Prepared remarks
Welcome everyone to Luminar's Fourth Quarter of 2024 Business Update Call. My name is Aileen McAdams, and I'm Luminar's Head of Investor Relations. With me today on the call are Austin Russell, Luminar's Founder and Chief Executive Officer, and Tom Fennimore, our Chief Financial Officer. As a quick reminder, this call is being recorded. You can find the press release and the presentation that accompanies this call on our website at investors.luminartech.com. In a moment, you'll hear remarks from Austin and Tom, followed by a Q&A session. Before we begin our prepared remarks and Q&A, let me remind everyone that during the call we may refer to non-GAAP and GAAP financial measures. Today's discussion also contains forward-looking statements based on the environment as we currently see it, and as such, does include risks and uncertainties. Please refer to the press release and the 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 Founder and CEO, Austin Russell. Austin?
Hi, can you hear me okay? Oh, perfect, perfect. All right, well, good afternoon, everyone. I'm calling in from just outside of NVIDIA's GTC in Silicon Valley, where we're showcasing some more LiDAR and Sentinel software on and with NVIDIA's automotive platform to OEMs. So good traction there. And as a recap of today's news, excited to be able to get out there, but with the outperformance this quarter, a strong finish to year-end from a sales standpoint, commercial momentum perspective, and achieving the product unification around Luminar Halo. Excited to jump in with regards to not just what this year was, but also what 2025 has to offer. And also as we look to scale up our LiDAR shipments by more than 200% this year. First, I want to start today off with a little bit of a refresher of the state of the union around LiDAR and Luminar, before we get into some of our achievements for this past year and what's ahead.
So at the beginning of this last year, I described how Luminar had stood at a crossroads of two different realities. The corridor business had never been stronger, with our technology proven and Iris successfully industrialized for a global production vehicle. Yet, at the same time, we all knew the broader automotive market was challenged on timely launches of new vehicle platforms. Of course, today we stand having successfully launched the first global production vehicle with the Volvo EX90 being shipped, with leading-class technologies for the first time at global scale, like Luminar and NVIDIA, to show the world what's possible. Of course, later on last year, after the kickoff of the beginning, we unveiled Halo during Luminar Day to be able to show how we're going to scale it to the global stage. We'll talk a little bit more about that. So those in the automotive industry know, and it's fair to say that it's undergoing a seismic shift with the introduction of new technologies ranging from electric powertrains to advanced compute to LiDAR on new vehicle platforms.
Introducing any one of those kinds of technologies to future vehicles is a major undertaking, much less multiple at the same time, into what automakers are calling software-defined vehicles. This is a monumental undertaking with complexity that cannot be overstated, while also driving significant disruption up and down value chains. It’s no secret that this result was such that many automakers had taken longer than their initial targets a few years ago to launch these new vehicle platforms, as they collaborate with a differentiated supply base and develop centralized vehicle software systems from scratch. With that said, one thing is very clear. Compared to a few years ago, or even recent history, more automakers than ever are planning to integrate things like LiDAR, AI, and advanced computing into their next-generation vehicle lineups, with the majority of them expecting to do so by the end of the decade.
The question is no longer if LiDAR is a relevant technology for the industry, but rather when it will become standardized across vehicles, just like other safety-enhancing technologies in the past like RADARs, cameras, airbags, seat belts, or even today, new technologies like GPUs in vehicles. Unlike the electronics industry with quick-paced roll-ins and outs of products, the automotive industry is one of those very high barriers to entry, but also very high barriers to exit industries. It takes a substantially more conservative and decisive approach to integrating and rolling out new technologies. Time and again, it's generally a 10 to 20 year adoption cycle from when the first new technologies are introduced to when they start to become standardized, or even eventually mandated on vehicles. We've witnessed it with everything from mobilized vision technologies to what's happening with the recent compute integrations, to, say, for example, automatic emergency braking capabilities.
