Q2 2021 Velodyne Lidar Inc Earnings Call

[music].

Good day and welcome to the Belladonna Lidar second quarter 2021 financial results Conference call.

Participants wait unless the only man shutting its fresh foods. Please signal conference specialist for Preston Starchy, followed by zero.

After today's presentation there'll be an opportunity to ask questions.

So ask the question on your press Star then 1 on your thoughts on keep on.

Withdraw your question. Please press Star then 2.

Please note. This event is being recorded on now.

I'd like to turn it over to MS Moriah Shilton.

Please go ahead.

Good afternoon, and thank you all for joining us on today's conference call to discuss Teledyne Lidar second quarter 2021 financial results.

With us on today's call are true hammer, the company's Chief Financial Officer.

Remember that that 1 is the office of the chief executive for Oce.

Jim Barnhart, the Companys Chief operating officer.

And Sinclair Fox, the company's Chief commercial officer.

Hello, Rob on through the calls prepared remarks, and Jim and Sinclair are available for Q&A.

Before we begin I would like to remind you that shortly after the market close today.

And on the issued a press release announcing its second quarter 2021 financial himself.

But what I'd also published an investor presentation.

You may access the press release and the presentation in the Investor Relations section of other die in Lidar Dot com.

Today's discussion includes forward looking statements.

Please refer to the press release for a discussion of factors that could cause the company's actual results to differ materially from these forward looking statements.

I would also like to remind you that during the call. We will discuss some non-GAAP measures related to validate its 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 analyst questions as possible during the call. We request that you. Please limit to 1 initial question and 1 follow up question.

Now I'd like to turn the call over to drew Hamer CFO with our dine on 1 of the members about I O C E.

Thank you Maria good afternoon, and thank you for joining us today as Brian mentioned I am 1 of the for members of our OCD and together we are executing on the company's growth strategy is developed by members of our executive team and former CEO Doctor on an Copeland.

As many of you know on <unk> and in an advisory capacity and our board is undertaking a search to find a full time CEO.

The oce has decades of collective business experience, including operations General management supply chain services manufacturing engineering employee engagement financial strategy and execution in industries, ranging from telecommunications to consumer electronics automotive and industrial laser market.

Speaking of markets.

Use of Lidar today in our served market and emerging target markets like gaming continues to gain momentum.

We are executing against this trend by closing deals with customers across a variety of markets.

<unk> by broad Lidar product portfolio that we're manufacturing today.

<unk> is the only Lidar company that has an off the shelf full software and hardware solution that can be put into vehicles and infrastructure.

We are the global Lidar leader shipping more units in the second quarter than the aggregate of all our peers when combined have reported shipping year to date.

We shipped more than 3800 sensory units in Q2 up for more than 2600 in Q1, as we increased the breadth of market adoption for our lidar across multiple industries and applications.

Those units 260, where solid state unit we.

We expect roughly 30% of our sales to be solid state for the full year.

Not only did we ship more sensors in the prior quarter. We also ship them to a larger group of customers at 72% of our sensors sold were through spot buys, indicating the boarder market interest for our solutions.

The number of inquiries from customers is increasing.

We believe we are now going through the other side of the COVID-19 pandemic, we expect unit volumes to start averaging more than 3800 sensors a quarter for the rest of the year.

We were listening to our customers and moving people and goods closer to them.

We've placed inventories in China, and Europe, we are strengthening in country technical support in all the regions, we serve including South Korea.

We also established a design center of excellence in India.

We continue to deepen our relationships with existing customers and building relationships in new markets.

We signed 5 more multi year agreements, bringing our total to 34 and meeting our prior stated goal for the year well before the end of the year.

We now expect to signed for additional multi year agreements by the year end, which will bring our total to 38.

Our pipeline continues to grow we had 213 projects at August 1st up from 198 projects. It may 1st.

25 of these opportunities include solid state develop at <unk>.

Included in the signed an awarded pipeline, our new Adas multiyear agreements, which we expect will begin to ramp starting in 2026.

We have an additional $4.5 billion of opportunity for projects that are not yet signed and awarded that go through 2025.

Turning to our served markets I would like to run through both how it lidar sensors and software are being used in the various applications of the various markets as well as provide an update on our progress with customers.

We have 300 plus customers over the past decade have bought product in most continue to byproduct from Vela died.

We are seeing many of these customers move from a long research and development phase with Lidar to the first wave of mass adoption.

First automotive and.

And a desk you will find our solid state Valerie H 800 long range sensor Valerie M 1600, midrange sensor envelop it from ultra short range to midrange sensing.

All of our sensors can enable advanced blind spot monitoring.

Parking assist lane keep assist adaptive cruise control automatic emergency braking, including for pedestrians and more.

Fair day future was our first publicly unveiled automotive program using the Valerie H 800, and we are currently making progress on our relationships with major high volume OEM customers as well for.

For example, our project with a major tier 1 <unk> provider in Asia for mass production of level III Lidar systems continues to move forward as part of this project, we were adding head count in country to support this effort and to build further relationships with customers in South Korea.

Avi can use both solid state and rotation of Lidar.

And application could include the full suite of rotational surround view product family, including our parks.

Puck and Alpha Prime mid to long range sensors, plus or solid state Valerie mid and long range sensors and develop it which are ultra short range to mid range sensors.

Or it can start with rotational and move to solid state is needed as.

As 1 example, Trump tax the first company in China to independently develop level for driverless trucks, we'll use our ultra puck puck and Valerie H 800 sensors as core sensor hardware and its autonomous trucks.

Trunk Tech recently became 1 of the first companies to obtain Beijing's permit that allows road tests for self driving commercial vehicles.

As I mentioned earlier in the call we are increasing our in country support as well as moving inventories closer to customers.

We are already seeing these efforts result in new customer wins.

We have signed another large company in China, who will use our current and next generation rotation of lidar sensors to support their logistics with precise reliable navigation for real time autonomous vehicle operation.

We're working with existing customers to extend their current agreements with us to include additional products within our portfolio.

Some of these opportunities came to us as a result of the customer's concern that theyre current lidar supplier cannot manufacturer at the scale they need.

In robotics, and industrial Youll find our surround view product family, including our Pax Ultra puck and alpha prime plus or solid state salaries and develop it.

We recently signed an agreement with an undisclosed North American large company to provide our sensor solutions for use in warehouses.

This builds upon our existing agreement for relationship with this customer for last mile delivery.

As another example of our success in deepening our relationships with our customers due to our broad product portfolio.

As announced earlier this week antibiotics is equipping it to autonomous mobile robots with a puck sensors by.

By using our <unk> sensors.

Biotics robotic inspection solution is able to map industrial environments to detect obstacles and allow any MAU to avoid any collisions, while navigating harsh environments with a higher level of accuracy.

We also signed a 5 year sales agreement with a leading defense and security company, who selected our sensors to provide mapping and autonomy capabilities for their robot for large scale manufacturing production of which is scheduled to begin in 2020 for the.

The quality of our Lidar sensors, plus our ability to mask manufacturer continues to set <unk> apart from its competitors and are driving additional customer wins for us.

In addition, you will also find our surround view product family.

Steve <unk>, BV, which specializes in high quality equipment for offshore surveying and dredging has selected our <unk> sensors for Lidar mobile mapping system.

The <unk> system is a turnkey mobile lidar solution for hydrographic surveys that helps companies transform their businesses with offshore <unk> mapping solutions, which can deliver highly accurate detailed data collection to support safe navigation and protection of marine environments.

Last but not least our smart city solutions, which is our first offering to combined software and hardware.

