Luminar Technologies - Earnings Call - Q3 2025

Executive Summary

• Q3 revenue of $18.7M grew 21% YoY and 20% QoQ, landing within the company’s prior Q3 guide of $17–$19M; GAAP gross loss improved sequentially to $(8.1)M and non-GAAP gross loss to $(7.3)M as mix shifted toward NRE and LSI and warranty expense declined.
• Capital structure and liquidity dominated the quarter: Luminar signed forbearance agreements with the vast majority of secured noteholders through Nov 24, 2025 while evaluating strategic alternatives, including potential asset or company sale; CFO transition to Thomas Beaudoin effective Nov 13 adds restructuring expertise.
• Automotive headwinds intensified: Luminar paused further IRIS production commitments pending resolution with Volvo and does not expect further development under the current Mercedes HALO contract; management is prioritizing LSI and non-automotive (off-road, defense, aerospace/marine) opportunities with visible demand and backlog.
• Cash and marketable securities ended Q3 at $74.0M; subsequent forbearance exhibits show $64.76M as of Nov 9 (ex-restricted), highlighting tight liquidity into negotiations; full-year 2025 guidance remains suspended, elevating binary outcomes as a stock driver (extension/transaction vs. default).

What Went Well and What Went Wrong

• What Went Well

  • Revenue reaccelerated to $18.7M (+21% YoY, +20% QoQ), aided by higher NRE and LSI momentum; shipments rose to ~5,400 IRIS vs. 4,800 in Q2.
  • Sequential gross loss improvement (GAAP $(8.1)M vs. $(12.4)M in Q2) helped by higher NRE mix, lower inventory purchases post-Volvo pause, and lower warranty expense; non-GAAP OpEx fell to $43.0M (from $47.0M in Q2).
  • Strategic optionality progressed: company received non-binding indications for entire company and assets; CEO: “we have had interest in assets, business lines, and in fact, the entire company”.

• What Went Wrong

  • Automotive program pressure: “the future course of our relationship with Volvo will depend on the outcome of ongoing processes… paused further production commitments of IRIS units”; no further development activity expected under the current Mercedes HALO contract.
  • Unit economics remain underwater at low volumes: “We are underwater on the sensor economics… selling at prices lower than what we can produce them at,” driving a supply-chain shift toward Thailand to help close the gap.
  • Liquidity stress: guidance suspended; forbearance required after missed Oct 15 interest; secured note principal balances remain large (e.g., 2L Series 1 $55.245M, Series 2 $180.953M; 1L $100M).

Transcript

Paul Ricci (Chairman and CEO)

Today, and thank you for standing by. Welcome to the Luminar Third Quarter 2025 earnings call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question-and-answer session. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. I would now like to hand the conference over to your speaker today, Yarden Amsalem, Head of Investor Relations.

Yarden Amsalem (Director of Investor Relations and Strategic Finance)

Thank you, Josh, and welcome everyone. With me today are Paul Ricci, Luminar's Chief Executive Officer, and Tom Fennimore, our Chief Financial Officer. As a quick reminder, you can find the press release and presentation that accompanied this call at investors.luminartech.com. In a moment, you will hear remarks from Paul and Tom, followed by a Q&A session. Before we begin the prepared remarks and Q&A, let me remind everyone that during the call, we may refer to GAAP and non-GAAP financial measures. Today's discussion also contains forward-looking statements based on the environment as we see it today, and as such, it does not include risks and uncertainties. Please refer to our press release and presentation for more information on the specific risk factors that could cause actual results to differ materially. With that, I'd like to introduce Luminar's CEO, Paul Ricci.

Paul Ricci (Chairman and CEO)

Good afternoon, everyone, and thank you for joining us. This has been a pivotal and challenging quarter for Luminar, including the developments we disclosed in our 8K a few weeks ago. We're now taking deliberate action to reposition the company, and I want to begin by addressing a few items directly. First, on our capital structure, we've entered into forbearance agreements with the majority of our secured noteholders, which run through November 24th. We anticipate further extensions as we continue to negotiate with our secured noteholders towards a longer-term solution to our capital structure and liquidity needs. During this period, our 2025 financial guidance remains suspended. We've also paused usage of our equity finance, credit, and preferred stock programs while we work toward a comprehensive solution. We may decide to resume use of these programs in the future, depending on developments.

As previously disclosed, we've also received and are evaluating multiple preliminary proposals and indications of interest to purchase the entire company, as well as certain of its assets and business lines. We have added Patricia Ferrari and Elizabeth Abrams as independent directors to support our efforts. Together, Ms. Ferrari and Ms. Abrams bring extensive experience in banking, finance, and restructuring advisory work. In addition, this will be Tom Fennimore's final quarter with Luminar as CFO. Tom has worked tirelessly with me over the past six months, and I'm appreciative of all the contributions he's made during his time here and wish him the best in his next chapter. I also want to take a moment to welcome our new CFO, Tom Bowden. Tom brings more than four decades of financial and operational leadership across both public and private technology companies.