The automotive industry is not like that in the sense that, say your next-generation phone, tablet, or VR headset is introduced in consumer hands year after year. These technologies take years to be developed, much less to be automotive-grade qualified, tested, validated, and integrated into platforms. And especially when those technologies are safety-critical like LiDAR? This is a highly complex process, and people's lives are at stake in the industry, so it moves at a very deliberate pace. Now I truly believe that just like those other technologies introduced to automotive that we described before, LiDAR on every vehicle is inevitable. It's just a matter of development, progress, and time. This sentiment has been echoed by industry leaders that we've seen both privately to us as well as publicly on a number of occasions. A recent example being Nissan, just on their most recent earnings call, specifically spoke around revolutionizing autonomous driving technologies and next-generation collision avoidance features, utilizing LiDAR for widespread standardization, first with them and then the broader industry.
I'm frequently asked, the comparison is made of what's the differentiation specifically for Luminar and Luminar's technology and LiDAR. It starts off with what we see in the industry as a little bit of a bifurcation to what you call a premium segment for the market and then a more lower-cost commodity segment for the market that particularly we've seen gain some traction, notably in China. One of the things that makes Luminar's LiDAR unique is the fact that we built our own technology from the chip level up, at a different kind of wavelength of light versus using more commodity off-the-shelf components at 905 nanometers. We use them at 1550 nanometers, which allows us to output orders of magnitude more pulse energy into the environment than 905 nanometers while maintaining eye safety. Whereas 905 nanometers is substantially limited. This allows us to detect even some of the hardest to see objects at distances past 250 meters in all kinds of lighting conditions and stands in stark contrast to our competitors' technologies, which can generally only see those kinds of difficult-to-see objects at a fraction of the distances, limiting the kind of speeds the vehicles can operate, as well as not maximizing the safety capabilities that can be achieved.
Some of those shorter perception distances can be helpful for lower-speed autonomous driving applications, but they're insufficient to ultimately safely maneuver at higher speeds. That's the fundamental difference that our LiDAR enables, and what is required to ultimately unlock Level 3 autonomy, going beyond just the base assisted driving capabilities. Of course, it still significantly and further enhances with the extra performance and capabilities you can expect from a safety standpoint for Level 2 and beyond. Now, what's happening right now in the market is that automakers and some of these platform providers are more so initially using the LiDAR for these assisted driving capabilities, while they develop those autonomous Level 3 capabilities to ultimately enable drivers to take their hands off, eyes off, and you know what, use your phone, work on your laptop, watch a movie, take a nap, whatever it may be in your vehicle.
We're starting to see some of those in global markets, as well as the China market. It's particularly exciting to see that there's some significant adoption there as those OEMs move very quickly. That said, on one hand, the low-performance LiDAR is okay for now for some of those vehicles, particularly in China, that can support Level 2 applications when drivers remain actively engaged, and the cost is fairly low, but it won't be sufficient to ultimately unlock the higher levels of performance and capabilities, higher levels of safety, and higher speeds. That's really where Luminar comes into play. We're ultimately building LiDAR so that you can have those capabilities fully realized. We see significant adoption from the Western world OEMs representing, on the order of 90% of the global volume, to establish these kinds of cases, and something we're very excited about. I think it's important to say that as software for Level 3 and higher capabilities is solved for and LiDAR's full value continues to be realized, we believe that the premium segment around LiDAR will ultimately be a critical part of the ecosystem in a winter here.
That's further supported by substantial cost reductions within what we have, like with Luminar Halo, to enable even broader widespread adoptions that ultimately surpass the other segments. At Luminar, we firmly position ourselves as a leader within this high-performance category with our 1550 nanometer technology. We believe that it's really the only viable solution for looking ahead at what the requirements are for Level 3 and beyond, and at the same time, the only solution that's going to maximize the safety capabilities for the vehicle. This leadership position we have in the industry is underscored by the traction we continue to see with our automaker partners, particularly with our next-generation LiDAR Luminar Halo. Our Iris product was there to show what was possible as we developed it and successfully launched it with Volvo. Now Luminar Halo is poised to lead the industry in performance, size, and cost.