Our intelligent infrastructure solution for <unk>.

<unk> combines our award winning lidar sensors, and powerful AI software to monitor traffic networks and public spaces.

In May <unk> was named a winner of the 2021 Smart 50 Award, which honors for 50, most transformative smart cities projects in the world.

I I S is deployed in multiple North America cities, including in Quebec in British Columbia.

Boca Raton, Florida this upcoming installations of directors campus in New Jersey, and Austin, Texas, and moving forward with a significant project in the Bay area.

In July we announced we joined to Nvidia Metropolis program, which is designed to nurture and bring to market a new generation of applications and solutions that make the world's most important spaces in operations safer and more efficient with advancements in AI vision.

At <unk>, we continue to advance our industry leading technology on.

On the hardware side in June we launched the next generation of our <unk> sensor, which delivers on what our customers are asking for it and ultra wide field of view F O V and higher resolution.

Our next generation <unk> was launched in under a year highlighting our commitment to meeting our customers' demands.

We held develop it demo day for key customers in June.

17 companies attended including 5 Oems and other customers evaluating our using our solutions and industrial robotics delivery EV and Adas applications.

Across the board companies told us, they're looking for to incorporating the product and their solutions.

Importantly, develop it is equipped with our breakthrough proprietary micro lighter array architecture for MLA.

The MLA brings together the core elements that make lidar work, the optical chip and our Asia or application specific integrated circuit technology.

The miniaturization combined with <unk> proprietary fully automated manufacturing process enables cost effective high quality mass production.

We are currently working on our next generation rotational sensors that will use proprietary asics and our MLR technology to provide ultra long range high resolution auto grade performance at scale.

Overall for all hardware technology choices. We have made we are marrying the high performance that is needed with scalability and the ability to manufacture. These technologies at the right cost point to enable mass market adoption.

On the software side.

Last week, we launched a new software development kit that allows customers to utilize the advanced capabilities of our Vela Lidar perception software and their autonomy solutions.

The Villa development kit or V. D. K enables companies to accelerate time to market for bringing cutting edge lidar capabilities to autonomous vehicles, a desk mobile delivery services industrial robotics drones and more.

Technology innovations such as these advance our mission to democratize Lidar based safety and autonomy.

The roll Lidar can play in improving safety and autonomy continues to gain recognition by the larger public sphere as well.

Recent news from the NHTSA on reported crashes involving autonomous vehicles and a desk shows that the federal government is taking a hard look at crashes and near misses for vulnerable road users such as pedestrians.

We have a solution available now that now enables automatic emergency braking for wide variety of objects, including pedestrians.

On the commercial vehicle side, we developed our vela rate for windshield implementation and the federal Motor Carrier Safety Administration recently published a notice of proposed rulemaking concerning vehicle safety technology installed on the interior of commercial motor vehicle Windshields, which if adopted will provide a blanket exemption for lidar and theirs.

For should lower the threshold to its adoption.

On the infrastructure side, the smart cities and communities Act will provide technical and financial resources to local governments to implement smart city technology, especially suburban and rural communities.

Smart cities is a proxy for technology that enhances and deploy safety in the infrastructure.

At <unk>, we have technology for both infrastructure and vehicles and are the only Lauder companies' results, providing a full circle of safety and autonomy.

Now I'd like to discuss our financials.

Ill review first our second quarter and first half results and then provide our full year 2021 guidance and business outlook.

Total revenue was $13.6 million compared.

Compared to $17.7 million in the first quarter of 2021, which included a $5.5 million licensing fee.

Product revenue was $12 million up nearly 30% from $10.6 million in the first quarter of 2021, as we were getting renewed demand for our lidar sensors from customers with delayed purchases due to the uncertainty caused by the COVID-19 pandemic.

The company's weighted average selling price per sensor was $3106 compared to $3887 per sensor and the first quarter of 2021.

License and services revenue was $1.6 million compared to $7.1 million on the prior quarter that included a $5.5 million licensing fee I previously mentioned.

GAAP gross loss was $5.8 million and non-GAAP gross loss was $5.3 million compared.

Compared to our first quarter 2021, GAAP gross profit of $1.9 million and non-GAAP gross profit of $2.7 million.

GAAP gross loss in Q2 did not benefit from the licensing fee in Q1.

GAAP operating expenses were $84.8 million and non-GAAP operating expenses were $28.8 million compared.

Compared to first quarter 2021, GAAP operating expenses of $42.5 million and non-GAAP operating expenses of $28.6 million.

GAAP operating expenses included $53.2 million stock based compensation expenses, including employer taxes.

Including stock based compensation expense was approximately $42 million charged against sales and marketing related to our 2020 merger with graph industrial.

This compared to first quarter 2021, GAAP operating expenses, including $13.3 million of stock based compensation expense, including employer taxes.

Included in general and administrative expenses of $1.4 million in legal and professional expenses in connection with our audit committee's investigation announced in the first quarter of 2021.

On to conduct by David Hall, the company's former Chairman and Marta Hall, the company's former Chief marketing Officer, and a current director of the company for.

For the first half of 2021 this figure was $3.7 million.

GAAP and non-GAAP operating expenses included increased spending in research and development that is a response to the visibility provided by our multiyear agreement pipeline.

GAAP net loss was $87 million and non-GAAP net loss was $34.4 million.

GAAP net loss per share was <unk> 42.

And non-GAAP loss per share was <unk> 18.

This compared to our first quarter of 2021, GAAP net loss of $40.8 million non-GAAP net loss was $26.1 million.

First quarter of 2021, GAAP net loss per share was <unk> 22.

And non-GAAP net loss per share was <unk> 14.

EPS for the second quarter of 2021 is calculated using weighted average shares outstanding of $193 million.

As of June 30, actual shares outstanding for $195.2 million.

<unk> completed the quarter with $353.6 million in cash and short term investments on its balance sheet.

Now for the first half of 2021.

Total revenue for the first half of 2021 was $31.3 million comprised of $22.6 million in product revenue and $8.8 million and license and service revenue.

This compares to $45.4 million on the first half of 2020.

Of which $27.9 million was product revenue.

$17.6 million was license and service revenue.

GAAP net loss for the first half of 2021 was $121.5 million and non-GAAP net loss was $60.5 million.

This compares to a GAAP net loss of $33.1 million.

For the first half of 2020, and $35.9 million and non-GAAP net loss.

Now for our full year 2021 financial statement guidance.

Revenue is expected to range between $77 million and $94 million.

We're seeing parts of our global markets, such as the U S and China recover.

While other geographies are still negatively impacted by the continuing toll of COVID-19.

We believe we have good line of sight to the low end of our guidance range and see a number of larger projects that will provide upside revenue should they come in.

Many of the upside projects would generate nonrecurring engineering revenue in 2021.

Non-GAAP gross margins are expected to be between 13% to 24%.

This reflects fewer units sold to cover remaining fixed overhead cost of our factory and San Jose, while we experienced ongoing delays in moving manufacturing offshore due to COVID-19.

Gross margins at the higher end of our revenue guidance would benefit from increased nonrecurring engineering.

On a GAAP basis gross margins are expected to include approximately $2 million for stock based compensation expense.

On a non-GAAP basis operating expenses are expected to range between $125 million and 100.

<unk> $29 million.

Based upon our expectations regarding our multiyear agreement pipeline, we are increasing our spend in new product development by approximately 40% in 2021 compared to 2020.

We expect general and administrative expenses will increase by approximately 35% in 2021 compared to 2020, primarily due to increased legal expenses and public company expenses.

