Q3 2020 Velodyne Lidar Inc Earnings Call

Good day and welcome to the vials I like Threeq.

Threeq U.S. White Twentytwenty earnings call today's conference is being recorded.

At this time I would like to turn the conference over to Ms. law that are there and the Blue shirt group. Please go ahead ma'am.

Good afternoon, and thank you for joining us on todays conference call to discuss the old I invite Inc.'s third quarter 2020 actually so what's the thought today's call are dr. a nod to go a lot of Teledyne, Chief Executive Officer, Andrew <unk>.

Our next Chief Financial Officer, before we begin I'd like to remind you that shortly after the market close today issued a press release announcing its third quarter 2012 financial results.

Oh, they also publish and Investor presentation, you may access the press release and the presentation in the Investor Relations section of Teledyne lighter Dot com.

Today's discussion includes forward looking statements. Please refer to our form 8-K dated October 2020 filed with the Securities Exchange Commission for a discussion of factors that could cause the companys actual results could differ materially from these forward looking statements I would also like to like do that during the call we will discuss.

The non-GAAP measures related to Celadon performance you can find a reconciliation of those measures to the nearest comparable GAAP measures in the press release contain.

To ensure that we address as many analysts questions as possible during the call. We request that you. Please look at to one initial question and one follow up question now I'd like to turn the call over to Dr. not go on C O Abella Guy.

I too long, though.

Thanks to everyone for joining us this afternoon I honestly I looked for you all paladyne lighter.

[laughter] combination with good often does feel car loans.

September 29.

Hi, it's not publicly traded company.

I'm kind of excited about this opportunity to present, our quarterly results for spot.

On behalf of management, we extend a song of the future into our dedicated internal team our customers and.

Our new public shareholders you block after whatever you ought to be.

It also grateful for the pioneering work or founder David Hall, who.

Launched the light out industry David's vision and expertise has a few words.

Development before turning over the call through Gamer, who would walk us through the third quarter of 2020 financial results.

The overly we get on the brink of lighter power to tournaments whenever you shouldn't be.

The applications for the lighter endless and continue to grow that'd be on that too.

Lie down a neighbor's berard secular trends for moving goods moving people smart cities and security.

Is the only light our company today with both the breath of product portfolio.

And the manufacturing capability to deliver lower price lighter wood multiple specifications.

Oh for real World applications. These include consumer vehicles party that systems industrial robotics delivery systems Smart cities Chuckles and many more.

As many of you know lighter is sharp light detection arranging.

Lighter based protection systems are advancing the development of faith automated system with multi dimensional object detection that distance and classification with a very high level of precision.

But I think that's the first more than lighter with a broad patent portfolio.

Double customer base.

And a valuable history of working across industries to help define applications and solution that enhance the safety of autonomous vehicles assistance.

Right, so that those vehicles and systems come to market quicker.

You all good target 25, plus market segments beyond automotive.

Many high margin not automotive industries on incorporating like that are considering like our seriously for adoption.

The project that in the future more than half of our revenue would be from outside of the auto space.

Ecommerce is one example.

The demand for contact list last mile delivery solutions accelerated during COVID-19.

Last year, the projected Vince for last mile delivery was two years out, but now we see contracts more quickly than anticipated.

On the regulatory front robotic delivery systems out approved already in 11 states, including Florida, and Texas and several cities such as Palo Alto and San Francisco.

And one last month application our customers analysis.

Sure that transitioning from human to like to Cook robotic delivery use a 96% cost savings.

He was saying and expense of $1.60 cents per package down to six cents per package.

In addition, we commerce a lighter technologies also at the forefront of improving opened security in functionality.

The city's Reno, Nevada recently integrated our lives sensors into the city infrastructure.

The groundbreaking project between the University of Nevada, and Nevada Governors office of economic development analyze this precise traffic into the restaurant data at intersections.

BYOD smart traffic lights.

We have engaged with many other state video TV and even internationally for similar programs.

The other night lighter sensor collect anonymous traffic data in any weather conditions, the daytime and nighttime.

Our latest technologies this evolutionary application.

Represents a seismic shift in the transportation industry.

Turning in a new leader level of safety.

Our business approach fosters entrenched customer relationships with high switching costs.

Our stickiness factor increases as we move closer to launch.

Once we have a design win with the customer they initiate the integration of our technology into their components.

These customers then bill validate and excellent technology their systems that are then not easily transferable due to the underlying software.

In fact, our relationship security grows as our customers move further into the program.

Cost is no longer a barrier to the adoption of lighter.

As we are seeing approachable pricing expands the demand for the application of like that technology can many industries, we have a direct near term line of sight.

For further lowering the ASP of our faith sensors, new use cases that evolving and we believe our time will only grow.

In my prior role at Teledyne, I was our company's Chief Technology Officer.

Our team has built a broad product portfolio and rotational and solid state lighting to avoid reliant on just one product or technology.

I said earlier, but design has an unmatched breadth of products architected for a wide range of applications, we manufacture surround view directionally solid state and blind spotlight.

To give you. An example of one of our popular centers. The al Subprime BLS Fund 28 offers Saddam rotational view with 300 meters of high resolution vision.