Its performance is multiples better than those of our previous generation of products, and in size, a fraction thereof. It's a multiple of the efficiency, and it's all in a highly efficient package for seamless integration. In working with our numerous automaker partners over the past several years, we've not only learned and developed the performance specifications and requirements for the products of LiDAR more generally, but we've also gained an incredible amount of design and manufacturing know-how and IP and learned the distinct advantages and disadvantages of every single iteration of - at the component level up, from the five different generations of LiDAR products that we've gone through. Ultimately, Luminar Halo is going to be the key enabler for what we believe to be widespread mass adoption of LiDAR, certainly in the Western world. We're making solid progress with our OEM partners.
We've demonstrated Luminar's Halo's performance now to several OEMs and are actively engaged in coordinated development efforts. This is something that we highlighted in the presentation. Now we actually have fully integrated samples of Luminar Halo to showcase, with more mature point clouds that we're continuing to develop. Today, we're also beginning to see green shoots in the industry. We've seen a first shift to the left by an automaker asking to pull forward the LiDAR rollout relative to their LiDAR - relative to their prior LiDAR plan, with an earlier vehicle platform. We've been working with this automaker for several years and are excited about what's ahead. What makes this possible is all around the accelerated development timeline for Luminar Halo, as well as our decision to simplify our overall product portfolio. Historically, we developed a number of different LiDAR related products simultaneously between the Iris family of products, as well as what we've been working on in the background with Halo.
With Iris initially there to primarily serve Volvo and the requirements there before it forked off to dozens of other companies we were able to provide it to. Subsequently, we also have Iris plus with our lead OEM customer in that respect. I'd say this is that from a development standpoint, now that the work on Iris is largely complete, and Iris plus, as I mentioned before from the announcement and as we're talking about here, is transitioning to be Halo from our lead customer with Iris plus. We now have a unified platform together that is a superset of all the different OEM requirements for what's needed in LiDAR. This allows us to have a singular product as opposed to a bunch of different variations of the same kinds of product, significantly simplifying our development efforts, saving on cost, enhancing efficiency, enhancing speed, among other things there. This also gives us an opportunity to transition customers with Iris into series production to Luminar Halo on mid-cycle refreshes.
As a result of all those factors, we're really all in on Halo and excited to be moving full speed ahead. From a broader perspective, we had historically built Luminar to have the capability to develop multiple products simultaneously around the LiDAR side. We know as of last year from some of the different restructuring actions that we took to streamline the organization we've implemented, they have been largely effective and haven't materially affected the overall development timeline from what we've had. In fact, they've actually streamlined and sped things up in many respects. When it comes down to it this year, as we shift from developing all these different kinds of LiDAR products to that one unified LiDAR platform, we think there's going to be some opportunities for dramatic efficiency improvements that we're going to realize this year. Why make this move now in terms of a broader strategic shift in our business model?
It's all because we're able to get our customers, especially our key customers on board with the Halo platform, moving full speed ahead in the same direction with shared requirements. That's something we've been working for many years to align those requirements and expectations. We're going to be talking a little bit more about that, and I'll have more to share over the coming weeks and months about how we will reinvent Luminar more radically as an organization under this new kind of business model. Less around custom developments for OEMs, and more with that shared unified platform. This becomes possible because we have invested nearly $2 billion over the past decade to create, industrialize, and launch an entire technology platform and ecosystem. Coming from the semiconductor all the way up to LiDAR to the software levels, we have some of the best engineering and technical talent in the industry, as well as technology on the shelf because of those investments.
