Luminar Technologies Inc.
11/13/2025 | Press release | Distributed by Public on 11/13/2025 15:50
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Annual Report") filed with the SEC on March 28, 2025. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed under the caption "Risk Factors" in our 2024 Annual Report, those discussed under the caption "Risk Factors" in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2025 and June 30, 2025 filed with the SEC on May 20, 2025 and August 13, 2025, respectively, our Current Report on Form 8-K filed on October 31, 2025, and elsewhere in this Form 10-Q. See also "Cautionary Note Regarding Forward-Looking Statements" at the beginning of this Form 10-Q.
Overview
We are a technology company specializing in advanced Light Detection and Ranging (LiDAR) hardware and software solutions to enable the world's safest and smartest vehicles. Over the past decade, we have been developing proprietary LiDAR hardware, core semiconductor components, and software in-house to meet the demanding performance, safety, reliability, and cost requirements to enable next-generation safety and autonomous capabilities for passenger and commercial vehicles, as well as other adjacent markets.
Beyond sensor hardware, our product portfolio has expanded to include semiconductor components of our LiDAR that have utility in adjacent markets, in-development software capabilities such as perception and high-definition "3D" mapping, certain data sets and other information, all of which we anticipate will monetize the ecosystem of improved safety and autonomy created by our LiDAR. Substantially all of our software products have not achieved technological feasibility or have been commercialized.
Basis of Presentation
Our condensed consolidated financial statements include the accounts of our wholly owned subsidiaries. We have eliminated intercompany accounts and transactions.
Industrialization Update
We have typically entered into contract manufacturing services agreements with manufacturers, including Celestica and Fabrinet, to enable series production of our Iris LiDAR sensors through the assembly and testing of our transceiver sub-component based on our design and components and final assembly and testing of our LiDAR sensor, including the transceiver. On November 1, 2025, Celestica sent to us a notice of termination of the master services agreement and equipment and tooling agreement between Celestica and a subsidiary of the Company. We are currently reviewing our options with respect to our arrangements with Celestica, including entering into a new agreement or transitioning our LiDAR sensor testing and assembly process to a different manufacturer. See "-Business Update-Celestica Update" below. We also have a partnership with TPK Group, whereby we established an engineering center in China, staffed by TPK, to assist with our industrialization efforts, including manufacturing process design, development and validation, component process verification and validation, supplier development support, system validation, cost analysis, and benchmarking.
We continually evaluate opportunities for optimizing our manufacturing and product design processes, including evaluating our sourcing strategies to reduce future per unit sensor manufacturing costs. In 2023, we commenced a change in sourcing of certain sub-assemblies and components from one supplier to another and our expected transition to new suppliers has essentially been completed. In 2024, we commenced a change in sourcing of final assembly of components from one contract manufacturer to another. This effort included taking scaled down or production downtime at the dedicated manufacturing facility in Mexico. Our continuing optimization of our manufacturing and product design processes may impact estimated useful lives or carrying values of additional property, plant and equipment or other assets.
Business Updates
Strategic Alternatives
As previously announced, the Company is exploring a number of potential strategic alternatives with respect to the Company, including the sale of all or part of the Company's business or assets, raising additional capital or restructuring its existing capital structure. Specifically, the Company has engaged Weil, Gotshal & Manges LLP, as legal advisers, Jefferies LLC, as investment banking advisers, and Portage Point Partners, LLC, as financial advisors, to assist the Company in analyzing and evaluating potential strategic alternatives and initiatives to improve liquidity. The Company has received and is actively evaluating nonbinding, preliminary proposals and indications of interest to purchase the entire Company as well as certain of its assets and business lines, including a preliminary proposal for one of our subsidiaries and an indication of interest for the entire company from Russell AI Labs, a company founded by our founder and former chief executive officer, Austin Russell. No assurances can be given that any strategic transaction will be consummated or that the Company will be able to
raise additional capital. Any additional capital may include the issuance of additional shares of Class A common stock, which could result in substantial dilution to the Company's existing stockholders. If the Company is unable to raise sufficient additional capital, unsuccessful in executing on any other strategic alternatives or unable to consummate another financing or restructuring solution, the Company will need to curtail or cease operations and/or seek relief under the U.S. Bankruptcy Code. In addition, a strategic transaction may be effected through a process under the U.S. Bankruptcy Code. In the event of a future liquidation or bankruptcy proceeding, holders of Class A common stock would likely suffer a total loss of their investment.
Wind-down of Data and Insurance Businesses
As part of our ongoing strategic review and focus on operational efficiency, we initiated the wind-down of our data and insurance businesses. The wind-down is expected to be substantially completed in the end of 2025. We do not expect these changes to impact our ability to deliver on our core customer programs or product commitments.
The wind-down of the data business is expected to result in a reduction in total revenue of approximately $16.3 million on a full-year run-rate basis. The revenue impact from the wind-down of the insurance business is not material. We expect the exit of both these businesses will reduce our operating expenses by approximately $31.6 million on a full-year run-rate basis starting in fourth quarter of 2025.
Volvo Update
In March 2025, we announced that our LiDAR technology will be equipped in the new Volvo ES90. This marks the second Volvo model to feature our technology, following the launch of the Volvo EX90. Our LiDAR sensors on initial EX90 vehicles are currently being used for road data collection and system training.
Volvo has since informed the Company that, beginning in April 2026, Volvo will no longer make the Company's Iris LiDAR standard on its EX90 and ES90 vehicles. Volvo also informed the Company that it has deferred the decision as to whether to include LiDAR, including Halo (Luminar's next generation LiDAR under development), in its next generation of vehicles from 2027 to 2029 at the earliest. As a result of these actions, the Company has made a claim against Volvo for significant damages and has suspended further commitments of Iris LiDAR products for Volvo pending resolution of the dispute. The Company is in discussions with Volvo concerning the dispute; however, there can be no assurance that the dispute will be resolved favorably or at all. Furthermore, there can be no guarantee that any claim or litigation against Volvo will be successful or that the Company will be able to recover damages from Volvo.
