Sumit Sharma: Yes, I think like if you look at the margin or the contract, anybody would be entertaining at this point. These are big numbers. That would take some time. But they have to nominate somebody so we can start going by assigning resources because there are timelines. I mean, one of the things is, in the early part of the RFQ is they vet out, are you able to deliver to the timeline they need? And if not, it doesn’t matter if you have the best technology, you’re out. Okay. So, that’s important to them. Now again, different people have different reactions to the 2027. But that’s realistic. That’s where OEMs are right now. Their software will take a while to develop, even though you’re ready with your hardware. So, but again, those are not like significant like into the next decade or anything, right?
They’re all within contained within a typical OEM engagement for these kind of technologies to be incorporated into their vehicle, right. So, as you can imagine, that timelines, they have specific dates. They have to build their fleet. They have to collect data. We have to deliver reliability. They want to see a control build. They want reliability data. They want to see the fully automated line. This whole development is a multi-year development. And you want to not do it with thousands of engineers. You have to do it with concerted effort. So, I get it. I’m a shareholder. I mean, I bought shares in the company on my own as well. It can’t go fast enough for all of us. And I get that. And I live it every day. And even if, like, nobody’s applying pressure on me or anybody in the company can assure you I apply pressure on myself, and everybody in the company feels that anxiety, I get it.
And I promise you, we get it. But OEMs are OEMs. I feel confident because the way things are moving, this is how people that are about to make big decisions talk. Nobody’s going to get rushed, especially somebody is going to sign up for something big, my provision in our history has done some big contracts, right? But nothing is big. Never, ever anything is big as ever crossed us, right? And grab multiple of them simultaneously. This is a big moment for us. I want to make sure that we sign agreements that are sustainable, that they appreciate what we bring, and what risk they want us to take. And I think a term I like that Anubhav used, we don’t want to transfer our wealth from our investors to our customers to win a project. And you can’t just throw in your towels and just go home because they’re asking for something tough.
I just feel like very confident. We can talk to them. We can describe them in situations. We can show them the details. And they’re getting a pretty good deal. Somebody that is actually going to give them a commercial proposal that says, you know what, I can give you in the hundreds of dollars. Here you go. But here’s the economy of scale, I need from you. And if you don’t achieve the economy of scale, here’s what the price is going to be. And somebody could, and OEM could say, yes, I want a flat price from day one. Well, from day one, if the first year volume is low and I’m running negative gross margin, my investors are not going to be happy then, right? So we have to find a balanced approach. And what I can clearly say is they listen, they talk, they’re engaged.
They understand. They all understand because if the tables were turned, they acknowledge, right? Yes, I understand what you’re putting together, right? And so it’s like any deal. When you have big numbers involved, you got to go through it. I wish I could give you a lot more flair about it. And maybe that’s going to get people understanding the process. But this is just a lot of money. And you got to have a cool head and just get through the process. You can’t have any hyperbole to investors, to the market, to your employees, or to the customers.
Operator: We do have a question from Andres Sheppard from Cantor Fitzgerald. Andres, your line is live.
Unidentified Analyst: Hey, this is [Nathan] (ph) on for Andres. Can you hear me?
Sumit Sharma: Yes, we can hear you.
Unidentified Analyst: Sweet, cool. Congrats on the quarter. And thanks for taking our question. So, I was just wondering if you could quickly walk us through what led to the revenue guidance revision and potentially related to that how long it would take for you to materialize a potential OEM contract? And with that what type of margins would you expect once that begins? Thank you.
Sumit Sharma: Right. So, let me take that question. So, on and just to clarify the reduction in the revenue guidance from 10 to 15 to 6.5 to 8 was related to direct sales so if you’d recall we had talked about that this year it’s going to be — the revenue is going to be from MOSAIK and the sale of MOVIA and the reduction is primarily attributable to some of the customers where we saw the opportunities moving into 2024 and this is primarily related to just tightening our forecasting processes with some of these smaller legacy Ibeo customers to better estimate the sales cycle and predict revenue. Since these are smaller opportunities, we’re now beginning to have better visibility into the sales funnel as we create the companies together.
Now in terms of margin obviously, Q3 we delivered 80% adjusted growth profit margins, which is again in line with the software or high contribution margin that we had talked about, and we expect that to continue in the fourth quarter as well and obviously, in 2024 when we provide more detailed guidance, it will — the adjusted gross profit margins would come down to become more normalized as we tend to get more NRE revenue from OEMs as well. So, hopefully, that answers your question about the guidance and how to model it going forward.