We're now on the other side of that investment curve, which allows us to realign the business without materially affecting near-term deliverables, revenues, etc. In concert with our Board of Directors, we're in the throes of developing that new strategic plan for Luminar under this new business model of that unified platform and look forward to sharing more. Lastly, before I turn it over to Tom, I want to take a moment to review some of our key achievements from a business milestone standpoint and highlight some of the impressive work from the Luminar team in 2024. At the beginning of last year, we outlined four business milestones to achieve by year-end. Number one was passing the final run at rate production audit to achieve a global start of production with Volvo and ramp accordingly. Second was launching a TPK facility for additional capacity and improved cost. Number three was to unveil our next-generation LiDAR, we later unveiled as Halo and deliver samples to customers.
Four was to expand the ecosystem around our LiDAR, and I'm happy to say that we've delivered across all four of these key business milestones at a company level. We achieved the start of production for Volvo with the EX90 this past year and were also awarded the Volvo ES90, which is the sedan equivalent of the EX90, which will go into production this year. We also launched an expanded industrialization partnership with TPK in our transition to an asset-light model for industrialization. We hosted a very successful Luminar Day, where we unveiled this next-generation LiDAR Luminar Halo and generated the First Point Cloud from Luminar Halo while demonstrating its capabilities to customers; feedback has been tremendously positive. We did all of this while aggressively working to restructure costs as part of the business, and of course while not without its challenges, I'm immensely proud of the Luminar team for all that we've achieved last year under the broader macro circumstances.
I have the utmost confidence in our ability to execute for 2025, and today we're going to outline a few of those key milestones to achieve by the end of the year. First and foremost is to ramp the production delivery of the Iris-related sensors for series production customers, and achieve those economies of scale with over 200% growth associated with our deliveries into the market. The second one was meeting the key requirements for Halo for our customer contracts and execution. The third was to streamline the business with the new business and operating model that we described as we have that unified product portfolio going from developing five different variants of products at the same time to one with Luminar Halo. This is going to help accelerate our efficiency as a business and path to profitability as well. We remain very confident in our strategy and execution. Our technology leadership remains unparalleled in the high-performance LiDAR space.
Our customer relationships are progressing well, and while we're pragmatic about the near-term industry challenges, we're very optimistic about the market's long-term expansion. As the industry continues to shift towards safer vehicles and towards Level 3 autonomous driving capabilities, we firmly believe Luminar is exceptionally well positioned to capitalize on this enormous opportunity ahead. With that, I'll turn it over to Tom to discuss financials. Thank you.
Great. Thank you, Austin. Let's start by reviewing Q4 financial results. Revenue for the quarter came in better than expected at $22.5 million, up 45% quarter-over-quarter and 2% year-over-year. The primary driver of this revenue growth was higher sensor sales, both to Volvo and non-series production, or adjacent market customers. During Q4, our sensor sales to adjacent market customers increased substantially, mainly due to a large order from one of our customers. While we expect this customer will continue to generate significant revenue in the longer term, we expect the shipments during the most recent quarter satiated their near-term demand. During Q4, we shipped over 4,000 Iris sensors to our customers, and over 9,000 for the calendar year. The vast majority of these sensors were shipped to Volvo. Moving on to gross margin. For the quarter, we reported positive gross profit of $12.5 million on a GAAP basis and $14 million on a non-GAAP basis.
Three factors drove our positive gross margin. First, we reversed $10 million of NRE contract losses accrued in prior quarters related to our Iris plus development work. As Austin mentioned, in Q4, we transitioned our lead Iris plus customer to Luminar Halo development, allowing us to terminate this Iris plus development work and reverse that contract loss accrual. The second factor that drove positive gross margin was planned production downtime at our Mexico facility, to align our production with our customers' demand. This allowed us to ship sensors from inventory that were already marked down to ASP levels. We estimate this was approximately a $4 million benefit to gross profit during the quarter. The third factor was the previously mentioned large sensor shipment to an adjacent market customer, accomplished at significantly higher ASPs than what we sell for in series production. We estimate that this was about another $4 million benefit.