Tom and I worked side by side for many years in building Nuance, and I'm delighted to be working again with him here at Luminar. On the business front, we are managing continued challenges in our automotive LiDAR business. As disclosed, the future course of our relationship with Volvo will depend on the outcome of ongoing processes. We've made a claim for damages and paused further production commitments of IRIS units pending resolution. We remain in dialogue with Volvo and are hopeful that we can reach an agreement on a path forward. At the same time, we have advanced the strategic shift we outlined last quarter. We're pursuing non-automotive markets more deliberately and elevating the role of our LSI photonics business, where we see continued progress.

Over the past several months, momentum has continued to build across both Luminar and LSI, especially in aerospace and defense, where our technology addresses mission-critical sensing and national photonics needs. These developments reinforce our belief that this strategic direction better positions Luminar for the years ahead. I'll speak more to that progress in a moment, but first, let me turn to customer updates. Starting with Volvo, the uncertain status of that relationship will reduce or perhaps eliminate the expected volume and revenues from the EX90 and ES90 programs. Given the unfavorable economics of IRIS sales to Volvo at these depressed volume levels, this change also will help our cash flow and gross losses. We're continuing a dialogue with Volvo, and we'll provide updates when there is more to share.

Regarding Mercedes, we do not anticipate further development activity under the current HALO development contract, although our technology remains under evaluation for future programs. Finally, our relationship with Nissan continues to advance as we remain focused on meeting their hardware and software program milestones and delivering the quality and performance they require. Taken together, the developments with Volvo and Mercedes reflect broader industry conditions, including extended timelines for L3 ADAS program readiness and award decisions. These dynamics reinforce the direction we outlined last quarter to move more deliberately to pursue commercial markets outside of automotive, where engagement and near-term opportunities continue to grow, and particularly so in aerospace and defense applications. Luminar now works with nearly all major developments in terrestrial off-road autonomy, including Caterpillar, where we recently shipped the first design validation units as we progress towards start of production. We're also expanding into defense and industrial use cases.

For example, Forterra, a leading autonomous mission systems company, is currently using IRIS on its off-road autonomy platforms. Our 1550-nanometer approach supports operations and conditions where stealth, detail, and reliability are important. It captures a highly accurate 3D view of unstructured terrain and allows safe navigation without GPS, which is increasingly important as GPS jamming becomes more common. Beyond ground systems, we're seeing similar interest in aerial and marine applications. Our work with Lake Fusion Technologies is an early example where IRIS sensors are being used to help helicopter pilots identify power lines and other hazards. We're also supporting partners in marine autonomy for obstacle avoidance and precision positioning. Ultimately, these commercial, defense, and industrial markets represent growing high-margin opportunities that validate the scalability of our technology. This connects directly to the progress we're seeing at LSI.

As a reminder, LSI supplies photonics components, subsystems, and systems across aerospace, defense, industrial, and medical markets, combining defense-grade reliability with chip-scale innovation from concept to deployment. As a trusted U.S. supplier in export-controlled domains such as missile defense, quantum sensing, directed energy, and optical communications, LSI is well-positioned to benefit from strong tailwinds driven by rising defense budgets, reshoring mandates, and national security priorities. Given that LSI currently represents about one-third of Luminar's annual revenue, we believe it is an under-recognized element of our business. Year to date, LSI has generated roughly $18 million in revenue, and we see a path for strong growth from here. Unlike the automotive business, which has proven to be a more unpredictable business, LSI benefits from stronger revenue visibility, with a significant portion of its backlog tied to multi-year customer orders.

With strong secular tailwinds, we believe LSI stands to build on this momentum over the next several years. Before turning it over to Tom to discuss Q3 results, I'd like to discuss our organization briefly, where we are taking steps to align our cost base with our long-term goals. As previously discussed, as part of our ongoing realignment, we will reduce roughly 25% of our workforce by year-end. This was a difficult but necessary step to give the company the stability it requires. We expect a meaningful reduction in operating expense as a result of these actions beginning in 2026. Regarding the supply chain, we are currently reviewing our arrangements with our contract manufacturing partners. This is consistent with our broader effort to right-size our cost structure and align our supply chain strategy with a lower-volume environment in the near term.

With that, I'll hand it off to Tom to discuss Q3 results.