On a GAAP basis operating expenses would include approximately $87 million of stock based compensation expenses. It reflects approximately $42 million, we charged against sales and marketing in the second quarter related to our 2020 merger with graph industrial and $8 million related to the recent departure of our CEO.

Yes.

On a GAAP basis.

Income tax expenses are anticipated to be approximately $800000.

Weighted average shares outstanding for the year are estimated to be $193.5 million.

Finally, I would like to review our business outlook.

At the end of the second quarter of 2021, we estimate we could have the opportunity for over $1 billion of revenue from signed an awarded projects through 2025, plus the pipeline of projects that are not yet signed and awarded a $4.5 billion.

As I mentioned earlier included in our multiyear agreements, our new <unk> agreements, which are expected to begin to ramp starting in 2026 and the years beyond.

This concludes my formal remarks, operator, we're now ready to take questions.

We will now begin the question and answer session to ask a question on your press Star then 1 on your telephone keypad.

Curious on Speakerphone, please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then 2 at this time, we will pause momentarily to assemble our roster.

Okay.

Alright appears on your first question comes from the Tim Donnelly.

Of Citi. Please go ahead.

Great. Thanks, good afternoon, everyone.

Hi, just hoping you could just go through the second half.

Gross margin bridge again, just wanted to send the key puts and takes.

Kind of drive the implied second half exit rate.

Yes, so as we're looking at the second half for the year for gross margins.

We've given you a sense of what we see for sensor counts.

<unk>.

So that will contribute to the gross margins as we were still a little bit delayed in getting these fee manufacturing moved offshore.

And just in the sensors creates a little bit of a drag on what those gross margins will go but as you get out towards the higher end of the range of the guidance we provided.

There is a pretty solid pipeline of newer contracts that will come along with some nonrecurring engineering, which is a significant gross margin contribution upwards of 100%. So.

We have a kind of a clear pipeline to the bottom end of the range, but more confidence as we get out into the middle.

For additional <unk> will bring that gross margin number up so as we look out towards towards the end of the year. We expect that the gross margins start to move up from there as low as those energy deals come in.

Got it that's helpful. And then just on the on the <unk> Award that begins in 2026 can you give a little bit more color maybe in terms of the region and perhaps even the perspective volume of that award going forward.

So without getting into too many specifics because of the.

As a free service confidential for natural.

Okay.

H gross cut agreement.

The.

The other data that is.

On a large OEM and it's project, where we're working with them closely on there. They are actually I think there are 2 projects underneath there, but we're just calling on 1 for now.

And it starts moving into what would be a normal OEM scale kind of volume.

And it would be in the Adas space.

Got it okay. That's not very helpful. Thank you.

Okay.

Our next question comes from Colin Rusch Oppenheimer. Please go ahead.

Thanks, so much guys.

With your non auto customers can you talk about the level of activity versus a year ago in terms of customer approach Asian sales.

Sales cycle.

Okay.

So what's going on in that segment of the okay.

Yes, so it's interesting to us is even when we look at our project pipeline that we share with people in our investor presentation and were seeing significant uptake I think the initial adoption for lidar is going to be coming more from our kind of robotics and industrial customers and so when you look at it.

At this space adoption will be.

A little bit faster sales cycles come a little bit more quickly.

And the implementation and uses of the sensors has happened much more rapidly. So as we're looking on it even as we look out a couple of years into our forecast, we're expecting that day linearity of revenue will actually start with this feed industrial maybe and robotics sensors some of the smart city and other kind of non automotive applications and then as automotive.

Into play in the later years 'twenty 3 'twenty 4 'twenty 5 'twenty 6.

These wells. This this this set of customers will start to generate revenues and the other day automotive space will start to generate volumes of sales as well that will kind of gather up catch up. So we are seeing a much shorter sales cycle much quicker implementation too.

From from when you get the.

Design win 2 to start up production with the industrial customers.

And so that was a resulting in quicker revenues for us.

Perfect and then within the guidance how much of the back on it is.

On shoot by an army.

So the.

We're pretty comfortable that a smaller portion of the low end of our guidance as NRI. So it's mostly made up of sensors, but as we get out further into the range of the guidance it becomes more and more in our <unk> at this point.

Because the volume set to catch up would be would require having those fixed contracts in place today and the manufacturing up and running so that that is going to be a little bit more entry at the on higher end of the guidance.

Okay. Thank you so much guys.

Yes.

Thank you nice growth.

Comes from Andrew.

Gill of Needham <unk> Company. Please go ahead.

Yeah, Hey, guys. This is actually Dennis.

Question on behalf of Rajiv.

Just joined Hill.

So first question is just regarding the solid state transition now with Covid.

So on talk on just a little bit on you know like kind of maybe the mix of solid state versus regular sensors, and maybe kind of who the top adopters out right now for your solid state sensors.

Sure so.

Youre right on with convicted for CF.

So for US the initial solid state sensors are actually going out to people on the industrial space. We have a lot of kind of R&D buys there's certainly a lot of that we mentioned, how even with our valve a bit.

Velvet day. So we had here we had a lot of activity, but those arent necessarily turning up in revenue. So those will be more production in the coming years, the <unk>, which are producing the solid state sensors today.

In terms of kind of moving into production or more in the industrial space. As these would be kind of the delivery space, we're seeing a little bit more of the activity for industrial contracts for multiyear agreement.

As well as discussions.

The smart cities or the EIS solutions.

And.

To another space I think is 3 of them or so.

Yes, I think we've covered most of it there.

Could you guys provide any color on on how many of the solid state you shipped this quarter.

We put in there is about 230 for something like that.

We're anticipating that it will increase.

We get into Q3 as well. So there is there is going to be a balancing I think it's like.

Like a lot of things that <unk>, even like our Asps are 1 of those things where you need to be careful not to take this quarters ASP and assume that that's going to be next quarters or that there's some kind of a steady decline trend. There I think people need to use a multiple quarters and look for a linear line trend it'll be at a little bit more gradual so as it relates to the sale of the solid state versus the rotational.

There is a balancing act going on where the mix will change from quarter to quarter, but gradually more and more we're going to see more of the solid state sensors moving in there.

Got it and for my follow up on was actually related to the net.

Is there anything you can tell us what kind of asps either for the rotational units are for solid state housing trend either sequentially or year over year is there any kind of color you can provide either on the high end units for some of the lower end units and detail would be great.

I'm not going to get into much more detail to tell you that we have a weighted average.

Asps that we share with everybody.

Alright, a real possibility.

And that's the day you have to believe we share data with your last quarter as well.

Okay, maybe I missed that what is that supposed to be for the year or for the second half.

For the full year for.

Quickly okay perfect. Thank you for that.

Let's see here. My first question was you know obviously when you went in the process of company, probably could talk about a large last mile delivery customer and I think he just mentioned make a potentially new opportunities with that customer specific to the last mile delivery engagement is that 1 still on on track in terms of timing and scale.

So of course dude confidentiality obligations I can't be too specific about that but we are seeing nice pick up on on the delivery solutions, Yes, we are.

And then we're also seeing some nice activity with a similar type of a customer in China.

Who is also going to be using that are are censors for similar applications. So.

There is a we're really seeing nice activity across kind of.

The space that includes some of these e-commerce largely commerce customers.

Okay Perfect and my my my follow on question was following up on the topic of gross margins here just trying to get the again the bridge to the second half the second half of the year to fit fit the full year range, even getting to the low end would suggest you're looking at gross margins and kind of the 30% range for the second half of the year is that a fair number and since that wouldn't include much anarchy.

Would that be a you know arrange to think about going into next year.

Yeah. So so the low end of our guys take the low end of our gross margin Ah gross margins would be at the low end of our revenue range Uhm.