Some of these factors like production downtime will not repeat going forward, and others like sensor sales to non-series production customers will repeat, but will be choppy from quarter-to-quarter. However, we are encouraged that we generated a positive gross profit during the quarter. While reaching gross profit positive is an important milestone for us, we are guiding to be modestly gross margin negative for each quarter in 2025, and I'll discuss more of that later. Now to discuss and give an update on our cost options and OpEx. Last year, we announced two major restructurings, one in April and one in September that allowed us to significantly improve our cost structure. The April actions were expected to achieve $80 million in total cost savings, about half in cash and half in stocks by the end of 2024, and the September actions were expected to achieve an additional $80 million, almost entirely in cash by the end of 2025, when fully implemented.
These actions have started to yield demonstrable results in our financial performance. Relative to Q1, before our cost actions were implemented, our non-GAAP OpEx, a good proxy to measure these cash savings, declined by $72 million on an annualized basis. Our quarterly stock-based compensation approximately for the stock savings declined by about $80 million on an annual basis over the same time period. Moving on to cash in our balance sheet, we ended the year with $233 million in cash and liquidity, which includes $183 million in cash and marketable securities, and $50 million on an undrawn line of credit. These year-end actual numbers were in line with our guidance, including the $209 million available in our equity finance program, which reflects a $75 million upsize we're going to do shortly after earnings. This amounts to a total access to liquidity of $442 million. Our change in cash during the quarter was $16 million, one-six, well below the $52 million from Q3.
This improvement was primarily driven by proceeds from our equity financing program, which amounted to $48 million for the quarter and was partially a function of timing as we only did $6 million in Q3. The proceeds generated under this program during the quarter continue to demonstrate our access to the capital markets and remain an avenue we can pursue to bolster our liquidity if and when needed. Free cash flow for the quarter was negative $62 million, slightly higher than the negative $58 million in Q3. The increase was almost entirely driven by $8 million of higher cash interest during the quarter from our August debt transaction. We expect to file an amendment S3 and prospectus supplement associated with the extension of our equity finance program and stock to be granted to one of our strategic suppliers over the next few days. I wanted to touch base on our order book. In the past, we disclosed forward-looking order book as an alternative financial metric that we updated annually, as a means by which the investment community can measure our commercial progress and opportunity.
Now that we have achieved series production, we are no longer going to update this on an annual basis, and instead replace it by disclosing our sensor shipments, which we believe is a better metric to measure our progress. This is consistent with what other LiDAR companies that have reached the series production stage have done. For full disclosure, our forward-looking order book as of 2024 would be lower relative to 2023. However, we believe this is a temporary phenomenon due to the Halo transition with our key customers from the Iris family. As a reminder, we established a very high order book for what was included in the order book and not, specifically only series production awards or equivalents were included, and we exclude customer contracts that are only in the development stage. While reception for Luminar Halo has been significant, the product still remains in the development phase, with a number of series production award opportunities pending completion of certain technical milestones.
To be absolutely clear, we continue to work with all of our customers from last year, have not lost any customers, and we expect the decline in the order book in 2024 to be temporary as we complete the outlined development milestones for Luminar Halo and hopefully with anticipated better economics. Our commercial opportunity for Halo remains strong. We have entered into Luminar Halo development contracts with two major automakers since our last earnings calls and have secured a series production equivalent contract with a major construction and highway machinery manufacturer. More details to come here shortly on those. Moving on to 2025 guidance. For 2025, we expect our full year revenue growth to be in the range of 10% to 20%. This growth will be almost entirely driven by a greater than three times forecasted increase in our sensors, from approximately 9,000 in 2024 to a range that we're currently forecasting of about 30,000 to 33,000 this year.
This growth in sensor shipments will be offset by the lower revenue from the non-automotive customer we discussed on our Q3 call and basically the full year impact of that renegotiated contract. We are being conservative in our revenue guidance and are basing our 2025 sensor output on a rather significant call it about a 50% haircut to the latest IHS forecast. We want to be conservative until we see more proof points of a sustained ramp in our customers' production volume. For the first quarter, we expect revenue will decline quarter-over-quarter and be closer to Q3, '24 than Q4 levels. This decline is driven by the lower sequential sensor sales to that non-series production customer we discussed earlier. In the past, we talked about reaching a mid $30 million revenue run rate on a quarterly basis, given the recalibrated contracts as well as lower assumed volume for series productions. We don't think that that is going to happen this year.