Caterpillar Update
In March 2025, we announced a collaboration with Caterpillar Inc. to integrate our LiDAR technology into Caterpillar's next-generation autonomous solution. Each Caterpillar off-highway truck will feature two Iris LiDARs with a unique integration system designed exclusively for the customer.
Celestica Update
On November 1, 2025, Celestica sent to us a notice of termination of the master services agreement and equipment and tooling agreement between Celestica and a subsidiary of the Company. We are currently in the process of reviewing our options, including the potential for entering a new agreement with Celestica or transitioning our LiDAR sensors testing and assembly process to a different manufacturer.
Cost-Reduction Restructuring Plans
In 2024, we executed a restructuring and cost reduction plan (the "2024 Restructuring Plan"), consisting of events in both May and September, which included reducing our workforce by a cumulative 30%, as well as sub-leasing of certain facilities and other actions. We expect the actions outlined will be substantially complete by the end of 2025. In May 2025, we began additional restructuring efforts which included a reduction in workforce (the "May 2025 Restructuring Plan"). We expect the actions associated with the May 2025 Restructuring Plan to be substantially completed by the end of 2025.
As of September 30, 2025, we incurred $12.7 million in total charges associated with employee severance and related costs, including both cash and stock from the actions we took in May 2024, September 2024, May 2025, August 2025 and September 2025.
On October 29, 2025, the Company committed to a plan to further reduce its workforce by approximately 25% in order to reduce operating costs (the "October 2025 Restructuring Plan"). The reduction commenced immediately and the October 2025 Restructuring Plan is expected to be substantially completed by 2025 year-end. The Company estimates that it will incur approximately $2.0 million to $3.0 million in cash charges associated with employee severance and related employee costs, to be incurred primarily in the fourth quarter of 2025. The Company's estimates are subject to a number of assumptions, and actual results may materially differ. The Company may incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the workforce reduction.
Debt Exchanges
In March 2025, we entered into separate, individually negotiated private exchange agreements with certain holders of our 1.25% Convertible Senior Notes due 2026 (the "2026 Convertible Senior Notes") to exchange $18.2 million aggregate principal amount of 2026 Convertible Senior Notes (the "March 2025 Exchanged Notes") for newly issued shares of our Class A common stock, plus, in certain circumstances, cash in respect of accrued and unpaid interest on the March 2025 Exchanged Notes (such exchanges, collectively, the "March 2025 Exchange Transactions"). We canceled the March 2025 Exchanged Notes received in the March 2025 Exchange Transactions. The March 2025 Exchange Transactions settled in four consecutive daily tranches, each for $4.6 million aggregate principal amount of March 2025 Exchanged Notes, commencing on March 25, 2025. As of March 28, 2025, which was the final settlement date of the March 2025 Exchange Transactions, we had issued an aggregate of 1,951,819 shares of Class A common stock in the March 2025 Exchange Transactions. We did not receive any cash proceeds from the March 2025 Exchange Transactions. See Note 9 of the notes to condensed consolidated financial statements included in this Form 10-Q for more detail.
In May 2025, we entered into separate, individually negotiated private exchange agreements and private repurchase agreements with certain holders of our 2026 Convertible Senior Notes to exchange $6.2 million aggregate principal amount of 2026 Convertible Senior Notes (the "May 2025 Exchanged Notes") for an aggregate of 1,098,931 newly issued shares of our Class A common stock (the "May 2025 Exchange Transactions") and repurchase $43.8 million aggregate principal amount of 2026 Convertible Senior Notes (the "Repurchased Notes") for an aggregate of $30.2 million in cash (the "Repurchase Transaction"), in each case, inclusive of accrued and unpaid interest on the May 2025 Exchanged Notes and Repurchased Notes. See Note 9 of the notes to condensed consolidated financial statements included in this Form 10-Q for more detail.
Series A Purchase Agreement
In May 2025, we entered into a securities purchase agreement (the "Series A Purchase Agreement") with certain institutional accredited investors, pursuant to which the Company may issue and sell, in a series of registered direct offerings, up to an aggregate of 200,000 shares of newly designated Series A Convertible Preferred Stock, par value $0.0001 per share, with a stated value of $1,000 per share (the "Series A Preferred Stock"), to the investors at a purchase price of $960.00 per share (the "Series A Preferred Stock Financing"). The initial offering for 35,000 shares (the "Preferred Shares") of Series A Preferred Stock closed on May 22, 2025, following the satisfaction or waiver of certain closing conditions set forth in the Series A Purchase Agreement. We recorded $33.6 million proceeds, net of placement agent fees and other offering expenses. At the closing, we also issued the lead investor 505,051 shares of our Class A common stock as a commitment fee pursuant to the Series A Purchase Agreement.
Debt Conversions
Through the nine months ended September 30, 2025, we received notices from note holders of Series 2 (the "Series 2 Notes") of the 2030 Convertible Notes (defined below) to convert the principal amount of $2.0 million of Series 2 Notes, upon which we issued 127,466 shares of Class A common stock on a reverse split-adjusted basis to settle such conversion of the Series 2 Notes.
Missed Interest Payments and Forbearance Agreements
On October 15, 2025, we did not make the quarterly interest payments due on such date (the "October 15 Interest Payments") in respect of our 9.0% convertible second lien senior secured notes due 2030 and our 11.5% convertible second lien senior secured notes due 2030 (collectively, the "2030 Convertible Notes"). Under the terms of the indenture governing the 2030 Convertible Notes (the "2030 Convertible Notes Indenture"), the failure to make the October 15 Interest Payments on the due date did not constitute an event of default under the 2030 Convertible Notes Indenture; however, the non-payment became an event of default under the 2030 Convertible Notes Indenture and the indenture governing our first-lien, senior secured floating rate notes due 2028 (the "Senior Notes") upon our failure to make the October 15 Interest Payments within the permitted 15-day grace period. During the 15-day grace period, we and our advisors engaged in discussions with advisors to an ad hoc group of holders (the "Initial Forbearing Noteholders") of our Senior Notes and 2030 Convertible Notes beneficially owning, collectively, approximately 94.5% of the Senior Notes and approximately 89% of the 2030 Convertible Notes, including potential strategies and options for a comprehensive solution to the Company's liquidity needs.
