Cepton, Inc. (NASDAQ:CPTN) Q4 2023 Earnings Call Transcript March 28, 2024
Cepton, Inc. misses on earnings expectations. Reported EPS is $-0.41 EPS, expectations were $-0.39.
CPTN isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to the Q4 and Full Year 2023 Cepton 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 CFO. Thank you, Dennis. You may begin.
Dennis Chang: Thank you, and welcome to Cepton’s fourth quarter and full year 2023 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.
Jun Pei: Thank you, Dennis, and good afternoon, everyone. Thank you for joining Cepton’s fourth quarter and full year 2023 earnings call. We will provide a business update and review our financial results with you. There’s quite a bit of news though within the industry these past few months, and specifically regarding Cepton. First, I’d like to congratulate our team on exceeding our FY ’23 revenue guidance with a record $13.1 million in recorded revenue and preparing us for growth with the launch of our new LiDAR product, Cepton Ultra at CES 2024. These are two major accomplishments that keeps us at the forefront of this industry. First, on our latest long-range LiDAR product, Cepton Ultra demonstrated at CES 2024. Cepton Ultra or Ultra represents a Pinnacle in LiDAR technology, boasting a remarkable long detection range of up to 300 meters at 10% reflectivity.
Ultra-high-resolution with software definable regions of interest and the distinction of being the world’s slimmest adaptive long-range LiDAR. This design enables seamless integration into various vehicle locations, maintaining aesthetic appeal and reducing aerodynamic impact. At its core, Cepton Ultra leverages our next-generation imaging technology, MagnoSteer, alongside with a proprietary chipset SoC to significantly enhance point cloud quality while minimizing cost, footprint and power consumption. This strategic blend of advanced features is designed to deliver an optimal balance of performance, cost and reliability, making Ultra not just a technological marvel, but also a viable solution for mass market adoption across automotive, smart infrastructure and various other applications.
Moving on to a piece of industry news that creates significant opportunity and competitive edge for Cepton. In a significant development that has considerable implications for the global LiDAR industry, a prominent Chinese LiDAR company on January 25, 2024, was added to the 1260H list of Chinese military companies by the U.S. government. This designation, which highlights entities believed to be affiliated with the Chinese military and defense sectors has underscored the complexities and risks associated with American business engaging in partnerships or transactions with firms listed under such a category. This development has prompted many U.S. corporations to reassess their supply chain strategies and partnerships aiming to mitigate risks associated with compliance, geopolitical tensions and national security concerns.
We believe this event is a significant opportunity and a catalyst for growth for our company. As the stakeholders and partners in the industry seek alternatives to navigate away from the potential risks posed by sourcing from entities on the 1260H list. Cepton as a U.S. company has emerged as a viable and secure partner and a supplier for LiDAR. This shift not only highlights our commitment to adhering to international regulations and safeguarding our operations from geopolitical uncertainties, but also reinforces our position as a trusted leader in the LiDAR technology sector. Our competitive advantage to offer reliable LiDAR supply amidst these challenging times has further solidified our market presence and opened new avenues for growth and collaboration.
Lastly, I want to briefly touch upon some recent news on the GM series production cancellation and a letter of indication from our Tier 1 partner and shareholder, Koito manufacturing, which were both disclosed in more details in our Form 8-K. On December 11, 2023, Koito informed us that the original equipment manufacturer that awarded Koito, the Series production award has decided to rescope its ADAS product offerings. And as a result, all outstanding purchase orders from Koito to the company that relate to the series production award have been canceled. As is customary, when an automotive program changes, Cepton initiated actions to secure project investment cost recovery related to any delay or cancellation of an existing program. On December 21, 2023, we announced that we have received a nonbinding proposal from Koito to acquire 100% of the outstanding shares of Cepton not currently owned by Koito.
Cepton’s Board of Directors via a special committee is currently evaluating the indication of interest among other strategic options with assistance from financial and legal advisers. No assurance can be given that a definitive transaction with respect to Koito’s indication of interest or any other potential transaction will eventually be consummated. As we have discussed in prior quarters, we are continuing to build our business and delivered yet another record setting quarter for revenue. Cepton remains steadfast in pursuing opportunities in automotive and remains in a good position to win additional series production award with sourcing decisions on the horizon. With that, I’ll turn it over to Mitch for details on our efforts with customer programs.