We expect to generate a negative non-GAAP gross margin on a quarterly basis throughout this year, driven by the lower sensor sales to non-series production customers, the resumption of our series production facility in Mexico, and some modest tariff headwinds. More specifically, we expect negative quarterly gross loss to average about $5 million to $10 million per quarter. While we made progress on improving our sensor economics and COGS overhead through various cost reduction efforts, the unfortunate reality is that the lower than expected production volume remains a major hurdle for us in achieving the necessary economies of scale to achieve a sustainable positive gross margin. We may generate positive gross margin from time to time like we did this most recent quarter, but this will be highly dependent on sensor sales to non-series production customers, which remain lumpy. I briefly want to address the current tariff environment.
Geopolitical tensions are creating significant uncertainty for companies with global supply chains like Luminar. At this point in time, we have determined that our LiDAR sensors that we ship from Mexico to the U.S. are likely subject to the recently implemented tariffs. That said, even if we take no actions to mitigate this exposure, we expect the impact on our gross profit to remain relatively modest. It's important to note that we remain one of the only LiDAR suppliers with a global footprint across North America and Asia, and we are actively exploring alternatives to modify our production footprint accordingly. For 2025, we expect non-GAAP OpEx to decline from the mid $50 million range in Q1 to the mid to high $30 million range by the end of the year, as we continue to make progress on our cost reduction efforts. We expect to end fiscal year '25 with greater than $150 million of cash and liquidity, which includes cash and marketable securities, and our $50 million line of credit.
We expect to issue on average about $30 million per quarter; will be a little bit higher, a little bit lower depending upon the quarter, under our equity financing program. For fiscal year 25, we expect our free cash flow to improve, driven by our cost reduction efforts. This brings me to my final topic, our capital structure and cash runway. I'll start with an update on our debt profile. In August of last year, we executed an exchange transaction which reduced our convertible debt by nearly $150 million while also raising $100 million of new debt capital. Since August, our convertible debt declined by $38 million through early conversions of our 2030 convertible bonds, leaving about $237 million outstanding on our convertible debt that matures in 2030. In total, our debt now stands at approximately $540 million versus $625 million a year ago. We plan to start chipping away at the remaining $203 million of convertible debt maturing in 2026 in a disciplined manner, ensuring it doesn’t materially impact our cash or liquidity profile.
We believe our current cash and liquidity position and equity financing program provide us with sufficient runway through at least 2026. I mentioned in the past that we may require approximately an additional $100 million of additional capital to reach profitability beyond that. We continue to execute aggressively in our cost reduction plan to lower that potential funding requirement. While we're in no rush to execute a transaction in the near term, we're also evaluating our options for raising additional capital and will continue to actively monitor the markets. That concludes our prepared remarks. I'd once again like to thank the entire Luminar team for a great 2024 and execution progress. With that, I'll hand it back over to Aileen to start our Q&A session.
Thanks, Tom. We're now going to get into our Q&A with our analyst community. Our first question is going to come from Jash Patwa at JPMorgan.
Questions and answers
Thank you for taking my questions. Austin, great to see you at the GTC. I'm wondering if there's any news regarding the reference architecture for NVIDIA's Hyperion platform, and if Luminar is expected to continue as the reference LiDAR sensor, as it was on earlier NVIDIA platforms? Thanks, and I have a follow-up.
Absolutely. As we mentioned earlier, we're in the process of shifting the broader customer base that we've had across the board, which is over a dozen different partners from the Iris family of products over to Luminar Halo. We certainly expect to be able to lead in driving this when it comes to a Hyperion platform or other kinds of partners that we've been working with accordingly for the Halo transition as well. Ultimately, Halo is going to be driving significantly better economics and as an opportunity for broader and more mainstream adoption, whereas Iris was proving out what was possible. The key is that these aren't theoretical efforts. We're very excited to be showcasing some of these capabilities already as it stands today. If any of you guys are at GTC, we encourage you to come by and see it live with us at NVIDIA at our booth there.