On October 30, 2025, the Company entered into forbearance agreements, effective on the same day (each, a "First Forbearance Agreement" and together, the "First Forbearance Agreements"), with the Initial Forbearing Noteholders. Pursuant to each First Forbearance Agreement, subject to the terms and conditions set forth therein, the Initial Forbearing Noteholders agreed to forbear from exercising any of their rights and remedies under the applicable indentures governing the Senior Notes and the 2030 Convertible Notes and applicable law originally until November 6, 2025 (the "First Forbearance Period") as a result of the Company's failure to make the October 15 Interest Payments (as defined in Note 19, Subsequent Events). On November 6, 2025, the Company and certain of the Initial Forbearing Noteholders (the "Extending Forbearing Noteholders"), which Extending Forbearing Noteholders beneficially owned, collectively, approximately 91.3% of the Senior Notes and
approximately 85.8% of the 2030 Convertible Notes, entered into new forbearance agreements, effective as of November 6, 2025 (each, a "Second Forbearance Agreement" and together, the "Second Forbearance Agreements"), in connection with which the Extending Noteholders agreed to extend the First Forbearance Period with respect to the Senior Notes and 2030 Convertible Notes through November 12, 2025 (the "Second Forbearance Period") in exchange for agreeing to pay the fees of advisors to the Initial Forbearing Noteholders and continued good-faith negotiations related to certain other fees and expenses payable to the Extending Noteholders in connection with future forbearance agreements. On November 12, 2025, the Company and the Extending Forbearing Noteholders entered into new forbearance agreements, effective as of November 12, 2025 (each, a "Third Forbearance Agreement" and together, the "Third Forbearance Agreements"; and, together with the First Forbearance Agreements and Second Forbearance Agreements, each a "Forbearance Agreement" and together, the "Forbearance Agreements"), in connection with which the Extending Forbearing Noteholders agreed to extend the Second Forbearance Period with respect to the Senior Notes and 2030 Convertible Notes through November 24, 2025 (the "Extended Forbearance Period") in exchange for certain ongoing reporting obligations and the Company's entry into confidentiality agreements with the Extending Forbearing Noteholders.We, our advisors and the advisors to the Extending Forbearing Noteholders continue to negotiate longer-term forbearance agreements with respect to the defaults under the indentures, and although there can be no assurances an agreement will be reached on acceptable terms or at all, we expects to enter into longer-term forbearance agreements prior to the expiration of the Extended Forbearance Period.
General risk updates
Given the customary business practices in the automotive industry, the rapidly changing nature of the markets in which we compete, and the fact that LiDAR is a new technology in the industry, there remains potential risk that our major commercial wins or other milestone achievements may not ultimately generate any significant revenue. See the discussion under the heading "The period of time from a major commercial win to implementation is long and we are subject to risks of cancellation or postponement of the contract or unsuccessful implementation" in "Risk Factors" in Item 1A of Part I in our 2024 Annual Report.
Components of Results of Operations
Revenue
Our business and revenue producing activities are organized in two operating segments: (i) Autonomy Solutions and (ii) Advanced Technologies and Services ("ATS").
The Autonomy Solutions segment is engaged in the design, manufacturing, and sale of LiDAR sensors catering mainly to OEMs in the automotive, commercial vehicle, robo-taxi and adjacent industries. The Autonomy Solutions segment revenue also includes fees earned from non-recurring engineering services provided to customers in connection with customization of our hardware and software products, as well as revenue generated from licensing of certain data and information.
The ATS segment provides advanced semiconductors and related components, as well as design, testing and consulting services to the Autonomy Solutions segment and to various third-party customers, including government agencies and defense contractors, in markets generally unrelated to autonomous vehicles.
Two customers, customer A and customer B of the Autonomy Solutions segment, accounted for 33% and 18%, respectively, of the Company's revenue for the three months ended September 30, 2025. Two customers, customer A and customer B of the Autonomy Solutions segment, accounted for 37% and 20%, respectively, of the Company's revenue for the nine months ended September 30, 2025. Two customers, customer B and customer A of the Autonomy Solutions segment, accounted for 34% and 17% of the Company's revenue for the three months ended September 30, 2024. One customer, customer B of Autonomy Solutions segment, accounted for 48% of the Company's revenue for the nine months ended September 30, 2024. A vast majority of the Company's long-lived assets are located in North America.
Consideration Payable to Customers
We enter into revenue and purchase contracts with the same customers from time to time. When payments to customers are in exchange for distinct goods and services, we evaluate the underlying economics and fair value of the distinct goods and services. If we determine any portion of the consideration payable to the customer exceeds the fair value of the distinct goods and services, the excess is accounted for as a reduction of the transaction price of the revenue contract.
Cost of sales and gross profit (loss)
Cost of sales includes the fixed and variable manufacturing cost of our LiDAR sensors, which primarily consists of material purchases from third-party contract manufacturers and suppliers that are directly associated with our manufacturing process, as well as personnel-related costs, including stock-based compensation expense for personnel engaged in manufacturing, and engineering. Cost of sales also includes the cost of providing services to customers, depreciation and amortization for manufacturing fixed assets or equipment, cost of components, product testing and launch-related costs, an
allocated portion of overhead, facility and information technology ("IT") costs, write-downs for excess and obsolete inventory, as well as shipping costs.
The ATS segment provides certain services and components to the Autonomy Solutions segment, which are recorded as cost of goods sold or research and development costs depending on the nature and use of such services and components by the Autonomy Solutions segment. These inter-segment transactions are eliminated in the consolidated results.
Gross profit (loss) equals revenue less cost of sales. As we transition from prototype production to series production, average selling prices for our products will be lower. We expect these lower average selling prices to temporarily increase our gross loss until we start to realize the benefits of cost reduction and efficiency measures and production scaling.
