Q3 2020 Velodyne Lidar Inc Earnings Call

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Good day and welcome to the values I like that Threeq U F Y Twentytwenty earnings call Today's conference is being recorded.

At this time I would like to turn the conference over to Ms. law that they're going to produce church group. Please go ahead ma'am.

Good afternoon, and thank you for joining us on today's conference call to discuss those I like the Inc.'s third quarter 2020, actual so well that's not today's call are dr., a nod to go up a lot of Teledyne, Chief Executive Officer and drilled Hammer go ahead.

Financial officer before once again I'd like to remind you that shortly after the market close today those aren't issued a press release announcing its third quarter 2020 financial results.

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

Today's discussion includes forward looking statements. Please refer to our form 8-K dated October 5th 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 somebody that during the call we will discuss.

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

To ensure that we address as many analysts questions as possible during the call. We request that you. Please limit to one initial question and one follow up question now I'd like to turn the call over to Dr. and not go blonde video of Teledyne.

But I do love them and thanks to everyone for joining us. This afternoon I don't want him go problem for you all thought it I'd like to.

[laughter] business combination would get off industrial car doors.

September 29, well advice is normal publicly traded company.

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

On behalf of management, we extend a strong execution through our dedicated it goes beyond our customers.

Because some of you are just getting to know Valentine. During this call I would spend a few minutes up front to share with you why Valentine hit the light on either in the global autonomous evolution.

Next I was sure recent development before starting over the course of two Hamer, who will walk us through the third quarter of 2020 times heard of that.

The overly we get on the brink of the lighter power to tournaments and evolution.

The applications for lighter endless and continue to grow rather beyond auto.

Like on our neighbors, but art secular trend for moving goods moving people smart cities and security.

If you wouldn't be lighter company today with both the breath of products for Ya.

And the manufacturing capability could deliver lower price glider with multiple specifications at.

Scaled for the real World applications. These include consumer vehicles, Buddy that's systems industrials robotic delivery systems smart cities Chuckles and many more.

How many of you know.

No lighter is sharp light detection and ranging.

Lighter based protection systems are advancing the development of safe 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 a global customer base.

Applied over 300, plus customers, including major Oems and leading tech companies.

Without a singular customer focus or concentration.

We have independently it reduced the risk in our modeling by serving multiple customers in multiple industries.

And we don't also have a geographical concentration.

He also target 25 lots market segments beyond automotive.

Many high margin not like much of industries on incorporating light that are considering like our CDC for adoption.

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

E Commerce is one example.

The demand for contact that last mile delivery solution accelerated during COVID-19.

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

On the regulatory front.

I think delivery systems out approved pagani in 11 states, including Florida, and Texas and several cities such as Palo Alto and San Francisco.

In one last Mike application our customers analysis.

Shows that transitioning from human to like to Cook robotic delivery, you, a 96% cost savings by reducing an expense of $1.60 cents per package down to six cents per package.

In addition to E Commerce I laid out technology is also at the forefront of improving opened security in functionality.

The city's Reno, Nevada recently integrated our neither sensors into the city infrastructure.

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

BYOD smart traffic lights.

We have engaged with many other states you eat and even internationally for similar programs.

The other night, our sensor collect anonymous traffic data in any weather conditions be eight that are like that.

Our lighter technologies. This evolutionary application represents a seismic shift in the transportation industry.

Putting in a new lives 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 component.

These customers then bill validate and excellent nice 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 light that technology can many industries, we have a direct near term line of sight.

Our front end loading the S.P. off our faith sensors can you 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 our technology.

I said earlier, but design has an unmatched breadth of products architected for a wide range of applications. The manufacturers have announced view directional solid state and blame spotlight. So.

A good example of one of our popular sensors the al subprime violist on 28 offers Saddam rotational view with standard meters a pilot mission vision.

Oh, Lord pricing in miniaturization increased installation options for many applications.

Today I can report 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 to be and operating without contract manufacturers.

He can produce at Cannes and via the furthest along the path to mass production.

With systems already in place and they are.

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 algorithms and software systems to complement our sensor products.

It's often is only possible with a robust pre existing hardware installed base like about a dime has today.

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

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 data sets and applying that AI across our product installed base.

Now I'd like to highlight recent business developments, but.

But we have 24 signed that awarded multiyear contract agreement with six added in the third quarter pretty quickly.

Our total number of pipeline projects is 175.

We continue to experience a high conversion from the art, if I am not 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 of that does that dozens to entry for a less established manufacturer to secure call quality contract at all yet.

Teledyne transforms lives and community by advancing state for mobility to help.

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

Proprietary testing indicated the superiority of our 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 switching technology, ultimately translate to a vast reduction of fatalities among operators drivers and pedestrians in closing, but as I say, it's far from a one technology or one customer type company.

Be manufactured a broad portfolio of exceptional lighter product.

On technology, and the diversity of customers and industries are key strengths of another.

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

Thank you.

Thank you Andrea and thank you again to everyone for joining us today I'm sure humor, the CFO for Belden lighter.

We used to this opportunity to share Golden light our financial results for the first time as a public company.

I'll 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 validation we started trading on September thirtyth on NASDAQ under the ticker symbol VR VR for the common stock and V. all the R.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.