But it would be kind of a.

Ask lighting a bit as we come out of the year here as we start seeing unit volumes continued to pace as they are.

Okay Fair enough that's all for me thank.

Thank you.

The car and doesn't do.

Detract from the the nature of the vehicle. So we are seeing a lot of activity on there was a lot of a lot of.

Very very good feedback from the Oems when they hear for avella bit days.

A month or so ago, and we are having a lot of extended conversations with them at this point around that.

Okay on that.

Couple of color and then I wanted to touch base on that I think on slide 12 on it.

Kind of compare it vs.

At last quarter is there anything to read into the the billion dollar revenue number and sign in order to contract.

What is an increase I think the 15% to 20% in the number of those signing awarded contracts themselves. I think it was 29 and May 2021, and 30 for on as of this quarter yet the estimated revenue number. If it's similar are some of the contracts that you're winning smaller in scope of revenue size or have.

There been adjusted to perhaps assumptions and and pretty and the previous pipeline.

Yeah. So this is this is is it very important conversation because.

The reason why we kind of talked about 2026 activities because we are forecasting on Friday and any information on that yet, which we would probably do starting next quarter, but for the $2 billion is.

These additional customer some of the industrial contracts are slightly smaller and the <unk> just the very nature of their businesses or others of the more recent M Y agreements continue to be larger will expand in the coming years, but there's you start looking out past 2025, we're seeing the potential for those those numbers to continue to expand gross substantially with some motorboat of activity.

So for right now we're confident that these numbers, you'll become a little bit more reliable and we're working towards ensuring there.

Turning into the P&L.

And.

Adding additional contracts is something that we anticipate as time goes past these numbers will continued growth.

Okay, and 1 more if I may can you provide a little bit more color on what specifically is the delay on the industrialization process and moving some of your production offshore, particularly at that sound <unk> reference that last quarter and it sounds as if it's incrementally worse. This quarter, then maybe you perhaps and tests.

<unk>. So what do you think about that was all being itself through the remainder of the year, what what what is still outstanding that needs to be completed that the industrial really industrialization process will get back on track.

If you don't mind I'm going to introduce Jim Barnhart, He's our new Coa's had a month's here valuating thises seasons C. O O with many this is in his first a rodeo is C O O E.

Is evaluated it he's got some feedback and then I'll add some additional color it and if there's any any other questions for follow up on Jim.

Thanks for good questionnaire Eileen.

The pucks have been with our contract manufacturers for years and the strategy was to have.

Assembled and then.

Then the setbacks to our facility here in San Jose for final testing and we're moving towards having really the full work being done at the contract manufacturers. That's in process and what's frankly delayed it is again the resurgence of Covid, both with our contract manufacturers facility in Thailand, as well as in Japan. They Unfortunately I've been hit.

Fairly hard with the Delta variance, so that has delayed not getting the equipment and the.

So these but allowing our engineers to travel to help I'll make sure that things are properly setup calibrated lying et cetera, there's been some delay there but.

Certainly with the ultra.

Already completely with.

With the contract manufacturer in Japan, and we're in process with the Alpha Prime transition that is moving forward as well, but again it has been somewhat delay just due to the unfortunate timing of the resurgence of the Covid pandemic.

I guess I should comment also sorry that the <unk>. The the M..1600, 8800, those transitions are in progress as well even as we're finalizing.

The various phases of designs on the product. So already these sub assemblies. The modules. If you will that go into the full lidar module those are in process being transition to the contract manufacturers as well so to your point, it's slit a little bit to the right, but it's really due to the resurgence of Covid. It has slowed things down for us a bit here.

Okay, Great. That's very helpful commentary, thanks for taking my question.

Okay. Thank you.

Our next question comes from Michael for the 12 Bahrenburg. Please go ahead.

Oh, yeah. Thanks for taking my question.

Just want to follow up on a question that was asked by 1 of my fellow analyst earlier about that last mile delivery customer.

I believe in an earlier presentation, you put out a while ago.

There had been some some numbers put out it said 100000 units related to that customer for 2022 and ran into 250000 or 2023 and $20 for.

Rather important I think.

The projections. So I'm just wondering if he obviously you don't have to take you to a customer is but I mean are those volume still in play is that customers still in your multi year agreement backlog just just any other additional come on.

So the the customer is still on the multi year agreement backlog I think the the.

We're not giving any 2022 guidance as of right now but.

It's not unreasonable to suggest that the customers priorities might change where some of the things could move that moves moving any direction.

But we also believe that with some of the other activity from other projects that are coming in if anything moved down on others can move up so that kind of beauty of our business relationship is we're in multiple industries with multiple products with multiple customers. So as it relates to that 1 customer there are so many different opportunities in there even.

Even if that did slip we believe that other other solutions would probably fill it.

Got it thanks, and then just looking at licensing services revenue if you back out the lump sum sort of 1 time.

Judgments I guess from the prior year it looked like maybe sort of a baseline coming into this year would be $10 million for the license services revenue, but even if you annualize the first happened back out that 1 time.

Number from the first quarter it looks like maybe license services could be like $10 million for last night I don't know maybe tell me on wrong, there, but on top of that with Afc's coming down. It seems like your your volume growth unit growth would have to be pretty robust in the back half I mean, we're talking you know.

Maybe 50 plus percent unit volume growth in the back half from step up on the run rate. So I guess is is that achievable. I mean is that is that sort of what you're targeting in terms of unit volume growth or is there may be.

I'll make some packets can drive the iced tea back up in the back out for the year.

So I did talk about.

The volume of sensors, we expect at least in the second half of the year.

Quarter. So you can you can put that together, we think asp's and like I said, they're probably not going to be.

To be more of a linear transfer asp's than trying to take 1 quarter in applying net so it could be overly conservative for you just use Q Q Tuesday asp's.

And then the any delta is between what you might get from taking unit volumes and Asp's, who will probably be made up in our east.

And the <unk> opportunities pretty significant for us right now.

Gotcha. Thanks, and then 1 last question just around sort of the Ada activity recently I mean, we've seen from from other competitors in the space Awards for from several Oems Uhm I'm guess I'm curious I mean, obviously you guys have been competing for those awards on I just wanted to get your thoughts as to why you think.

Low and I'd hasn't been selected for this sort of the near term awards outside of Faraday future.

Just just any commentary for why you think that that could be.

Yeah, it's an interesting conversation because when we talk about the awards and I'm not sure what you're near term is but.

Not expecting anybody see anything significant in the next year or so.

So they don't the war's most of the words, we've heard discussed and we've seen out there are a couple of years out.

We believe that a lot of those who will still be in play. We've had we mentioned earlier, we've had some conversations with customers who are coming back to us because the ones who are more near term are finding that the people they selected or 2 might've previously announced their relationship on.

Are unable to produce and they are not confident in the sensors to be able to perform at the level that was expected were valid on lidar is currently producing sensors and can deliver sensors at the volume they need to meet their started production targets.

And are also going to be capable of providing the levels of.

Accuracy that they need in order to be able to release their systems.

So this is.

And involving story, but that's that's why we've we've gotten so far so we are aware at some of them. We look at them and we feel like some of them are kind of really still kind of R&D stage and they're still.

Could change and we'll see the dynamic we just discussed.

Could play out more so in coming years.

Understood. Thank you for the color I appreciate it okay.

This concludes our question and answer session on now is turn on the conference Doctor over to Mister drew Hammer for any closing remarks.

Thank you very much everybody for joining us today.

We're very excited here valid on light or for the what we're starting to see is the traction lidar sensors in their adoption in so many different industries in so many different parts of the world and there's so many different.