Operating Expenses
Research and Development (R&D)
R&D costs are expensed as incurred. Design and development costs for products to be sold under long-term supply arrangements are expensed as incurred. Design and development costs for molds, dies, and other tools involved in developing new technologies are expensed as incurred.
Our R&D efforts are focused on enhancing and developing additional functionality for our existing products and on new product development, including new releases and upgrades to our LiDAR hardware and integrated software solutions. R&D expenses consist primarily of:
•Personnel-related expenses, including salaries, benefits, and stock-based compensation expense, for personnel in our research and engineering functions;
•Expenses related to materials, software licenses, supplies, data labeling and other third-party services;
•Prototype expenses; and
•An allocated portion of facility and IT costs and depreciation.
The ATS segment provides certain services and components to the Autonomy Solutions segment, which are recorded as cost of goods sold or R&D costs depending on the nature and use of such services and components by the Autonomy Solutions segment. These inter-segment transactions are eliminated in our consolidated results. We expect our R&D costs to remain elevated for the foreseeable future as we continue to invest in research and development activities to achieve our product roadmap, and we expect to continue to incur operating losses for at least the foreseeable future due to continued R&D investments.
Sales and Marketing Expenses
Sales and marketing expenses consist of personnel and personnel-related expenses, including stock-based compensation of our business development team, as well as advertising and marketing expenses. These include the cost of marketing programs, trade shows, promotional materials, demonstration equipment, an allocated portion of facility and IT costs and depreciation.
General and Administrative Expenses
General and administrative expenses consist of personnel and personnel-related expenses, including stock-based compensation of our executive, finance, human resources, information systems and legal departments as well as legal and accounting fees for professional and contract services.
Other income (expense), net
Other income (expense), net includes change in fair value of warrant liabilities, interest expense, interest income, gain of extinguishment of debt, gain on acquisition of EM4, changes in fair value of derivative liability, and losses and impairments related to investments and certain other assets and other income (expense).
Change in Fair Value of Derivative Liabilities
The derivatives are classified as marked-to-market liabilities, and the corresponding increase or decrease in value is reflected in change in fair value of bifurcated derivatives.
Interest Income and Interest Expense
Interest income consists primarily of income earned on our cash equivalents and marketable securities. These amounts will vary based on our cash, cash equivalents, and marketable securities balances, and also with market rates. Interest expense consists primarily of interest on our notes as well as amortization of premium (discount) on marketable securities.
Losses and Impairments to investments and Certain Other Assets, and Other Income (Expense)
Other income (expense), net includes realized gains and losses related to the marketable securities, as well as impact of gains and losses related to foreign exchange transactions, and impairment of investments and certain other assets.
Results of Operations for the Three and Nine Months Ended September 30, 2025 and 2024
The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this Form 10-Q. The following table sets forth our condensed consolidated results of operations data for the periods presented (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 18,749 | $ | 15,493 | $ | 3,256 | 21 | % | $ | 53,269 | $ | 52,911 | $ | 358 | 1 | % | |||||||||||||||||||||||||||||||
| Cost of sales | 26,830 | 29,525 | (2,695) | (9) | % | 81,877 | 91,079 | (9,202) | (10) | % | |||||||||||||||||||||||||||||||||||||
| Gross loss | (8,081) | (14,032) | 5,951 | (42) | % | (28,608) | (38,168) | 9,560 | (25) | % | |||||||||||||||||||||||||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | 35,268 | 50,591 | (15,323) | (30) | % | 112,884 | 184,191 | (71,307) | (39) | % | |||||||||||||||||||||||||||||||||||||
| Sales and marketing | 4,264 | 11,097 | (6,833) | (62) | % | 14,465 | 37,752 | (23,287) | (62) | % | |||||||||||||||||||||||||||||||||||||
| General and administrative | 14,109 | 30,206 | (16,097) | (53) | % | 16,272 | 93,045 | (76,773) | (83) | % | |||||||||||||||||||||||||||||||||||||
|
Impairment of goodwill and intangible assets
|
3,719 | 6,647 | (2,928) | (44) | % | 3,719 | 6,647 | (2,928) | (44) | % | |||||||||||||||||||||||||||||||||||||
|
Impairment of long-lived assets
|
7,513 | - | 7,513 | nm | 7,513 | - | 7,513 | nm | |||||||||||||||||||||||||||||||||||||||
| Restructuring costs | 1,708 | 3,284 | (1,576) | (48) | % | 2,952 | 9,546 | (6,594) | (69) | % | |||||||||||||||||||||||||||||||||||||
| Total operating expenses | 66,581 | 101,825 | (35,244) | (35) | % | 157,805 | 331,181 | (173,376) | (52) | % | |||||||||||||||||||||||||||||||||||||
| Loss from operations | (74,662) | (115,857) | 41,195 | (36) | % | (186,413) | (369,349) | 182,936 | (50) | % | |||||||||||||||||||||||||||||||||||||
| Other income (expense), net: | |||||||||||||||||||||||||||||||||||||||||||||||
| Change in fair value of warrant liabilities | - | 65 | (65) | (100) | % | - | 1,050 | (1,050) | (100) | % | |||||||||||||||||||||||||||||||||||||
| Interest expense | (12,342) | (8,908) | (3,434) | 39 | % | (36,918) | (14,422) | (22,496) | 156 | % | |||||||||||||||||||||||||||||||||||||
| Interest income | 961 | 2,407 | (1,446) | (60) | % | 3,997 | 8,356 | (4,359) | (52) | % | |||||||||||||||||||||||||||||||||||||
| Gain on extinguishment of debt | - | 147,346 | (147,346) | (100) | % | 22,056 | 147,346 | (125,290) | (85) | % | |||||||||||||||||||||||||||||||||||||
|
Gain (loss) from acquisition of EM4
|
- | - | - | - | % | (48) | 1,752 | (1,800) | (103) | % | |||||||||||||||||||||||||||||||||||||
| Gain from sale of investment | - | - | - | - | % | 2,908 | - | 2,908 | nm | ||||||||||||||||||||||||||||||||||||||