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 Bell, the guideliner with well capitalized with $298 million of 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 sense for 360 degree surround the light our sensors.

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

And the non-GAAP basis, we expect R&D spend between $13 million and $15 million as we continue to invest in new products.

Sales and marketing expense on a GAAP basis is expected to include approximately $55 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.

Caffeine a operating expenses.

In fact, it to 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 D. N O insurance and other public company costs.

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

For the full year gap operating loss is expected to include approximately $142 million of stock based compensation expense, which will result in a total operating loss of $208 million to $205 million.

This assumes the stock based compensation expense is calculated using closing common share price for V. L. D. R.

On October 30th 2020.

The actual charge for each employee equity incentive we're very based upon the data incentive vests.

Non-GAAP operating loss is expected to be in the range of $67 million to $64 million for the full year of 2020.

Fourth quarter non-GAAP adjustments of approximately $142.1 million includes $142 million in stock based compensation expense.

As noted stock based compensation expense will be significant in the fourth quarter related to anticipated chair of ethics.

For modeling purposes basic weighted average shares will be approximately 175.4 million for the fourth quarter and $148.5 million for the full year.

In closing I was long term optimism is even stronger following the company's public listing recent.

The recent high profile wins, our significant pipelines contract opportunities and our commitment to new product development positions us well for the future.

Thank you for your interest in for joining us for Valentines first earnings call.

The third quarter Investor presentation is available on our Investor Relations website today.

We look forward to sharing results in the quarters ahead, and now I'm in and are you ready to address your questions.

Operator, we are now open for questions.

Hi, Kim if you would like to ask a question. Please taken out of bypassing star one on your telephone keypad if.

If you are using a speakerphone. Please make sure you amused function is turned off to allow your sick now to reach our equipment I voice prompts on the phone line or indication. Your line is open can you state your name before closing your question again press that one to ask a question.

We will now take our first question from Mister chest and she got that yeah from parents. Thank you.

Looking at when we can expect an infection point kinda wherever you're from what's another car in the project today into this initial volume the lamp cause it's fair to assume that this would be for next month.

90 degree vehicles since you've come out to you on the cold the newest projects would moving.

Headers expectations.

And what type of thing, it's B should we expecting visa initial volume lamps.

And he can just not gonna do it thank you.

Put a question yeah, I think we can definitely see it goes with the army.

The economic conditions as well as the sushi conditions around the pandemic. We are seen last night of the Liberty and elevated Simpsons Andrew.

Excavating faster than some of the other traditional automotive applications. Some let me do the 11th fine So you're kind of sand dune inflict.

Oh, and we expect to move to come to fruition sooner than some of these other applications.

I don't think we publicly.

Especially big Asp's associated with.

Awesome.

Supposed to be customers with application, Virginia She speaking.

Before we see in in high Wall U V C E O in.

In the.

Thousand dollar range.

What about the justification later.

Side, clearly, we're having those conversations today with a lot of the Oems and this is really on the backs of our ability to create something like development, which we announced at CES earlier this year, which is a 100 dollar at the light and mass volume.

I could really unlock and two because now we have been able to pick the low price points that are needed for production. So we added.

They've been having many deep conversations with multiple Oems around the use of this technology in conjunction with our software acquiring has two functions like the lease.

From a from a volume ramp perspective, yes, we expect these to come to fruition or more likely in the 23 24 timeframe.

And 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.

So the total dollar volume of those six or so or nothing.

Good application are my board.

Well, let me first Arctic family also has multiple excuse in it going from a low end performing relative to a high performing well today and leaves the highest impacting that or is that also men are designed for providing the high resolution a long range that are needed.

Our highly a that type of applications. So I would say we have multiple products that hit us applications and Furthermore, we have.

Curious if you could give us some flavor of how the product mix will shift over time is different and markets grow maybe a year or two three after.

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

Well, maybe I can add some color so I think.

We moved forward, we definitely need to see.

The bus snakes startups, both in the <unk> <unk> <unk> <unk> <unk> like the validated develop it having said that we definitely see for some of the log volume tagging application.

He is available and the move into the out here to become.

A bigger portion of do next shift.

Relative as well so the combination of the supply chain that is the prime designing the product the supply chain is being selected to do that doing it with Emily Eightsix chips moving it offshore using proprietary machines.

Yes. It is we look at wavelengths as a tool in the tool box. So the question is what's the right way a lot of that I tried to make for these types of applications. We are talking about that hits the performance point, but also be able to hit the scalability and price points.

These applications from that perspective, the current portfolio.

Like to ask a question can you signal by pressing start one on your telephone keypad. We will now take our next question for Mister Joseph spot from our a B C capital.

Good afternoon, everyone.

Sure I.

I was wondering if you could provide.

Update on the Villa.

Software products specifically.

Oh, we customers willingness to to look for that type of a solution as as they sort of you know work on their next generation.

Projects.

Yeah, So I think.

I would say that D as in David.

We have no all the tools in the toolbox.

Oh and base I've been looking at obviously I didn't get that might be good like explanation for selecting better dying at the cockpit of choice.

And that's because we have the ability to pick the liner meet the pollen we have the plastic market leader in the state.

Been doing this Bob.

The decade at this point.

That concludes today's call. Thank you for your participation you may now disconnect.