Customer so.

We go forward, we look forward to talking with you more and looking forward to seeing this evolving market takes shape.

And continuing to be the major player in the space and leading it as it goes for hope you'll have a wonderful afternoon. Thank you.

[music].

[music].

Yeah.

[music].

Good day and welcome to the Velodrome Lidar second quarter 2021 financial results conference call on <unk>.

Participants are in listen only mode shutting any assistance. Please signal conference specialist by pressing starchy followed by zero.

After today's presentation there'll be an opportunity to ask questions.

Ask the question on your press Star then 1 on your thoughts on keypad.

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Please note. This event is being recorded I would now like to turn it over to MS. Moriah Shilton.

Please go ahead.

Good afternoon, and thank you all for joining us on today's conference call to discuss <unk> Lidar second quarter 2021 financial results.

With us on today's call are true Hamer, the Companys, Chief Financial Officer, and members of <unk> office of the Chief Executive for Oce.

Barnhart, the Companys, Chief operating officer, and Sinclair boss, the Companys Chief commercial officer.

Well move on through the calls compared remarks, and Jim and Sinclair are available for Q&A.

Before we begin I would like to remind you that shortly after the market close today. The other 90 issued a press release announcing its second quarter 2021 financial results.

But what I'd also published an investor presentation.

You may access the press release and the presentation in the Investor Relations section of our dine Lidar Dot com.

Today's discussion includes forward looking statements.

Please refer to the press release for a discussion of factors that could cause the company's actual results to differ materially from these forward looking statements.

I would also like to remind you that during the call. We will discuss some non-GAAP measures related to validate its performance.

You can find a reconciliation of those measures to the nearest comparable GAAP measures in the press release.

To ensure that we address as many analyst questions as possible during the call. We request that you. Please limit to 1 initial question and 1 follow up question.

Now I'd like to turn the call over to drew Hamer CFO with our dine on 1 of the members at Valentines Oce.

Thank you Maria good afternoon, and thank you for joining us today as Maria mentioned I am 1 of the for members of our Oce and together we are executing on the company's growth strategy is developed by members of our executive team and former CEO, Dr. Ron and Copeland.

As many of you know on <unk> and in an advisory capacity and our board is undertaking a search to find a full time CEO.

The oce has decades of collective business experience, including operations General management supply chain services manufacturing engineering employee engagement financial strategy and execution in industries, ranging from telecommunications to consumer electronics automotive and industrial laser market.

Speaking of market the use of lidar today in our served markets and emerging target markets like gaming continues to gain momentum.

We are executing against this trend by closing deals with customers across a variety of market supported by a broad lidar product portfolio that we're manufacturing today.

Teledyne is the only Lidar company that has an off the shelf full software and hardware solutions that can be put into vehicles and infrastructure.

We are the global Lidar leader shipping more units in the second quarter than the aggregate of all our peers when combined have reported shipping year to date.

We shipped more than 3800 central units in Q2.

For more than 2600 in Q1, as we increased the breadth of market adoption for our lidar across multiple industries and applications.

Of those units 260 were solid state unit.

We expect roughly 30% of our sales to be solid state for the full year.

Not only did we ship more sensors than in the prior quarter. We also ship them to a larger group of customers at 72% of our sensors sold were through spot buys, indicating the broader market interest for our solutions.

The number of inquiries from customers is increasing.

We believe we are now going through the other side of the COVID-19 pandemic, we expect unit volumes to start averaging more than 3800 sensors a quarter for the rest of the year.

We're listening to our customers and moving people and goods closer to them.

We've placed inventories in China, and Europe, we are strengthening in country technical support in all the regions, we serve including South Korea.

We also established a design center of excellence in India.

We continue to deepen our relationships with existing customers and building relationships in new markets.

We signed 5 more multi year agreements, bringing our total to 34 and meeting our prior stated goal for the year well before the end of the year.

We now expect to signed for additional multi year agreements by the year end, which will bring our total to 38.

Our pipeline continues to grow.

We had 213 projects at August 1st up from 190 day projects at May 1.

25 of these opportunities include solid state develop at <unk>.

Included in the signed an awarded pipeline, our new <unk> multi year agreements, which we expect will begin to ramp starting in 2026.

We have an additional $4.5 billion of opportunity for projects that are not yet signed and awarded that go through 2025.

Turning to our served markets I would like to run through both our lidar sensors and software are being used in the various applications of the various markets as well as provide an update on our progress with customers we.

We have 300 plus customers over the past decade have bought product in most continue to byproduct from valid on it.

We are seeing many of these customers move from a long research and development phase with Lidar to the first wave of mass adoption.

First automotive and.

And a desk you will find our solid state Valerie H 800 long range sensor Valerie M. <unk> hundred a midrange sensor and develop it from ultra short range to midrange sensing.

All of our sensors can enable advanced blind spot monitoring.

Parking assist lane keep assist adaptive cruise control automatic emergency braking, including for pedestrians and more.

Sarah day future was our first publicly unveiled automotive program using <unk> H 800, and we are currently making progress on our relationships with major high volume OEM customers as well for.

For example, our project with a major tier 1 <unk> provider in Asia for mass production of level III Lidar systems continues to move forward as part of this project, we're adding head count in country to support this effort and to build further relationships with customers in South Korea.

Avi can use both solid state and rotational lidar.

And application could include the full suite of rotational surround view product family, including our <unk> Ultra puck and Alpha Prime mid to long range sensors, plus or solid state Valerie mid and long range sensors and develop it which are ultra short range to mid range sensors.

Or it can start with rotational and move to solid state is needed.

As 1 example trunk tech the first company in China to independently develop level for driverless trucks, we'll use our ultra puck tuck in <unk> H 800 sensors as core sensor hardware and its autonomous trucks.

<unk> recently became 1 of the first companies to obtain Beijing permit that allows road tests for self driving commercial vehicles.

As I mentioned earlier in the call we are increasing our in country support as well as moving inventories closer to customers.

We are already seeing these efforts result in new customer wins.

We have signed another large company, China, who will use our current and next generation rotational lidar sensors to support their logistics with precise reliable navigation for real time autonomous vehicle operation.

We are working with existing customers to extend their current agreements with us to include additional products within our portfolio.

Some of these opportunities came to us as a result of the customer's concern that their current lidar supplier cannot manufacturer at the scale they need.

In robotics, and industrial Youll find our surround view product family, including our <unk> Ultra puck and alpha prime plus or solid state salaries and develop it.

We recently signed an agreement with an undisclosed North American large company to provide our sensor solutions for use in warehouses.

This builds upon our existing agreement for relationship with this customer for last mile delivery.

It's another example of our success in deepening our relationships with our customers due to our broad product portfolio.

As announced earlier this week antibiotics is equipping its autonomous mobile robots with our puck sensors.

By using our <unk> sensors antibiotics robotic inspection solution is able to map industrial environments to detect obstacles and allow any MAU to avoid any collisions, while navigating harsh environments with a higher level of accuracy.

We also signed a 5 year sales agreement with a leading defense and security company, who selected our sensors to provide mapping and autonomy capabilities for their robots.

The large scale manufacturing production of which is scheduled to begin in 2024.

The quality of our Lidar sensors, plus our ability to mask manufacturer continues to set <unk> apart from its competitors and are driving additional customer wins for us.

In addition, you will also find our surround view product family.

<unk> BV, which specializes in high quality equipment for offshore surveying and dredging has selected our <unk> sensors for Lidar mobile mapping system.

