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Cepton(CPTN) - 2022 Q2 - Quarterly Report

Revenue Growth and Market Opportunities - Cepton has been awarded the largest known ADAS lidar series production award in the industry to date by General Motors, which includes multiple platforms and vehicle models, with an estimated production start in 2023[144]. - The company expects significant revenue growth as it transitions from prototype sales to commercialized production-ready lidar sensors, driven by strategic partnerships in the automotive and smart infrastructure markets[165]. - The automotive market represents a large portion of the total addressable market, with Cepton currently engaged with all of the top 10 global automotive OEMs based on vehicle production volume rankings for 2019[163]. - The company anticipates that lidar adoption in smart infrastructure markets may occur at a more rapid pace compared to the automotive sector, with applications varying widely from tolling to security[156]. Financial Performance - Total revenue for the three months ended June 30, 2022, was $2.6 million, representing an increase of $1.7 million, or 186%, from $0.9 million for the same period in 2021[181]. - Lidar sensor and prototype revenue increased by approximately $0.5 million, or 61%, to $1.4 million for the three months ended June 30, 2022, compared to $0.9 million for the same period in 2021[182]. - Net income for the three months ended June 30, 2022, was $0.8 million, compared to a net loss of $(10.2) million for the same period in 2021, representing an improvement of $11.0 million[181]. - The company recorded net income of $42.0 million during the six months ended June 30, 2022, offset by $69.8 million of non-cash income and expenses[209]. Expenses and Losses - Operating loss for the three months ended June 30, 2022, was $(16.1) million, compared to $(10.2) million for the same period in 2021, representing an increase in loss of $5.9 million, or 58%[181]. - Research and development expenses increased by $2.3 million, or 37%, to $8.4 million for the three months ended June 30, 2022, from $6.1 million for the same period in 2021[191]. - Sales, general and administrative expenses increased by $3.5 million, or 96%, to $7.2 million for the three months ended June 30, 2022, from $3.7 million for the same period in 2021[193]. - Total operating expenses for the three months ended June 30, 2022, were $15.6 million, an increase of $5.8 million, or 59%, from $9.8 million for the same period in 2021[181]. Cost Management and Margins - Cepton's gross margin is anticipated to increase as material costs decrease and fixed manufacturing overhead costs are absorbed over larger production volumes[159]. - The company is focused on driving down product costs to achieve mass-market adoption of lidar in automotive applications, balancing performance, reliability, and cost[158]. - Increased costs for components and logistics, driven by inflation and supply chain issues, have negatively impacted gross margins and may continue to do so[169]. - Lidar sensor and prototype cost of revenue increased by $1.2 million, or 91%, to $2.5 million for the three months ended June 30, 2022, from $1.3 million for the same period in 2021[187]. Cash Flow and Liquidity - As of June 30, 2022, the company had cash, cash equivalents, and short-term investments totaling $31.0 million, which are expected to satisfy foreseeable liquidity needs for at least the next twelve months[200]. - The company received net cash proceeds of $47.2 million from the Business Combination and PIPE, net of certain transaction costs[203]. - During the six months ended June 30, 2022, the company incurred negative cash flows from operating activities of $32.3 million, reflecting an accumulated deficit of $53.4 million[205]. - Investing activities used $24.3 million of cash during the six months ended June 30, 2022, primarily from purchases of short-term investments of $32.4 million[212]. - Financing activities provided $57.4 million of cash during the six months ended June 30, 2022, consisting primarily of $47.2 million from the Business Combination and PIPE investment[214]. Risks and Uncertainties - The company is subject to risks and uncertainties typical of early-stage companies, including the uncertainty of successfully developing products and securing contracts[206]. - Cepton is classified as an "emerging growth company" and will maintain this status until at least the end of the 2022 fiscal year[228]. - The company expects to remain an emerging growth company until it achieves total annual gross revenue of at least $1.07 billion or the market value of its common stock held by non-affiliates exceeds $700 million[230]. - Cepton's revenue is primarily generated in U.S. dollars, while expenses are incurred in local currencies, exposing the company to foreign currency exchange risk[235]. - The company has not engaged in any hedging strategies to manage foreign currency exchange risk, but will reassess its approach as international operations grow[235]. - Cepton does not believe inflation has materially affected its business, but significant inflationary pressures could harm its financial condition[233]. - The company is exposed to market risks primarily due to fluctuations in foreign currency exchange rates and interest rates[232]. Production and Supply Chain - Supply chain shortages have led to increased lead times for some products, creating potential mismatches between supply and demand, which may impact revenue forecasts[161]. - The series production award from OEM-B has expanded from four to nine vehicle models, indicating a growing acceptance and integration of lidar technology in various vehicle classes[153].