Our lower pricing in miniaturization increased installation options for many applications.

Today I can hold available in the palm of Manhattan.

I would note that we have designed a product portfolio with interchangeable components across the product lines, which gives customers engineering teams economies of scale.

We have fully automated wafer scale like our manufacturing processes in place today and operating with our contract manufacturers.

He can produce at scale and we are the furthest along the path to mass production.

With systems already in place and boost.

Our capex spending over the next several years, we'll be tens of millions and not hundreds of millions of dollars.

We have developed complex I gotta guidance and software systems to complement our sensor products.

Software is only possible with a robust pre existing hardware installed base like Paladyne has today.

Higher margin software subscription model is therefore, a natural adjacency for us and.

And we had on the cost of winning new software contracts, which are incremental to our pipeline.

We are accumulating data sets and building off of these datasets and applying that AI across our product installed base.

Now I'd like to highlight recent business developments.

First we have 24 signed and awarded multiyear contract agreement with six added in the third quarter of 2020.

Our total number of pipeline projects is 175.

We continue to experience a high conversion from the artist playing out a few stages for contracts.

Based on our long history of selling our latest solutions, we understand the need to plan for an in depth engineering led sales cycle.

And the value that this that dozens to entry for a less established manufacturer to secure quality contracts at volumes.

Paladyne transforms lives and community by advancing save for mobility to help.

We issued a recent white paper comparing lighter centric data to the current camera and radar based technology in nighttime conditions for.

Proprietary testing indicated the superiority of odd lighter based solution, where the camera and radar system trip.

Finally in late October we hosted our third annual World Safety Summit.

Our policy work brings people together.

Mark vision technology, ultimately translate to a vast reduction or fatality among operators drivers and pedestrians in closing, but as I say is far from a one technology or one customer that company.

We manufacture a broad portfolio of exceptional lighter product.

On technology, and the diversity of customers and industry are key strengths of celadon.

Now I will turn our call over to my colleague grew to walk you through our third quarter financials.

Thank you bye.

Thank you on it and thank you again to everyone for joining us today I'm through hammer the CFO for Belden lighter company.

I'm pleased for this opportunity to share Golden light our financial results for the first time as a public company Abhi.

Ill begin with an overview of the company's third quarter results before moving on to guidance for the fourth quarter and Reconfirming fiscal year 2020.

Third quarter 2020 is a milestone for Veledimex, we started trading on September thirtyth on NASDAQ under the ticker symbol video VR for the common stock and VR VR W. Towards.

This was a long process for the company's management team employees and investors and we are excited and proud to be the first publicly traded lighter company with an exciting future opportunity set.

Business continues to benefit from broad interest in wider solution, both automotive markets and not automotive markets Importantly, the company continues to see healthy levels of customer engagement as evidenced by an increase in long term contracts.

Third quarter revenue of $32.1 million represents a 137% increase versus the comparable quarter last year.

Searchers are the company's focus revenue stream this quarter, we sold a record number of Alco prime units predominantly to the automotive sector.

Another important area for the company is multiyear agreements with customers that are putting their supply chain in place for solutions that include lighter.

The company finished the third quarter with 24 multi year agreements Baidu, an automotive customer was the largest of these contracts robo sense, a last mile delivery customer accelerated its program in response to COVID-19.

True to our diversified end market model, our third quarter contracts represent customers offering solutions in each of our targeted end user segments.

As highlighted in the press release, GAAP and non-GAAP gross profit in the quarter benefited from a onetime restocking fee as well as the start of production at our contract manufacturers.

The company expects next quarter's GAAP and non-GAAP gross margin to reflect a more normalized production model and I'll touch on that during guidance.

R&D was lower for the quarter due to the reclassification of some expenses to cost of goods sold in connection with nonrecurring engineering services offered to our customers.

Third quarter Gionee includes legal expenses related to the recent successful up intellectual property protection actions as well as the write off of IPO related expenses.

Non-GAAP operating income does not include the sale of our Morgan Hill building.

That building was sold for a net gain of approximately $7.5 million and the sale proceeds decreased third quarter operating expenses by the same amount under GAAP accounting rules.

At the end of the third quarter relatively lighter with well capitalized with $298 billion in cash and short term investments on the balance sheet.

This includes the proceeds from the equity financing that occurred in conjunction with the business combination as well as global licensing agreements with has signed robo sets for 360 degree surround view might our sensors.

I would note that the capital expenditures were half a billion dollars in the third quarter.

Lastly, just to level set everyone. The company ended the quarter with 140.5 million weighted average shares outstanding.

This accounts for the conversion of all available and lighters common and preferred shares plus the shares registered for the investment that it closed at the time of the business combination.

$65 million stock based compensation expense, resulting in a total expense of $59 million.

On a non-GAAP basis sales and marketing expenses are projected to be remain around $4 million for the fourth quarter.

<unk> operating expenses.

In fact, it will include approximately $44 million of stock based compensation expense, which will result in total expenses of approximately $49 million in queue for.

On a non-GAAP basis Q4, G&A expenses reflect a decrease in legal expenses related to our I P protection, but the reduction of those costs are partially offset by DNO insurance and other public company costs.

