but I'll ask anyway.

The Koito offer to buy Cepton, can you provide us with any update on where that stands? And what's going on in that area?.

Yes, Gus, Jun here. Thanks for the question. Yes, it's been a few months since we received the initial offer. And there's not too much detail I can disclose, but we're actually actively working on this process. It's 2 big public companies with pretty complicated process that needs a little bit more time. But again, I assure that we are working on it.

Just there's no details we're ready to disclose publicly. For that, I'll just have to say stay tuned for further news. .

Thank you. We have reached the end of our question-and-answer session. And with that, I would like to turn the floor back over to CEO, Jun Pei, for any closing comments. .

Yes. Thanks again, everyone, for attending our quarterly conference call. As you have witnessed, Cepton is working on the cutting-edge technology and making continuous commercial progress. So we'll keep you updated as we have more exciting news coming our way. Thank you. Thank you very much. .

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..