Austin Russell: Basically, what you see is that, because you have sort of a cost variance, there of call it, it’s very it’s very hard to predict the exact like what it is to be exact like plus or minus 10%, when it comes to that. But because the way that this happens, with the contracts that we have with automakers and like the revenue recognition pre-production percentage of completion as well as relative costs so that when things go up or down by, 5% here or there plus 5% there and adjust the timing of the revenue recognition. And then that’s kind of as we go through it. Obviously, we have the same kind of questions. It’s like, well, why does this — why does this input affect this or whatever it may be? But from a business management standpoint, we’re on track to our milestones and what we’ve laid out, including, to the important part for startup production.
And that lines up with both — with both Iris and ultimately Iris+ as well. That comes thereafter for the respective additional programs for SOP.
Aileen Smith: It’s going to come from John Babcock from Bank of America.
John Babcock: I guess just my question, the performance that, you’ve seen this quarter and then what you’re expecting through the rest of the year. Is there anything we should take from that and how that impacts your longer term outlook? I know you guys reiterated it but just want to see if this poses any risk or if there are any other factors that we should keep in mind as we’re thinking about that?
Tom Fennimore: The answer to that question is, John, we don’t — we don’t see anything, while these are our bumps on the road and the revenue came in a little bit lighter than expected. And we talked about some of the gross margin headwinds as you kind of industrialize your product and kind of go from the B to C sample phase. You freeze the design and actually reach serious production. And lot of these, launch related costs wind down. And so as you successfully industrialize, those kind of bumps on the road costs that were higher costs that we’re seeing in COGS, those should dissipate. We’re seeing it on Iris where — we’re — a year plus or minus ahead in terms of development line there. You know, Iris+ is just a little bit behind that. And, as you’re going through that industrialization process, the cost can be a little bit unpredictable. On the revenue side, once again.
Austin Russell: Yes, plus or minus like 5% or 10%, like we’re not talking, I mean, because then basically that again feeds into the respective revenue line. That’s, okay, plus or minus 5% or 10% or whatever it is. So if anything that then gets offset respectively to like it’s not like lost, it’s just based on the economy that it gets offset to respectively the next year. So it doesn’t actually affect, the long term outlook of what we got.
Tom Fennimore: So, John, it doesn’t change the size of the order bump. We’re still on track for the SOP target dates that our customers want to be on. And so you just need to make it to there and then, start converting the order book into real annual revenue. And so these bumps on the roads that we’re hitting there don’t impact that. And some of the revenue lightness we experienced in Q3 is related to, I would say, a couple of things, particularly with these issues. One, we had to move some of our LSI engineers off revenue for external projects. To help you know implement some of these design changes. And so, that’s revenue where, didn’t come in during this quarter when those engineers free up and we’re going to get that in the future.
And then, the way that we account for the revenue we receive for the development work it’s based upon percentage completion and so we’re still going to recognize the same amount of revenue, you just because of percentage completion methods, have to recognize less in this specific quarter. As your cost goes up, your percentage of completion goes down.
John Babcock: Okay. And then just one quick follow-up here as it you know pertains to the next-generation LiDAR, how much of that investment has already been made versus how much does still have to be done and then also how where have you made OEMs of this product of capabilities et cetera, has this flowed through into your order book at this point?
Austin Russell: Yes. So I think we’re really just starting to successfully get that off the ground of where we’ve — we spent years’ worth of work on the back end from a technology development standpoint, creating the fundamentals of what’s there, so I would say the — I mean the majority of the time and investment for what’s required to create the fundamentals of the technology for the next gen LiDAR is already done, the real question at this point is being able to progress throughout this coming year to get to a stage of where we can really set this up to be a LiDAR system that can fundamentally be on every vehicle produced and that’s really the goal is that we talk about standardizing and democratizing safety and economy and I think we — we recognize that as fantastic as the products are today, that it’s meant for millions of sensor scale, not tens of millions of sensors in terms of respective scale that we can be able to get out there with and this is exactly what this is designed for so we can really capture the larger automotive industry and also not just the initial vehicle launches that some of these automakers have.
But also when you start going towards even very mainstream vehicle models as well this will be particularly helpful, so that’s really what — what we’re seeing. And then when it comes to that investment standpoint, I mean, you take a look at like most of the investment is actually goes into the infrastructure that’s required for both development as well as the call of the manufacturing infrastructure and getting that setup right to be able to successfully produce this. And that’s really what we’ve been doing in partnership, of course, with Celestica and TPK respectively. So setting that groundwork is very, very helpful. The level of like efficiency, I’d say just from a development cost perspective is, dramatically higher for each iterative product thereafter.
And that’s something that’s also particularly helpful when we have the economies of scale and the supply chain to be able to support it. If you didn’t have that with like $1 billion of business and shipping being able to have a million unit supply chain along the way, then that’s a very different scenario and outcome than if we did and that’s what we’re able to leverage successfully. So with that said, there’s more work to do obviously on this but we’re very excited to have an opportunity to unveil details respectively next year about the next generation product.
Tom Fennimore: And then John, while we haven’t been talking a lot publicly about the details of our next generation product, we have been talking about it with some of our customers and with your question about order book. There was nothing for our next generation product in the order book. At the end of last year, I’m pretty confident some of the positive growth you’ll see in the order book this year will include, some portion of it from our next-generation product. And as Austin said, we’ll talk about that in the future and hopefully near future here.
Aileen Smith: Our next question is going to come from Natalia Winkler at Jefferies.
Natalia Winkler: So the one I just wanted to clarify, Tom, on those 2 contracts that you highlighted in the — in the letter that have been pushed up, could you explain a little bit more how do these work and also may be part of that, like how should we think about that sequential growth that you guys are seeing in the revenues in the fourth quarter?