| Changes in fair value of derivative liability | 2,521 | 2,476 | 45 | 2 | % | 7,841 | 2,476 | 5,365 | 217 | % | |||||||||||||||||||||||||||||||||||||
|
Provision for credit loss
|
(2,186) | - | (2,186) | nm | (2,186) | - | (2,186) | nm | |||||||||||||||||||||||||||||||||||||||
|
Gain (loss) related to investments and certain other assets, and other income (expense)
|
(162) | 32 | (194) | (606) | % | (400) | (5,947) | 5,547 | (93) | % | |||||||||||||||||||||||||||||||||||||
| Total other income (expense), net | (11,208) | 143,418 | (154,626) | (108) | % | (2,750) | 140,611 | (143,361) | (102) | % | |||||||||||||||||||||||||||||||||||||
| Loss before provision for income taxes | (85,870) | 27,561 | (113,431) | (412) | % | (189,163) | (228,738) | 39,575 | (17) | % | |||||||||||||||||||||||||||||||||||||
| Provision for income taxes | (25) | 158 | (183) | (116) | % | 272 | 180 | 92 | 51 | % | |||||||||||||||||||||||||||||||||||||
| Net loss | $ | (85,845) | $ | 27,403 | $ | (113,248) | (413) | % | $ | (189,435) | $ | (228,918) | $ | 39,483 | (17) | % | |||||||||||||||||||||||||||||||
Revenue
The following table sets forth a breakdown of revenue by segments for the periods presented (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Revenue from sales to external customers: | |||||||||||||||||||||||||||||||||||||||||||||||
| Autonomy Solutions | $ | 11,381 | $ | 9,766 | $ | 1,615 | 17 | % | $ | 35,444 | $ | 36,066 | $ | (622) | (2) | % | |||||||||||||||||||||||||||||||
| ATS | 7,368 | 5,727 | 1,641 | 29 | % | 17,825 | 16,845 | 980 | 6 | % | |||||||||||||||||||||||||||||||||||||
| Total | $ | 18,749 | $ | 15,493 | $ | 3,256 | 21 | % | $ | 53,269 | $ | 52,911 | $ | 358 | 1 | % | |||||||||||||||||||||||||||||||
The $1.6 million increase in revenue of our Autonomy Solutions in the three months ended September 30, 2025 compared to the same period in 2024 was primarily due to a $2.1 million increase in service revenue, offset by a $0.5 million decrease in product revenue.
The $0.6 million decrease in revenue of our Autonomy Solutions in the nine months ended September 30, 2025 compared to the same period in 2024 was primarily due to a $8.7 million decrease in product revenue, offset by a $8.1 million increase in service revenue.
The $1.6 million increase in revenue of our ATS segment in the three months ended September 30, 2025 compared to the same period in 2024 was primarily due to a $1.4 million increase in product revenue and $0.2 million increase in service revenue.
The $1.0 million increase in revenue of our ATS segment in the nine months ended September 30, 2025 compared to the same period in 2024 was primarily due to a $3.6 million increase in product revenue, offset by a $2.6 million decrease in service revenue.
Cost of Sales
The $2.7 million and $9.2 million decrease in the cost of sales in the three and nine months ended September 30, 2025, respectively, compared to the same period in 2024, was primarily due to cost reduction initiatives in 2025 and decrease in costs associated with an Iris+ development contract for non-recurring engineering services terminated in the fourth quarter of 2024.
In 2023, we commenced a change in sourcing strategy of certain sub-assemblies and components from one supplier to another, which resulted in discontinued use of certain plant, property and equipment assets as they were no longer needed for their original intended use and required us to abandon certain equipment at the legacy supplier. As a result, we revised the estimated useful lives of the long-lived assets within the impacted asset group, which resulted in us recording depreciation for these assets over an accelerated period. These assets were fully depreciated in the second quarter of 2025. We recorded $0.3 million of incremental accelerated depreciation charges associated with this manufacturing and sourcing change in the nine months ended September 30, 2025.
Operating Expenses
Research and Development
The $15.3 million decrease in research and development expenses in the three months ended September 30, 2025 compared to the same period in 2024 was primarily due to a $12.1 million decrease in personnel-related costs driven mainly by decreased headcount, a $1.9 million decrease in purchased materials, and a $1.3 million decrease in lower expenses allocated to research and development expenses, offset by a $1.6 million increase in outside consultants and contractor fees.
The $71.3 million decrease in research and development expenses in the nine months ended September 30, 2025 compared to the same period in 2024 was primarily due to a $48.7 million decrease in personnel-related costs driven mainly by decreased headcount, a $8.0 million decrease in outside consultants and contractor fees, a $6.6 million decrease in purchased materials and a $4.3 million decrease in lower expenses allocated to research and development expenses, offset by a $1.5 million increase in computer software and other subscriptions.
Sales and Marketing
The $6.8 million decrease in sales and marketing expenses for the three months ended September 30, 2025 compared to the same period in 2024 was primarily due a $4.0 million decrease in personnel related costs including stock-based compensation cost due to lower headcount, a $2.2 million reduction in sponsorship fees and a $0.5 million decrease in outside consultant and contractor fees.
The $23.3 million decrease in sales and marketing expenses for the nine months ended September 30, 2025 compared to the same period in 2024 was primarily due a $8.0 million decrease in personnel related costs including stock-based compensation cost due to lower headcount, a $4.9 million reduction in sponsorship fees, a $1.9 million decrease in subscription fees and license expenses and $0.4 million decrease in outside consultant and contractor fees.
General and Administrative
The $16.1 million decrease in general and administrative expenses for the three months ended September 30, 2025 compared to the same period in 2024 was primarily due to a $13.5 million decrease in personnel-related costs, including stock-based compensation expense and reduction in headcount, a $3.3 million decrease in legal, outside consultant and contractor expenses, a $1.5 million decrease in rent expenses and a $0.4 million decrease in travel expenses, offset by a $2.8 million increase in higher information technology and facility related costs allocated to general and administrative expenses.