Great, that's very helpful. Just as a follow-up, historically, we've heard from Luminar and some of your industry peers about a metaphorical barrier preventing Chinese suppliers from securing global OEM contracts due to escalating geopolitical tensions. However, a recent success by one of your Chinese counterparts suggests that the competitive landscape might be more complex than we would have previously anticipated. Curious if you could just discuss the competitive dynamics, particularly regarding which competitors you encounter most frequently during the sourcing processes. It would also be helpful if you could highlight areas where Luminar excels and where it may face challenges compared to the competition. Thank you.
Yes, absolutely. In relation to the China market, there has been significant and rapid development within that market for LiDAR adoption, where now there are millions of vehicles being shipped accordingly, even with some of the lower performance LiDAR technologies equipped on those. This is, in fact, a little bit of foreshadowing for what happens in the Western world. I would say more broadly, the Western and Eastern ecosystems have different kinds of product requirements when it comes to an OEM standpoint, such as performance, safety requirements, and capabilities. The Eastern world has been moving more quickly for initial adoption than the Western world, while the Western world is responsible for around 90% of the global volume. Our goal is to position ourselves as the Western world leader. It seems that the ecosystems have become more divided and isolated over the last three years. There's a lot of discussions around avoiding anything with a single line of Chinese code in it, as that could put the entire vehicle platform at risk. While speculation exists that some Chinese companies have not had production wins elsewhere in material capacity, we know that we need to position ourselves as the premium player in the Western market for the greatest level of safety application. We're doubling down on that.
Understood. That's great color. Thanks, Austin, and good luck.
Thanks, Jash. Our next question is going to come from Winnie Dong at Deutsche Bank.
Hi, thanks for taking that question. Question, the first one is on the Luminar milestones that you're looking for this year. I was wondering if you can elaborate on some specific customer development you might be looking for. Is there any specific number of contracts that you might be hoping to get for SOP during this year?
Yes, between all of our key OEM customers, everything from Volvo to Nissan to Mercedes, and beyond, there are generally more detailed milestones from a product standpoint that are included in those in terms of what's needed to ultimately successfully launch with them. The key is what we've been doing is transitioning the work from the Iris family of products over to Halo and establishing those milestones. We already have the necessary milestones for some of those key OEM contracts in place today. The focus right now is on maturing the different component level sub-assemblies for it. Some of which we have production intent sub-assemblies, while other ones we're still developing to be able to reach that stage. We ultimately want to have Halo product samples in the hands of our various key customers by year-end.
Yes, just maybe a follow-up to that question. As you're looking to streamline the operations, I'm curious how that will impact your current series production with Volvo. Will there be any material impacts on the transition?
Winnie, we're doing this in a way where it shouldn't have any material impact on this. Rewind to where we were three years ago. We were developing three products simultaneously: Iris, Iris plus, and Halo. Most of the work on Iris is substantially done by the end of the year; I wouldn't say it's going to be 100% done, but there's going to be more maintenance-level work on that. Iris plus is no longer being worked on as we transitioned our lead customer there directly to Halo. So we're going to have one product that the team is going to be working on, which is Halo. This will allow us to free up resources, streamline operations, and it shouldn't impact execution or production on Iris.
Thank you. In terms of OpEx and cost reductions, can you provide more detail on the incremental actions that will be taken this year to drive down costs?
If you go back to what we announced in April, that is substantially complete. Regarding what we did in September, we're about halfway done there. The remaining half will ramp up in terms of the savings and ramp down in OpEx through the rest of the year. Because we're stopping work on Iris plus, that will be the next catalyst to streamline the organization even further for continued and even more cost savings than what we've talked about historically.
