Addressing Misconceptions with Facts
In this letter to shareholders, Luminar CFO Tom Fennimore underscores:
- Luminar has established itself as the clear leader in the industry; in 2023 this leadership position has widened with expanded wins, now totaling 20+ vehicle lines.
- This success has been met with increased noise, but has no effect on the fundamental value of Luminar. We have more conviction than ever in our near and long-term value creation opportunity.
- Questions were raised this week about our pricing forecast. Our ASP’s are not theoretical and are supported by our awarded contracts that span the decade. There is additional upside to further grow revenue per vehicle with our software and insurance solutions.
Luminar is off to a very strong start in 2023, but the volatility of our share price is increasingly disconnected from our execution and longer-term growth potential. I’m writing to factually address some of the recent misconceptions in the market that are driving part of this disconnect.
To recap a few of the events that unfolded this year:
In February, we announced significant multi-billion dollar deal expansions, including two of our core customers: Polestar and Mercedes-Benz. We ended February with a successful Luminar Day with strong in-person and virtual attendance and overwhelmingly positive feedback.
Our share price rallied as the market recognized our technology leadership, the achievements of our team and our bright, credible future. This rally continued until the overall market stalled with the Silicon Valley Bank collapse. Thankfully, Luminar has been largely immune to this and its ripple effects as we have taken proactive steps to protect our large cash position.
In the wake of our strong momentum, you’ve probably noticed other lidar companies stepping up their public attacks on us. We expect this spread of misinformation to continue as our success grows and their struggles accelerate (google “crab mentality” to better understand why). We don’t pay attention to this “FUD” (fear, uncertainty and doubt) and would encourage you to do the same if you aren’t already.
While we normally do not publicly respond to other misconceptions in the market, we have received enough inquiries where I feel the need to address two events in more detail.
First, as part of our Luminar Day, a member of our team included a thumbnail of a generic graphic of a photonic integrated circuit on a single slide in a 165 page presentation. This thumbnail was there to give a visual illustration of a generic photonic integrated circuit in our semiconductor section of the presentation. A startup company that Luminar has never heard of contacted the media claiming that we were improperly passing off their tech as ours. This is clearly not the case. For the avoidance of doubt, we replaced the thumbnail with an actual microscopic photo of one of our integrated circuits. Let me be clear — all of our key semiconductor intellectual property at Luminar is home grown and owned by us.
Second, earlier this week, a research analyst downgraded LAZR from “Neutral” to “Sell”. This downgrade took us by surprise as the same analyst had published a note a couple weeks prior reiterating both his Neutral rating and price target. Every analyst is entitled to his or her views, but there did not appear to be a credible Luminar-specific catalyst for the downgrade.
While the catalyst remains unclear, the explanation in the report for the downgrade was two-fold: (1) expected ASP/margin downside from our pricing being “50% to 100% higher than key competitors” and (2) a valuation premium versus other lidar companies (two of which the analyst covers and rates as Buys).
The concern over expected ASP/margin pressure ignores a critical point: our customers (and consumers) are willing to pay a premium for superior technology, especially life-saving technology. Our contractual agreements we have in place today for our 20+ awarded vehicle lines include “premium pricing” not only at the time of start of production, but over the life of the program. “Premium pricing” isn’t a theoretical concept we are forecasting, but an achievement we have already made in our major customer contracts. Additionally, there is upside to grow our revenue per vehicle with our software and insurance solutions.
Regarding the concern about our premium valuation, we believe using 2025 revenue as a valuation benchmark versus peers dramatically undervalues Luminar, as many of the 20+ vehicle lines we have been awarded are not expected to reach production until beyond 2025. We expect the superior performance enabled by our technology will not only continue to drive accelerated bookings and exponential revenue growth in the near-term, resulting in a deserved premium multiple for Luminar, but also will drive better longer-term growth versus other companies.
I would like to end this note by assuring all of our shareholders that the Luminar Team is 100% focused on executing and achieving our 2023 milestones as well as our longer-term vision to save lives and power autonomy. We have the awarded business today, the cash on our balance sheet, and a world-class team in place to execute on our vision and create significant shareholder value.
We appreciate all of your patience, support and faith in us as we execute.
Tom and the rest of the Luminar Team
Certain statements included in this press release that are not historical facts are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as “aims,” “believe,” “may,” “will,” “estimate,” “set,” “continue,” “towards,” “anticipate,” “intend,” “expect,” “should,” “would,” “forward,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding the likelihood that customers are willing to pay a premium for our safety technology and that we will generate revenue from software and other solutions. These statements are based on various assumptions, whether or not identified in this press release, and on the current expectations of Luminar’s management and are not guarantees of actual performance. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements, including the risks discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Luminar’s most recently filed periodic reports on Form 10-K and Form 10-Q, and other documents Luminar files with the SEC in the future. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and Luminar undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release.