The $76.8 million decrease in general and administrative expenses for the nine months ended September 30, 2025 compared to the same period in 2024 was primarily due to a $77.1 million decrease in personnel-related costs, including $34.7 million stock-based compensation expense reversal as a result of the resignation of our former CEO and reduction in headcount, a $3.9 million decrease in rent expenses, a $2.1 million decrease in legal, outside consultant and contractor expenses and a $1.7 million decrease in travel expenses, offset by a $9.7 million increase in higher information technology and facility related costs allocated to general and administrative expenses.
Impairment of Goodwill and Intangible Assets
For the three and nine months ended September 30, 2025 we recognized $2.2 million impairment charges of goodwill of Optogration reporting unit and $1.5 million impairment charges of intangible asset related both Optogration and NRE asset groups. For the three and nine months ended September 30, 2024 we recognized $3.4 million and $3.3 million impairment charges related to goodwill and IPR&D for Freedom Photonics.
Impairment of Long-lived Assets
For the three and nine months ended September 30, 2025 we recognized impairment of long-lived assets due to significant financial and commercial hurdles and decline in sensor shipment because of slower automotive production ramps and the end of legacy contracts, and a sustained decrease in share price of the Company, the earnings forecast for the next several years was revised.
Restructuring Costs
The change in restructuring costs for the three and nine months ended September 30, 2025 was due to actions taken pursuant to the 2024 Restructuring Plan announced in May 2024 and fewer employees impacted by the 2024 Restructuring Plan and the May 2025 Restructuring Plan during the three and nine months ended September 30, 2024 compared to the same period in 2024.
Change in Fair Value of Private Warrant
The change in fair value of private warrant for the three and nine months ended September 30, 2025 is a non-cash benefit or charge due to the corresponding decrease or increase in the estimated fair value of warrants issued in a private placement on connection with the initial public offering of Gores Metropoulos, Inc. ("Private Warrants").
Gain on Extinguishment of Debt
The change in gain on extinguishment of debt for the three and nine months ended September 30, 2025 compared to same period in 2024 was primarily due to the difference between the carrying value of exchanged 2026 Convertible Senior Notes and the collective fair value of 2030 Convertible Notes and the Senior Notes, net of the cash payment received from the investors, along with the gain from the 2030 Convertible Notes principal amount conversion initiated by the holders.
Change in Fair Value of Derivative Liability
The change in fair value of derivative liability for the three and nine months ended September 30, 2025 is a non-cash benefit or charge due to the corresponding decrease or increase in the estimated fair value of the bifurcated derivatives in the 2030 Convertible Notes.
Provision for Credit Loss
The increase in provision for credit loss for the three and nine months ended September 30, 2025 compared to same period in 2024 was primarily due to the full write off of a promissory note we received issued in June 2025. See Note 8 Allowance for Credit Losses in the Notes to Condensed Consolidated Financial Statements in Part I of this Form 10-Q.
Gain from Sale of Investment
The change in sale of investment for the three and nine months ended September 30, 2025 compared to same period in 2024 was primarily due to repurchase of Class A common units by Robotics Research Opco LLC. pursuant to in May 2025. See Note. 6 Investments - Equity Investments in the Notes to Condensed Consolidated Financial Statements in Part I of this Form 10-Q.
Segment Operating Income or Loss
Segment income or loss is defined as income or loss before taxes. Our segment income or loss breakdown is as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Segment operating income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||
| Autonomy Solutions | $ | (67,287) | $ | (106,132) | $ | 38,845 | (37 | %) | $ | (169,917) | $ | (350,719) | $ | 180,802 | (52 | %) | |||||||||||||||||||||||||||||||
| ATS | (7,375) | (9,725) | 2,350 | (24 | %) | (16,496) | (18,630) | 2,134 | (11 | %) | |||||||||||||||||||||||||||||||||||||
Autonomy solutions segment operating loss decreased $38.8 million and $180.8 million in the three and nine months ended September 30, 2025, respectively, compared to the same period in 2024. The decreases in operating loss was primarily due to decreases in personnel-related costs due to decreased headcount and a decrease in stock-based compensation expense and travel related expenses, a decrease in purchased materials, and a reduction in supplies expenses.
ATS segment operating loss decreased $2.4 million in the three months ended September 30, 2025 compared to the same period in 2024. The decrease in operating loss was primarily due to decreases related to impairment of goodwill and intangible assets in the third quarter of 2024.
ATS segment operating loss decreased $2.1 million in the nine months ended September 30, 2025 compared to the same period in 2024. The decrease in operating loss was primarily due to decreases in personnel-related costs driven by decreased headcount and a decrease in stock-based compensation expense.
Liquidity and Capital Resources
Sources of Liquidity and Capital Requirements
Our capital requirements will depend on many factors, including:
•market adoption of new and enhanced products and features;
•production capacity and volume;
•the timing and extent of spending to support R&D efforts;
•investments in manufacturing equipment and facilities;
•investments in information technology systems; and
•debt service costs.
Since inception, we have not generated positive cash flows from operating activities and have incurred significant losses from operations. Until we can generate sufficient revenue and profits from the sale of products and services to cover our operating expenses, working capital, debt service costs and capital expenditures, we expect our cash, cash equivalents and marketable securities, and proceeds from debt and/or equity financings to fund our cash needs.
Issuances of our equity securities have resulted, and any future issuances of our equity securities will result, in dilution to stockholders. Any equity securities issued may also provide for rights, preferences, and privileges senior to those of existing holders of our common stock and may contain terms which impose significant restrictions on our operations. Issuances of our debt securities have resulted in rights, preferences, and privileges senior to holders of our common stock. The indentures governing our outstanding senior secured floating rate notes and our convertible notes contain, and any future indebtedness that we may incur may contain, financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness.