Thanks, Winnie. Our next question is going to come from Federico Merendi on for John Babcock from Bank of America.
Good afternoon, everybody. From the press release I gathered that your cash burn might be around $200 million in 2025, which leaves you roughly with $100 million at the end of the year, excluding the credit facility. Tom, I think you said that you will need an additional $100 million to reach profitability. Does this mean that you will reach profitability by the end of 2026?
Yes. First of all, I think your math is generally accurate and in line with our guidance. I think projecting '26 for profitability might be a little too soon. We need to get Halo to market due to better-than-expected sensor economics. I don't think it will take too long after 26 for us to reach that level. We're doing what we can to chip away at our cost structure to reduce that amount. While we don't expect to get it to zero, we're making good progress to minimize our additional capital needs to reach profitability.
Understood. You mentioned that you're commencing operations with TPK, which I understand is in China?
We always referred to it as Asia; we haven't necessarily specified that it's in China.
In your 10-K, you mentioned that the operations are in China?
We didn’t cite China specifically; we referred to it as Asia in our press release.
TPK is Taiwanese.
How are you going to manage the tariff risk or potential bans from foreign technology in the United States?
The ban of foreign technology in the United States does not materially impact or present a material risk at this time for us. The tariffs and the landscape are changing, so that's something we're looking at daily. Historically, from a tariff standpoint, the product we make in Mexico has a Mexican country of origin. We're looking at ways to mitigate the tariff impact. If we're unable to mitigate it, we anticipate a modest impact on our gross profit, not an immaterial one. We're constantly evaluating our manufacturing footprint and how we define our product to minimize that tariff impact both in the near and longer term.
Thank you very much, guys.
We also mentioned that 60% of our product content comes from Thailand, as opposed to Mexico. That's just one factor to consider. As we think about the landscape, we don’t want to make any harsh reactions since things keep changing every week. We're the only LiDAR supplier with a truly global footprint, which we believe will allow us to adapt to the ebb and flow of the global trade ecosystem as we manage tariff risks.
Thanks, Federico. Our next question is going to come from Morgan Long on for Mark Delaney from Goldman Sachs.
Hi guys, thanks so much for taking the questions. While I understood your comments about order book disclosure, could you help us better understand the implications on the backlog from the transition from Iris plus to the Halo platform? How does it change the quoting process with customers?
It doesn't change a lot in terms of the quoting process here. What happens is, Halo is in an earlier stage of product development, and we have a stricter definition of what we include in the order book. We only include something in the order book if it's an official series production award or equivalent. Halo has to meet certain development milestones defined in our contracts with customers. If we meet those milestones, then they reconvert back into the series production award category. Because of our technical definition, Halo hasn't gone through the development process yet to get the series production award. However, as we continue to develop that product, it should be replenished. Halo is expected to have better unit economics than Iris or Iris plus, which will ensure we replenish the order book at better longer-term economics.
Just wanted to double-check that there's been no change to the timeline for Halo. Is that still expected by the end of 2026?
Yes, it’s generally in that timeframe, targeted for 2026 for specific vehicle lines that have SOPs in 2027.
Hi everyone. Thanks for taking my questions. For the ramping development for the new Volvo win, how should we think about the timeline for that?
Are you referring to the ES90? IHS has a pretty aggressive volume ramp for the ES90. In the guidance we've given, if you look overall, we've assumed about a 50% haircut to IHS. We hope IHS is right and we're wrong, but we want to be more conservative until we see a sustainable ramp. The embedded guidance does not indicate a significant ramp for the ES90. While the EX90 started production in April of last year, there's potential for higher production volume once a new China facility comes in. However, we're remaining conservative on that ramp as well.
Awesome. Thank you. I appreciate it.
Thanks, Tyler. That marks the end of our Q&A session. I'd like to thank everyone for sticking around and participating in the call. For the analysts that asked questions, and investors and others who've joined us, we look forward to talking to you next quarter.
Thank you.
Thanks.