Tom Fennimore (CFO)

Thank you, Paul. Revenue for the quarter came in at $18.7 million, up about 20% sequentially and 21% year-over-year. The increase in revenue during the quarter was primarily driven by three factors. First, we shipped roughly 5,400 IRIS sensors in Q3 compared to 4,800 in Q2, with the vast majority of these shipments going to Volvo. Second, higher NRE revenue related to development work we are currently performing for our customers. Finally, a sequential increase in LSI revenue as we've seen continued growth in defense and aerospace-related spending. For the quarter, we reported a gross loss of negative $8.1 million on a GAAP basis and negative $7.3 million on a non-GAAP basis. Q3 gross loss improved sequentially driven by a higher mix of NRE revenue, lower inventory purchases following the previously discussed Volvo program pause, as well as a lower warranty expense.

This was partially offset by higher shipments of series production sensors and unfavorable economics. OPEX came in at $66.6 million on a GAAP basis and $43 million on a non-GAAP basis. Non-GAAP OPEX declined roughly 9% and $4 million relative to the prior quarter and 29% or $18 million relative to Q3 of last year. This decrease was driven primarily by lower R&D spend and continued progress on our cost actions. We ended the quarter with $74 million in cash and marketable securities in line with the preliminary results shared a few weeks ago. As Paul noted, we have paused usage of our equity financing and preferred stock programs while we work towards a longer-term solution for our capital structure and liquidity needs. We may decide to resume use of these programs in the future depending upon developments.

We are also actively evaluating multiple non-binding preliminary proposals and indications of interest to purchase parts of or the entirety of the company. We will share updates on this when appropriate. Our change in Q3 was negative $34 million above the $31 million level from Q1. This was driven by lower proceeds from our equity financing program. Free cash flow for the quarter was roughly negative $48.5 million, lower than the $53.8 million in Q2 and significantly below the $58.4 million from a year ago. I'll now turn it back to Paul for closing remarks.

Paul Ricci (Chairman and CEO)

While this is undoubtedly a challenging period, we're approaching it with discipline, transparency, and focus. We're deeply grateful to our employees, customers, and partners for their continued commitment and trust as we navigate this transition. We will now take your questions.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. Our first question comes from Winnie Dong with Deutsche Bank. You may proceed.

Winnie Dong (Director of Equity Research)

Hi. Thank you for taking the questions. I was wondering if you can provide maybe a preliminary update on the direction of the strategic actions going forward in the prepared memory. It was said that you're evaluating potential sale or partial sale of the company. Just wondering if there is any preliminary indication of interest and what you guys might be leaning forward. Thank you.

Paul Ricci (Chairman and CEO)

Yes. As I did comment moments ago, we have had interest in assets, business lines, and in fact, the entire company. We are in the process of evaluating those as well as other financing interests in the company.

Winnie Dong (Director of Equity Research)

Okay. That's helpful. Maybe in the meantime, in terms of your next-gen product development, is that put on hold or is that still behind the scenes, still progressing?

Paul Ricci (Chairman and CEO)

No, it has not been put on hold. We've maintained critical engineering and related resources necessary to pursue the HALO architecture, which we've talked about in some detail in previous quarters. That work continues unabated.

Winnie Dong (Director of Equity Research)

Okay. Got it. Thank you.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star 11 on your telephone. Our next question comes from Josh Patwell with JPMorgan Chase. You may proceed.

Jash Patwa (Equity Research Associate)

Hi. Good evening, and thanks for taking my questions. I wanted to start with LSI. Could you maybe give us a sense of the size of the business, the intellectual property portfolio, and the current momentum you're seeing with customers? I understand that LSI is the result of a series of acquisitions over the years, so I'd appreciate your perspective on how you think about the intrinsic value of that segment. Thanks and have a photo op.

Paul Ricci (Chairman and CEO)

Earlier in my comments, I gave a little bit of indication of revenues year-to-date in LSI. Other than that, I can't comment terribly on the size, too much on the size. It is a growing business. It has deep technologies in various areas of photonics that I mentioned in my comments. Those range from medical applications to industrial applications to military and defense applications. As I've indicated previously and again today, we think it's an under-recognized asset and business line in our company. We're doing the things necessary to accelerate growth in that business. There has been, as I've mentioned, strategic interest in that business as well.

Jash Patwa (Equity Research Associate)

Appreciate it. As a follow-up, while we appreciate all the detail on your automaker partnerships, I was hoping you could also share any updates on your relationships with platform partners like NVIDIA. Is there continued engagement on that front, especially in light of several major automakers recently announcing their L4 platforms in collaboration with these platform players? Thank you.

Paul Ricci (Chairman and CEO)

The company does continue to work with platform players. I don't have any updates on partnerships in that area today, though.

Jash Patwa (Equity Research Associate)

All right. Thank you, and good luck.

Operator (participant)

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.