As of September 30, 2025, we had accumulated deficit of $2.3 billion. We expect to continue to incur operating losses for at least the foreseeable future due to continued investments in our product and software development, efforts to build customer relations, expansion into additional markets, and investments in developing advanced manufacturing capabilities, including at contract manufacturing partners.
As of September 30, 2025, we had cash and cash equivalents totaling $54.5 million and marketable securities of $19.5 million, totaling $74.0 million of liquidity. For the nine months ended September 30, 2025, $173.2 million of cash was used in operations. Our principal sources of liquidity have been proceeds received from issuances of debt and equity, including issuance of shares of Class A common stock to vendors and third parties for services provided under our stock in lieu of cash program, issuance of Class A common stock under our Equity Financing Program (as defined in Note 13 of the notes to condensed consolidated financial statements included in this Form 10-Q) or the issuance of preferred stock under our Series A Preferred Stock Financing Program (see Note 12 of the notes to condensed consolidated financial statements included in this Form 10-Q), or any combination of the foregoing. To execute on our strategic initiatives, we will continue to require additional capital resources. We continue to assess our liquidity position and opportunities for additional capital through issuances of equity securities including convertible preferred securities or the incurrence of additional debt. However, we may not be able to obtain funding on acceptable terms, or at all. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations would be adversely affected.
Further, on October 15, 2025, the Company did not make the October 15 Interest Payments in respect of the 2030 Convertible Notes. Under the terms of the 2030 Convertible Notes Indenture governing the 2030 Convertible Notes, the failure to make the October 15 Interest Payments on the due date did not constitute an event of default under the 2030 Convertible Notes Indenture; however, the non-payment became an event of default under the indentures governing the 2030 Convertible Notes and Senior Notes upon the Company's failure to make the October 15 Interest Payments within the permitted 15-day grace period. During the 15-day grace period, the Company and its advisors engaged in discussions with advisors to the Initial Forbearing Noteholders, including potential strategies and options for a comprehensive solution to the Company's liquidity needs, which resulted in the entry into the First Forbearance Agreements with the Initial Forbearing Noteholders and Second and Third Forbearance Agreements with the Extending Forbearing Noteholders. For more information on our convertible notes, including the 2030 Convertible Notes, see "Business Updates" in this section and Note 19, Subsequent Events, in the Notes to Condensed Consolidated Financial Statements in Part I of this Form 10-Q.
As a result, based on our current forecast and liquidity assessment, our unrestricted cash and cash equivalents, cash flows from operating activities, availability under existing financing agreements, and factors that arose subsequent to the third quarter of 2025, we have concluded that the Company is at risk of insufficient funding to meet its obligations as they become due within the next twelve months and there is substantial doubt about the Company's ability to continue as a going concern. Our condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. While the Company is actively exploring a capital restructuring plan among other strategic alternatives, including capital raises and/or a potential sale of all or part of the Company's business or assets, there can be no assurance that, once determined, any such plan will be successfully implemented or that it will be sufficient to mitigate the conditions raising substantial doubt. Therefore, substantial doubt exists regarding our ability to continue as a going concern for a period of at least twelve months from the date our condensed consolidated financial statements are issued. If the Company continues with its current monthly cash expenditures and does not raise additional cash through equity offerings, financing activities, additional revenues, asset sales or otherwise, it will not have sufficient cash and cash equivalents or cash flows from operations to meet its operating and liquidity needs during the first quarter of 2026 and may also breach the minimum liquidity covenant contained in the indentures governing the 2030 Convertible Notes and Senior Notes prior to the end of the fourth quarter of 2025. As a result we may need to curtail or cease operations and/or potentially seek relief under the U.S. Bankruptcy Code.
In February 2024, we entered into two non-recourse loan and securities pledge agreements (the "Loan Agreements") with The St. James Bank & Trust Company Ltd. (the "Lender"), pursuant to which we may borrow up to an aggregate of $50.0 million. Any loans made by the Lender under the Loan Agreements would be collateralized by shares of our Class A common stock or stock we hold of another company. The Loan Agreements require us to pay an up-front structure fee of 1.5% on any amounts borrowed, and any outstanding amounts would bear interest at 8.0% per annum. We did not borrow any amount from this credit facility and had no outstanding balance as of September 30, 2025.
In May, 2024, we entered into a Sales Agreement (the "2024 Sales Agreement") with Virtu Americas LLC (the "Agent") under which we may offer and sell, from time to time at our sole discretion, shares of our Class A common stock with aggregate gross sales proceeds of up to $150.0 million under our equity financing program under which the Agent will act as sales agent in sales of our Class A common stock pursuant to the 2024 Sales Agreement (the "Equity Financing Program"). This was an extension of the Equity Financing Program we established with the Agent in February 2023. In August 2024, we increased the Equity Financing Program by an additional $50.0 million pursuant to the 2024 Sales Agreement and in March 2025, we further increased the program by an additional $75.0 million. We intend to use the net proceeds from offerings under the Equity Financing Program for expenditures or payments in connection with strategic investments, partnerships and similar transactions, repurchases of outstanding debt securities, and for general corporate and business purposes.
Under the 2024 Sales Agreement, we set the parameters for the sale of the shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitations on the number of shares that may be sold in any one trading day, and any minimum price below which sales may not be made. Subject to the terms and conditions of the 2024 Sales Agreement, the Agent has agreed to use its commercially reasonable efforts, consistent with its normal trading and sales practices, to sell the shares by methods deemed to be an "at the market" offering as defined in Rule 415 promulgated under the Securities Act, including sales made through The Nasdaq Global Select Market.
We issued 6,280,277 and 12,527,353 shares of Class A common stock under the Equity Financing Program during the three and nine months ended September 30, 2025 for net proceeds of $14.7 million and $36.2 million, respectively. As of September 30, 2025, $172.5 million of Class A common stock was available for sale under the program.