Mitch Hourtienne: Thank you, Jun. Since our last earnings call, Cepton has received a dramatic increase of attention from the automotive industry. In part due to the macro events against Chinese LiDAR companies mentioned previously, but more importantly, the launch and demonstration of our new Ultra product. Specifically, we have made significant strides with a Top 10 global automotive OEM. Previously mentioned is one of the industry’s top open RFQs. Our recent demonstrations of the B samples of our Ultra product have been a game changer in advancing this particular automotive RFQ as well as accelerating discussions with other top automotive OEMs. Furthermore, our in-depth collaboration with Koito as an automotive supply titan has become one of the top driving factors for automotive OEMs to consider the Cepton-Koito solution over other competing solutions.
The go-to-market strategy of Seton with Koito as our Tier 1 partner is starting to become an obvious and sustainable winning combination for customers as they solidify their first mass production launches using LiDAR technology. Of course, we have seen some false starts, delays and rescoping as car companies refine their adoption of this new technology. But it is clear that LiDAR is not going away. It’s just a matter of time before several OEMs safely launch new ADAS systems, incorporating the tremendous advantages that LiDAR provides. Having a supplier, which can sustain this launch learning curve is becoming paramount to OEM sourcing decisions. Next, Cepton recently filed an 8-K disclosing the notification of an OEM series production award.
Today, we’re not able to disclose any more details on this project outside of those disclosed in the 8-K, but they will be forthcoming soon as we work together with the OEM and Koito public announcements. In addition to our recent automotive developments, I’m pleased to highlight significant progress we made with a major autonomous industrial vehicles OEM using our near-range LiDAR, Nova in Q4 of 2023. During the quarter, Cepton passed a significant gate review with this early adopter of our near-range LiDAR technology, and we’ve advanced to the final preproduction phase of this project in 2024 with expected mass production launch in 2025. With this milestone in hand and in partnership with Koito, we now have several other OEMs, including shuttle OEMs, heavy equipment manufacturers and smart infrastructure customers with greater interest and higher demand for our near-range LiDAR product in 2024.
2024 will be a decisive year for continued LiDAR adoption across the automotive landscape. With our new product, Ultra and our deepens partnership with Koito, we are poised to capture market share in this key inflection point of adoption. Now I’ll turn it back over to Dennis.
Dennis Chang: Thank you, Mitch. Starting with our fourth quarter. Total revenue for the quarter was $5.0 million, an increase of 214% compared to the prior year period and up 29% compared to our previous quarter. The increase for the quarter was evenly contributed by product revenue and development revenue. Fourth quarter 2023, GAAP net loss was $8.3 million or $0.52 loss per share, basic and diluted. Fourth quarter 2023 non-GAAP net loss was $6.4 million or $0.41 loss per share, basic and diluted. Fourth quarter 2023 adjusted EBITDA was a negative $7.1 million. Now on to our full year 2023 results. Total revenue for 2023 was $13.1 million, an increase of 76% compared to the prior year and above the full year 2023 revenue guidance provided in our third quarter 2023 earnings release.
We achieved full year gross margin of 27%. Our full year GAAP operating expenses were $54.3 million, excluding stock-based compensation expenses and nonrecurring loss on impairment of property and equipment. Our non-GAAP operating expenses were well below the $50 million we communicated in our third quarter 2023 earnings release. Full year GAAP net loss was $48.5 million or $3.08 loss per share, basic and diluted. Full year non-GAAP net loss was $38.9 million or $2.47 loss per share, basic and diluted. And the full year adjusted EBITDA was a negative $41.2 million. As of December 31, 2023, we had approximately $56.4 million in cash, cash equivalents and short-term investments. Lastly, we’re not offering 2024 guidance at this time. We expect to provide an update on the full year guidance at our Q1 earnings call.
And with that, I’d like to open up the call for questions.
Operator: [Operator Instructions] Our first question comes from the line of Shadi Mitwalli with Craig-Hallum. Please proceed with your question.
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