The <unk> system is a turnkey mobile lidar solution for hydrographic surveys that helps companies transform their businesses with offshore <unk> mapping solutions, which can deliver highly accurate detailed data collection to support safe navigation and protection of marine environments.

Last but not least our smart city solutions, which is our first offering to combined software and hardware.

Our intelligent infrastructure solution for <unk>.

<unk> combines our award winning lidar sensors, and powerful AI software to monitor traffic networks and public spaces.

And Mei Iis was named a winner of the 2021 Smart 50 Award, which honors for 50, most transformative smart cities projects in the world.

Iis is deployed in multiple North America cities, including in Quebec in British Columbia Poker.

Boca Raton, Florida this upcoming installations of directors campus in New Jersey, and Austin, Texas, and moving forward with a significant project in the Bay area.

In July we announced we joined the Nvidia Metropolis program, which is designed to nurture and bring to market a new generation of applications and solutions that make the world's most important spaces in operations safer and more efficient with advancements in AI vision.

At <unk>, we continue to advance our industry leading technology on.

On the hardware side in June we launched the next generation of our <unk> sensor, which delivers on what our customers are asking for and ultra wide field of view FOV and higher resolution.

Our next generation <unk> was launched in under a year highlighting our commitment to meeting our customers' demands.

We held develop it demo day for key customers in June.

17 companies attended including 5 Oems and other customers evaluating our using our solutions and industrial robotics delivery EV and Adas applications.

Across the board companies told us they are looking forward to incorporating the product and their solutions.

Importantly, develop it is equipped with our breakthrough proprietary micro lighter array architecture for MLA.

The MLA brings together the core elements that make lidar work, the optical chip and our AC or application specific integrated circuit technology.

The miniaturization combined with <unk> proprietary fully automated manufacturing process enables cost effective high quality mass production.

We are currently working on our next generation rotational sensors that will use proprietary asics and our MLR technology to provide ultra long range high resolution auto grade performance at scale.

Overall for all hardware technology choices. We have made we are marrying the high performance that is needed with scalability and the ability to manufacture. These technologies at the right cost point to enable mass market adoption.

On the software side.

Last week, we launched a new software development kit that allows customers to utilize the advanced capabilities of our fellow lidar perception software in their autonomous solutions.

The Villa development kit or V. D. K enables companies to accelerate time to market for bringing cutting edge lidar capabilities to autonomous vehicles, a desk mobile delivery services industrial robotics drones and more.

Technology innovations such as these advance our mission to democratize Lidar based safety and autonomy.

The roll Lidar can play in improving safety and autonomy continues to gain recognition by the larger public sphere as well.

Recent news from the NHTSA on reported crashes involving autonomous vehicles and a desk shows that the federal government is taking a hard look at crashes and near misses for vulnerable road users such as pedestrians.

We have a solution available now that now enables automatic emergency braking for wide variety of objects, including pedestrians.

On the commercial vehicle side, we developed our vela rate for windshield implementation and the federal Motor Carrier Safety Administration recently published a notice of proposed rulemaking concerning vehicle safety technology installed on the interior of commercial motor vehicle Windshields, which if adopted will for.

Provide a blanket exemption for lidar, and therefore should lower the threshold to its adoption.

On the infrastructure side, the smart cities and communities Act will provide technical and financial resources to local governments to implement smart city technology.

Especially in suburban and rural community.

Smart cities is a proxy for technology that enhances and deploy safety in the infrastructure.

At <unk>, we have technology for both infrastructure and vehicles and are the only Lauder companies' results, providing a full circle of safety and autonomy.

Now I'd like to discuss our financials.

I will review first our second quarter and first half results and then provide our full year 2021 guidance and business outlook.

Total revenue was $13.6 million compared to $17.7 million in the first quarter of 2021, which included a $5.5 million licensing fee.

Product revenue was $12 million up nearly 30% from $10.6 million in the first quarter of 2021, as we were getting renewed demand for our lidar sensors from customers with delayed purchases due to the uncertainty caused by the COVID-19 pandemic.

The company's weighted average selling price per sensor was $3106 compared to $3887 per sensor and the first quarter of 2021.

License and services revenue was $1.6 million compared to $7.1 million on the prior quarter that included a $5.5 million licensing fee I previously mentioned.

GAAP gross loss was $5.8 million and non-GAAP gross loss was $5.3 million compared to our first quarter 2021, GAAP gross profit of $1.9 million and non-GAAP gross profit of $2.7 million.

GAAP gross loss in Q2 did not benefit from the licensing fee in Q1.

GAAP operating expenses were $84.8 million and non-GAAP operating expenses were $28.8 million.

Compared to first quarter 2021, GAAP operating expenses of $42.5 million and non-GAAP operating expenses of $28.6 million.

GAAP operating expenses included $53.2 million stock based compensation expenses, including employer taxes.

Including stock based compensation expense was approximately $42 million charged against sales and marketing related to our 2020 merger with graph industrial.

This compared to first quarter 2021, GAAP operating expenses, including $13.3 million of stock based compensation expense, including employer taxes.

Included in general and administrative expenses of $1.4 million in legal and professional expenses in connection with our audit committee's investigation announced in the first quarter of 2021.

On to conduct by David Hall, the Companys, former Chairman and Marta Hall, the Companys, former Chief marketing Officer, and a current director of the company for.

For the first half of 2021 this figure was $3.7 million.

GAAP and non-GAAP operating expenses included an increased spending in research and development that is a response to the visibility provided by our multiyear agreement pipeline.

GAAP net loss was $80.7 million and non-GAAP net loss was $34.4 million.

GAAP net loss per share was <unk> 42.

And non-GAAP loss per share was <unk> 18.

This compared to our first quarter of 2020 on GAAP net loss of $40.8 million non.

Non-GAAP net loss was $26.1 million.

First quarter of 2021, GAAP net loss per share was 22.

And non-GAAP net loss per share was <unk> 14.

EPS for the second quarter of 2021 is calculated using weighted average shares outstanding of $193 million.

As of June 30, actual shares outstanding for $195.2 million.

<unk> completed the quarter with $353.6 million in cash and short term investments on its balance sheet.

Now for the first half of 2021.

Total revenue for the first half of 2021 was $31.3 million comprised of $22.6 million in product revenue and $8.8 million and license and service revenue.

This compares to $45.4 million on the first half of 2020 of.

Of which $27.9 million was product revenue and $17.6 million was license and service revenue.

GAAP net loss for the first half of 2021 was $121.5 million and non-GAAP net loss was $60.5 million.

This compares to a GAAP net loss of $33.1 million for the first half of 2020 and $35.9 million.

And non-GAAP net loss.

Now for our full year 2021 financial statement guidance.

Revenue is expected to range between $77 million and $94 million.

We're seeing parts of our global markets, such as the U S and China recover.

While other geographies are still negatively impacted by the continuing toll of COVID-19.

We believe we have good line of sight to the low end of our guidance range and see a number of larger projects that would provide upside revenue should they come in.

Many of the upside projects would generate nonrecurring engineering revenue in 2021.

Non-GAAP gross margins are expected to be between 13% to 24%.

This reflects fewer units sold to cover remaining fixed overhead costs of our factory and San Jose, while we experienced ongoing delays in moving this manufacturing offshore due to COVID-19.

Gross margins at the higher end of our revenue guidance would benefit from increased nonrecurring engineering.

On a GAAP basis gross margins are expected to include approximately $2 million for stock based compensation expenses.

On a non-GAAP basis operating expenses are expected to range between $125 million.

Third $29 million.

Based upon our expectations regarding our multiyear agreement pipeline, we are increasing our spend in new product development by approximately 40% in 2021 compared to 2020.

