Luminar’s Business Evolution

A Message from Founder and CEO, Austin Russell

After a decade of intensive R&D, product development, and industrialization, last month Luminar officially achieved Start of Production (SOP) at global scale, with the first production model being the Volvo EX90. It's a validation of our big bet on enhancing (rather than replacing) the driver, and our focus on safety above all, and begins conversion of our multi-billion Order Book to revenue.

Today, we stand at the crossroads of two realities: the core of our business has never been stronger across technology, product, industrialization, and commercialization; yet at the same time the capital markets perception of our company has never been more challenging.

To date, we've invested $1.8 billion to build the breakthrough technology foundation from the semiconductor-level up, which has enabled us to help lead the industry and collaborate with top automakers to build their platforms on our technology.

Our vision is to democratize safety and enable autonomy, which was supported earlier this week by US regulators announcing a new legal mandate for the same kind of advanced automatic emergency braking functionality that we enable to be required on all new vehicles by 2029. We see this as a catalyst for Luminar to help enable automakers to achieve these new standards and save more lives.

Now that we've made the necessary billion-dollar R&D investments from the chip-level up and successfully launched with SOP as a standardized technology, the business model and cost structure that enabled us to achieve this leadership position no longer fit the needs of the company.

Today, we are announcing an evolution in our business to a more "asset-light" model. The first step in this transition involves outsourcing more of the industrialization process to our existing partners. This new structure will enable us to (a) accelerate our next-generation products to market, (b) enable flexible and rapid scaling with automakers beyond our current capacity, (c) drastically reduce cost overhead on industrialization activities and for our company at large, and (d) deliver strong profitability on unit economics. Today marks the first major step in this shift, and I'll be sharing more details on this evolution in the coming weeks.

While we've contemplated this possibility for some time, we knew we first needed to reach SOP. In anticipation, at the beginning of this year we began executing nearly a dozen internal initiatives to deliver on this new business model by expanding our technical and industrialization partnerships, and particularly our partnership with TPK. They have now committed to an exclusive relationship with Luminar, in which they are providing substantial dedicated industrialization resources to manage, accelerate, and substantially cost-down our supply chains, all the way from Iris to Luminar Halo. At Luminar Day, the CEO of TPK described our global launch to automakers as the "iPhone moment" for the autonomous industry, and they're making a big bet on us - in a similar way to Foxconn with Apple in the early 2000's before the iPhone launch, when Apple was just a $5 billion company.

This shift also means a substantial reduction in costs across the board. By far the most difficult and emotional decision has been to reduce our full-time employee base by roughly 20% which we announced today. Many of these team members have been on our journey with us for years, which is why this is so difficult. We have also made the decision to roll off the majority of our contractors who supported us to SOP. We have informed the affected employees regarding the roles that are no longer required at this juncture.

In parallel, we are taking the opportunity to streamline other costs, flatten our organizational structure in certain areas, as previously shared renewing our strategic equity program for financial flexibility if needed, and better aligning the vast majority of our employee base to the core of what we do best - building breakthrough technology across semiconductors, optics, lasers, and AI software that automakers require in this new era.

As a result of this evolution, our expanded partnerships and our cost-saving actions, as a first step Luminar is expecting to realize more than $400 million in savings over the next 5 years, while simultaneously accelerating our long-term growth and path to profitability. In the more immediate term, we are expecting to realize over $80 million in savings on an annual run rate basis from the various actions I mentioned. Our shift in operating model and actions today are not expected to materially affect our growth plan, and, rather, will enable an acceleration of our product timelines and scale.

As the leader of our Luminary team, these kinds of decisions are never easy, and we're taking steps to provide significant support for our exiting employees. At the same time, we know these are the necessary steps to best position Luminar and maximize success throughout the decade - to save the greatest number of lives, time, and money for drivers around the world.

-Austin Russell

Founder and CEO, Luminar

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For more information on the strategic equity program, please see our Registration Statement and Prospectus Supplement filed with the SEC. These $80M per year in run-rate cost savings include $50 to $65M in savings from our 2024 Restructuring Plan disclosed in the 8-K we are filing today as well as significant additional cost saving actions including reduction in contractors and other discretionary spending.
Forward Looking Statements: This blog entry contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including that regulations will materially accelerate adoption of our technology, that incorporating our technology will result in significant reductions in vehicle crashes and fatalities, and that restructuring and cost-saving measures will result in substantial savings and accelerate future development. More information on these risks and other potential factors that could affect the Company's business is included in the Company's periodic filings with the SEC, including in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's most recent reports on Form 10-K and Form 10-Q. The Company assumes no obligation to update any forward-looking statements, which speak only as of the date they are made.