The total non-GAAP G&A expenses are estimated to be approximately $5 million.

Thank you.

Feel I'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Voice prompt on the phone line would indicate when your line is open. Please state your name before posing your question again press Star one to ask a question.

We will now take our first question from Mr. Tristan.

Yeah from Baird. Thank you.

Irrs on developing a broad portfolio of products to.

Be able to enter different markets at different price points.

And still provided a deep the kind of successful margins company should have its going to be a big joint company.

And what we're seeing is that so you could see our when I talk about our weighted average asps in the future because these solutions may be using vela razor or as we get even out a little further could start using della bits in the coming years.

That will that will result in the blended weighted average ASP to be coming down but overall. This is purpose built based upon the products that are being used that weve been developing for the last four to five years.

Okay, Great and then as you kind of question.

How much visibility do you have into the initial two basic design wins and looked at this market share do you think you can get to that segment.

And in terms of timeframe. It is 2023, when we should we see this in volume wiping to able to education.

Yes, so I didn't get any applications.

Clearly we are having those conversations today with a lot of the Oems and this is really on the backs off on it you need to create jumping act develop it which we announced at CES earlier, this year, which is $100 actually laid out in mass volumes that could be unlocked and two because now we have EBITDA.

Low price points that are needed for the editor adoption. So we added and they've been having made these conversations with multiple Oems on our own.

Use of this technology in conjunction with our software, but the Whiting has two functions like the leap.

From a from a volume perspective, yes, we expect these to come to fruition more liking the 23 24 timeframe.

That's as a result of this conversation.

Great. Thank you.

Thank you. Thank you.

Operator next question please.

We will now take our next question from Mr., Colin Rusch from Oppenheimer. Thank you and please go ahead.

Thanks, So much guidance can you give us a sense of the total dollar volume of those six awards that you're.

No name them and their specific applications that are much more.

And long range that are needed.

Hi, Lee a that type of application. So I would say we have multiple products that it does applications and Furthermore, we we have these startups that are in production today and shipping too much for the customers.

Okay and the last one for me cause in terms of.

Part time preparedness a scale with you are there there is a concern and types apply or where you're having trouble getting second thoughts horses or that we should be aware of or that you're working on actively right. Then I'll just get onto something furniture, you're talking about.

Yeah, you know this is Judy.

Did you want sex Amendment, one other thing that sets melatonin a box although it. Okay. So this is what 50 I can do for five <unk> should we have all of the period of time developed architecture Steiner scale.

Develop supply changed that had multiple sources gone on to keep him. Please.

And I could find that we have diversity not just from a jogger picco perspective, but also from supplying perspective <unk> almost like a key component and that's what gives us confidence in being able to <unk> into the pie volume can't connect dot.

Talk to you about today.

Great. Thanks, so much for us.

Thank you. Thank you.

We will now take our next question from Mister John Murphy from Bank of America. Please go ahead.

Good afternoon, guys can you hear me.

Yes, we can thank you for journeys.

Thank you so much for having me Uhm just a first question as we look at disclosure around revenue.

You need to have a number of sensors for an <unk> for the third quarter of 20 I'm. Just wondering if you could give us idea of mix and <unk> in the third quarter 20th versus third COVID-19, and then also as we look at what you're having some slide loving in your third quarter deck, which is incredibly helpful and understand.

And markets over time I'm, just curious if you could give us some flavor of how the product mix will shift over time as these different and markets grow maybe a year or two three out true.

Uhm I'm sorry on the first question, John I think you're asking about asp's.

<unk> <unk> this year versus last year's that right Q3, 2020, 123, 20 2019, Yeah. If you could give us some idea of the sensor number year over year E. S. P year over year, and and how mix no shifted between products on a year abbreviation your patience in the corner.

Yeah. So you know really what we're very focused on.

Negative entities in Belgrade, having said that we definitely see for some of the large volume caving application binaries envelop. It has me move into the out here. So it become a bigger portion of units shipped uhm, but the sound. Good products, we can sure to be incredibly strong and some.

Segments like level towards that was fine as well as the Baltic and where the country with the also be pushing up that Avenue.

It really made it so that we can feel pretty confident that we should be able to hit the margins that we've been talking about previously.

Can I check how do you think the blind Higgins.

Sorry, I didn't mention I, just need to fly and do have been marching towards Faulkner.

You design will find nanometer and maybe the key advantages bed at a table to pick the Bahamas off with application, but do that with you have significantly lower of cost for the key components that I've used in the building up the lighter such as laser sent the actors that'd be have that moved to use for your solid.

Yeah, I actually developed a perspective I would say that we discussed.

Okay. We have now all the tools in the toolbox of Allosaur print weird looking we country to work with my two customers and is there anything that into their systems, you're seeing a lot of strong interest <unk>.

Yeah, just get market leader in the state.

I've been doing this for them.

Order a decade at this point.

I'd be happy to admit it to Debbie would <unk> you know I I I can reshape more of a <unk> in a week than any many of the other players of all of the other b, a shipping and <unk> and that's 11 upscale it's critical for some of these hyperscale or blood looking.