We expect general and administrative expenses will increase by approximately 35% in 2021 compared to 2020, primarily due to increased legal expenses and public company expenses.

On a GAAP basis operating expenses will include approximately $87 million of stock based compensation expenses that reflects approximately $42 million, we charged against sales and marketing in the second quarter related to our 2020 merger with graph industrial and $8 million related to the recent departure of our CEO.

Yes.

On a GAAP basis.

Income tax expenses are anticipated to be approximately $800000.

Weighted average shares outstanding for the year are estimated to be $193.5 million.

Finally, I would like to review our business outlook.

At the end of the second quarter of 2021, we estimate we could have the opportunity for over $1 billion of revenue from signed an order projects through 2025, plus the pipeline of projects that are not yet signed and awarded a $4.5 billion.

As I mentioned earlier included in our multiyear agreements, our new <unk> agreements, which are expected to begin to ramp starting in 2026 and the years beyond.

This concludes my formal remarks, operator, we are now ready to take questions.

I will begin the question and answer session to ask a question you May Press Star then 1 on your telephone keypad.

Curious on Speakerphone, please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then 2 at this time, we will pause momentarily to assemble our roster.

Okay.

It appears our first question comes from Tim Mulrooney.

Please go ahead.

Great. Thanks, good afternoon, everyone.

Hi, just hoping you could just go through the second half.

Gross margin bridge again, just wanted to send the key puts and takes.

Kind of drive the implied second half exit rate.

Yes, so as we're looking at the second half for the year for gross margins.

We've given you a sense of what we see for sensor counts.

<unk>.

So that will contribute to the gross margins as we were still a little bit delayed in getting these fee manufacturing moved offshore.

And just in the sensors creates a little bit of a drag on what those gross margins will go but as you get out towards the higher end of the range of the guidance we provided.

There is a pretty solid pipeline of newer contracts that will come along with some nonrecurring engineering, which is a significant gross margin contribution upwards of 100%. So as we have a kind of clear pipeline to the bottom end of the range, but more confidence as we get out into the middle.

Additional <unk> will bring that gross margin number up so as we look out towards towards the end of the year, we expect that the gross margins start to move up from there.

So as those energy deals come in.

Got it that's helpful. And then just on the <unk> Awards that begins in 2026 can you give us a little more color maybe in terms of the region and perhaps even the prospective volume of that award going forward.

Yes.

So without getting into too many specifics because of the <unk>.

The first was confidential for natural.

Okay.

H growth kind of agreement.

The.

Net of data that is.

On a large OEM and it's project, where we're working with them closely on there. They are actually I think there are 2 projects underneath there, but we're just calling on 1 for now.

And it starts moving into what would be a normal OEM scale kind of volume.

And it would be in the Adas space.

Got it okay. That's all very helpful. Thank you.

Okay.

Our next question comes from Colin Rusch Oppenheimer. Please go ahead.

Thanks, So much guys are going on.

With your non auto customers can you talk about the level of activity versus a year ago in terms of customer quotation sales.

Sales cycle.

Right.

So what's going on in that segment of the okay.

Yes, so it's interesting to us is even when we look at our project pipeline that we share with people in our Investor presentation. We are seeing significant uptick I think the initial adoption for lidar is going to be coming more from our kind of robotics and industrial customers and so when you look at it.

At this space adoption will be.

A little bit faster sales cycles come a little bit more quickly.

And the implementation and uses of the sensors has happened much more rapidly. So as we're looking on it even as we look out a couple of years into our forecast we're expecting that the linearity of revenue will actually start with this these industrial maybe and robotics sensors at some of the smart city and other kind of non automotive applications and then as automotive.

Into play in the later years 'twenty 3 'twenty 4 'twenty 5 'twenty 6.

These wells. This this this set of customers will start to generate revenues and the other day automotive space will start to generate volumes of sales as well that will kind of gather up the carrot catch up. So we are seeing a much shorter sales cycle much quicker implementation too.

From from when you get the.

Design win 2 to start up production with the industrial customers.

And so that was a resulting in quicker revenues for us.

Perfect and then within the guidance how much of the back on it is.

Oh shoot by NRG.

So the.

We're pretty comfortable that a smaller portion of the low end of our guidance as NRI. So.

It was mostly made up of sensors, but as we get out further into the range of the guidance it becomes more and more energy at this point.

Because the volume set to catch up would be would require having those fixed contracts in place today and the manufacturing up and running so that that is going to be a little bit more entry at the higher end of the guidance.

Okay. Thank you so much growth.

Thank you. Your next question comes from Andrew.

Gil of Needham <unk> Company. Please go ahead.

Hi, Rajeev, Yeah, Hey, guys. This is actually Dennis.

On behalf of Rajiv.

He is joined Hill.

We'll see.

First question is just regarding the solid state transition now.

Would you guys want to talk on just a little bit on kind of maybe the mix of solid state versus regular sensors, and maybe kind of who the top adopters out right now for your solid state sensors.

Sure so.

You're right on with conviction.

So for US the initial solid state sensors are actually going out to people on the industrial space. We have a lot of kind of R&D buys there's certainly a lot of that we mentioned, how even with our value a bit.

Velvet day. So we had here we had a lot of activity, but those arent necessarily turning up in revenue. So those will be more production in the coming years, <unk>, which are producing the solid state sensors today.

In terms of kind of moving into production or more in the industrial space. As these would be kind of the delivery space, we're seeing a little bit more of the activity for industrial contract for multiyear agreement kinds.

As well as discussions.

The smart cities or the Iis solutions.

And.

So it's another space I think is 3 of them right. So yes.

I think we've covered most of it there.

You guys provide any color on how many of the solid state you shipped this quarter.

If you could put in there is about 230 for something like that.

We're anticipating that it will increase as we can.

Into Q3 as well. So there is there is going to be a balancing I think.

Like a lot of things that <unk>, even like our Asps are 1 of those things where you need to be careful not to take this quarters ASP and assume that that's going to be next quarters or that there is some kind of a steady decline trend. There I think people need to use a multiple quarters and look for a linear line trend it'll be at a little bit more gradual so as it relates to the sale of the solid state versus the rotation.

There's a balancing act going on where the mix will change from quarter to quarter, but gradually more and more we're going to see more of the solid state sensors moving in there.

Got it and my follow up on is actually related to the net.

Is there anything you can tell us about kind of the asp's either for the rotational units are for all states kind of how does it trend either sequentially or year over year is there any kind of color you can provide either on the high end units or some of the lower end units and detail would be great.

I'm not going to get into much more detail to tell you that we have a weighted average ASP.

Asps that we share with everybody.

We have seen the prices of all the sensors coming down and.

And as we get out into next year and years beyond that as our MLA in Asics chips become incorporated in the rotational sensors will be able to manufacture them at a lower cost.

It will also allow us to while still maintaining our gross margin targets be able to sell them at lower price points and achieved broader market adoption, which is sticking with the strategy that the company has had in place for about 5 years now.

Okay, Alright, that's it for me thank you very much.

Thank you for joining have a good day.

Your next question comes from Richard Shannon with Craig Hallum. Please go ahead.

Hi, Richard Hello, guys, Hi, George.

Just a clarification drew did I hear something in your prepared comments about something like 30% of your sales are coming from solid state sensors for sure expected I know I got that wrong. So please clarify what that was.

Yes, we believe that that overall sensor sales were going to see a bit of a pickup in the solid state sensors here in the second half for the year and it could be upwards of 30% of our total sensors sold so looking at our current kind of visibility that we're getting from customers and expected buys from them as well as the work that we've got with most of your agreements, we see that as a very real possibility.