In May 2025, we entered into the Series A Purchase Agreement with certain institutional accredited investors, pursuant to which we may issue and sell, in a series of registered direct offerings, up to an aggregate of 200,000 shares of newly designated Series A Preferred Stock, to the investors at a purchase price of $960.00 per share. The initial offering for 35,000 shares of Series A Preferred Stock was closed on May 22, 2025, for net proceeds to the Company of $33.6 million, before deducting placement agent fees and other offering expenses. The Company also issued the lead investor 505,051 shares of the Company's Class A common stock as a commitment fee pursuant to the Series A Purchase Agreement. As of September 30, 2025, holders of the Company's Series A Preferred Stock converted an aggregate of 31,800 shares of Series A Preferred Stock into 12,506,641 shares of Class A common stock. See Note 12 of the notes to condensed consolidated financial statements included in this Form 10-Q for more detail.
Cash Flow Summary
The following table summarizes our cash flows for the periods presented:
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | (145,932) | $ | (214,692) | |||||||
| Investing activities | 81,683 | 58,099 | |||||||||
| Financing activities | 36,619 | 132,115 | |||||||||
Operating Activities
Net cash used in operating activities was $145.9 million during the nine months ended September 30, 2025. Net cash used in operating activities was due to our net loss of $189.4 million, adjusted for non-cash items of $36.6 million, primarily consisting of $22.1 million gain on extinguishment of debt, $13.0 million of depreciation and amortization, $12.8 million of vendor stock in lieu of cash program, $7.8 million of change in fair value of the derivatives, $7.5 million of impairment of long-lived assets, $6.3 million of change in product warranty and other, $5.9 million of amortization of debt discount and issuance costs, $4.6 million of inventory write-offs and write-downs, $4.9 million of amortization of operating lease right-of-use assets, $9.2 million of stock-based compensation, $3.7 million of impairment of goodwill and other intangible assets, $2.9 million gain from sale of investment, $2.2 million bad debt expenses related to promissory notes and cash used for operating assets and liabilities of $6.9 million due to the timing of cash payments to vendors and cash receipts from customers.
Investing Activities
Net cash provided by investing activities of $81.7 million during the nine months ended September 30, 2025 was primarily comprised of $119.0 million of proceeds from maturities of marketable securities, $16.2 million of proceeds from sales and redemptions of marketable securities, and $2.9 million of proceeds from sales of equity investments, partially offset by $54.1 million related to purchases of marketable securities and $2.1 million issuance of promissory notes.
Financing Activities
Net cash provided by financing activities of $36.6 million during the nine months ended September 30, 2025 was primarily comprised of $31.4 million proceeds from the issuance of Series A Preferred Stock, net of issuance costs, discount and commitment fees, $36.2 million cash received from the sale and issuance of shares of Class A common stock under the Equity Financing Program, offset by $30.3 million paid for the repurchase of a portion of outstanding 2026 Convertible Senior Notes.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
We believe our critical accounting policies involve the greatest degree of judgment and complexity and have the greatest potential impact on our condensed consolidated financial statements.
During the three and nine months ended September 30, 2025, there were no significant changes to our critical accounting policies and estimates. While there have been no significant changes to our policies during the three and nine months ended September 30, 2025, there were changes in circumstances in certain assumptions within two of our critical accounting estimates to reflect developments during the three months ended September 30, 2025. For a more detailed discussion of our critical accounting policies and estimates, please refer to our 2024 Annual Report and Note 2 of the notes to condensed consolidated financial statements included in this Form 10-Q.
Goodwill
The Company reviews goodwill for impairment annually in its third quarter, and more frequently whenever events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, as a basis for determining whether it is necessary to perform a quantitative analysis. During the third quarter of 2025, the Company determined that the fair value of its Optogration reporting unit was lower than its carrying amount due to significant financial, commercial hurdles and decline in sensor shipment because of slower automotive production ramps and the end of legacy contracts, and a sustained decrease in the share price of the company. For the three and nine months ended September 30, 2025, we recognized $2.2 million in impairment charges of goodwill of the Optogration
reporting unit. This charge is reflected in "Impairment of goodwill and intangible assets" in our condensed consolidated statements of operations. The Company estimates the fair values of its reporting units using a discounted cash flow model. Significant inputs to the reporting unit fair value measurements included forecasted cash flows, discount rates, and terminal growth rates which were determined based on management estimates and assumptions.
Impairment of Long-lived Assets
We evaluate the recoverability of our long-lived assets with finite useful lives whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Examples of such triggering events include a significant decline in the market value of a long-lived asset, a significant adverse change in the manner or extent of its use, a deterioration in the business environment, the loss of a major customer or partner, sustained operating losses, or a current expectation that an asset will be sold or otherwise disposed of significantly before the end of its estimated useful life. When a triggering event occurs, we perform a recoverability test by comparing the estimated undiscounted future net cash flows expected to be generated by the asset group to its carrying amount. The asset group represents the lowest level for which identifiable cash flows are largely independent of other assets and liabilities. If the carrying amount exceeds the estimated undiscounted cash flows, the asset group is considered not recoverable, and the asset group's fair value is measured. We measure and record an impairment loss equal to the excess of the asset group's carrying amount over its fair value.
In the third quarter of 2025, management identified an accumulation of triggering events such as the significant financial, commercial hurdles and decline in sensor shipment because of slower automotive production ramps and the end of legacy contracts, and a sustained decrease in share price of the Company. These factors collectively required an impairment review of the related long-lived assets.
A test of recoverability was performed which identified a possible impairment as the asset group's carrying value exceeded the recoverable value. The Company uses the market participant perspective when determining fair value of an asset group based on estimated future cash flows.
As a result of this analysis, we recognized $9.0 million in impairment charges of intangible assets and long-lived assets related to the Optogration and NRE asset groups during the three and nine months ended September 30, 2025. This charge is reflected in "Impairment of goodwill and intangible assets" in our condensed consolidated statements of operations.
Smaller Reporting Company Status
Based on the Company's public float as of June 30, 2025, and its revenue, the Company is a smaller reporting company and will take advantage of certain reduced disclosure requirements.
Recent Accounting Pronouncements
See Note 2 of the notes to condensed consolidated financial statements included in this Form 10-Q.
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