And that study I believe for sure that with you last quarter as well.

Okay, maybe I missed that and does that just go for the year or for the second half.

For the full year.

Okay perfect. Thank you for that.

That's my first question was.

Obviously, when you process the company, probably you could talk about a large last mile delivery customer and I think you just mentioned.

Potentially new opportunities with that customer specific to the last mile delivery engagements that 1 still on track in terms of timing and scale.

So of course due to confidentiality obligations I can't be too specific about that but we are seeing nice pick up on.

On the delivery solutions, yes, we are.

Then we're also seeing some nice activity with a similar type of a customer in China.

Who is also going to be using that our sensors for similar applications. So.

There is a we're really seeing nice activity across kind of.

The space that includes some of these ecommerce large ecommerce customers.

Okay Perfect and my my my follow on question was following up on the topic of gross margins here just trying to get the again the bridge to the second half the.

Second half of the year to sit for full year range, even with getting to the low end would suggest you're looking at gross margins and kind of the 30% range for the second half of the year is that a fair number and since that Wouldnt include much NRG would that be.

A range to think about going into next year.

Yes, so the low end of our guidance at the low end of our gross margin.

Gross margins would be at the low end of our revenue range.

But it would be kind of escalating a bit as we come out of the year here as we start seeing unit volumes continue to pace as they are.

Okay Fair enough that's all for me thanks.

Thank you.

As a reminder, if you have a question. Please press Star then 1 for next question comes from Aileen Smith with Bank of America. Please go ahead.

Good afternoon, everyone I wanted to follow up on the commentary.

I wanted to follow up on the commentary that a lot of the traction you're seeing on the condensate centers is actually coming from industrial end markets. I think most are not to characterize that labatt or I think you've characterized the element in the past Israeli the level 1.2 plus.

8 at oriented center. So is your customer traction on the automotive side consistent with your expectations or what's your thought process on what is it sustainable mix on solid state sensors between automotive and nonautomotive end markets over time.

Yes, so that's a that's a really important question because that last part of your statement is really.

It's the overtime part so we live in a unique world, where you guys kind of measures on how we're doing this year in this quarter in terms of our P&L, but where are we going on where are we expecting things to go in the coming years.

For the current period, we're seeing the solid state sensors being picked up in industrial spaces, where those markets are really kind of the early adopters of this technology and it's rolling out a little more quickly.

We're getting a lot of activity in the Adas space very much so around the Ada around availability as well as some of our <unk> products, what we're working with some of our Asia customers is strictly along the <unk> family line.

And then the 2026 solution that we talked about is also solid state price.

Earlier on the <unk> space so.

In time, we are expecting that the automotive space will probably not so much the road robotics, So I should say the robo taxi space Robo taxis not as concerned about aesthetics.

More likely be using rotational sensors on their cars because they are more efficient and provide more data to ensure the safety of the vehicle driving but as you get into <unk>.

Cars that are more focused on the aesthetics, then develop bits in the Valerie has become more important because they can embed them in the car and doesn't detract from the nature of the vehicle. So we are seeing a lot of activity on there was a lot of lot of <unk>.

Very good feedback from the Oems when they're here for our available days.

You know a month or so ago, and we're having a lot of extended conversations with them at this point around that.

Okay. That's helpful color and then I wanted to touch base on that on I think on slide 12 on it.

It kind of compare it versus.

Last quarter is there anything to read in keel on the.

For $1 billion revenue number and sign an awarded contracts.

What is an increase I think on September 20% in the number of those timing awarded contracts themselves. I think it was 29 in May 2021, and 34 on ASIC.

As a net coronary yet the estimated revenue number it's simple.

There are some of the contracts that you're winning smaller in scope on revenue size or have there been adjustment can you, perhaps assumptions and premium on the previous pipeline.

Yes. So this is this is.

Is it very important conversation because.

Reason why I would kind of talked about 2026 activities. Because we are forecasting on Friday any information on that yet, which we will probably do starting next quarter.

But so the $1 billion is with these additional customer some of the industrial contracts are slightly smaller than the just the very nature of their businesses or others of the more recent nya agreements continue to be larger and we will expand in the coming years.

But as you start looking out past 2025, we are seeing the potential for those numbers to continue to expand rather substantially with some automotive activity. So.

For right now we're confident that these numbers become a little bit more reliable and we're working towards ensuring there.

Turning into the P&L.

And.

Adding additional contracts is something that we anticipated as time comes to pass these numbers will continue to growth.

Okay.

And 1 more if I may can you provide a little bit more color on what specifically is the delay in the industrialization process and moving some of their production offshore and particularly as it sounds you referenced that last quarter on.

And it sounds as if it's incrementally worse.

And then maybe perhaps anticipated so as you think about that 1 involving thrill the remainder of the year, what what's still outstanding that needs to be completed that the industrial industrialization process will get back on track.

If you don't mind I'm going to introduce.

Jim Barnhart, who is our new COO had months here evaluating the <unk> season.

Seasoned CFO with many this isn't as first rodeo as COO. He has evaluated it he's got some feedback and then I'll add some additional color at the end if there's any other questions for follow up Jim.

Thanks, Good question really and certainly the <unk>.

<unk> have been with our contract manufacturers for years and our strategy was to have the capex.

Assembled and.

And sent back to our facility here in San Jose for final testing and we're moving towards having really the full work being done at the contract manufacturer. So that's in process and whats frankly delayed it is again the resurgence of Covid on both with our contract manufacturers facility in Thailand, as well as in Japan. They unfortunately have been hit.

Fairly hard with the Delta variance, so that has delayed not getting the equipment in.

<unk>, but allowing our engineers to travel to help make sure that things are properly set up calibrated aligned et cetera. There has been some delay there, but certainly with the ultra.

Already completely with.

With the contract manufacturer in Japan, and we're in process with the Alpha Prime transition that is moving forward as well, but again it has been somewhat delayed just due to the unfortunate timing of the resurgence of.

Covid pandemic.

I guess I could comment also on sorry that the <unk> hundred 8800, those transitions are in progress as well even as we are finalizing the various phases of designs of the products. So already these sub assemblies for modules. If you will that go into the full lidar module those are in process being transitioned to the contract when you.

Factors as well so to your point, it's slit a little bit to the right, but it's really due to the resurgence of COVID-19 that has slowed things down for us a bit here.

Okay, Great Thats very helpful commentary, thanks for taking the question.

Okay. Thank you.

Our next question comes from Michael Tong Bahrenburg. Please go ahead.

Hi, guys. Thanks for taking my question.

I guess I wanted to follow up on a question that was asked by 1 of my fellow analyst earlier about that last mile delivery customer.

I believe in an earlier presentation, you put out a while ago.

There had been some numbers put out and said you know a 100000 units related to that customer for 2022 and ramping to 250000, a $223.1 point for.

So rather important I think to <unk>.

<unk>. So I'm just wondering given obviously you don't have to take with the customer is but I mean are those volume is still in play is that customers still in your multiyear agreement backlog of just just any other additional comments.

So the the customer is still on the multi year agreement backlog I think the the.

We're not giving any 2022 guidance as of right now but.

It's not unreasonable to suggest that the customers' priorities might change where some other things could move out move moving any direction.

We also believe that with some of the other activity from other projects that are coming in if anything moved down others can move up so that kind of beauty of our business relationship is we're in multiple industries with multiple products with multiple customers. So as it relates to that 1 customer there are so many different opportunities in there.

Even if that did slip we believe that other other solutions would probably fill in.

Got it thanks, and then just looking at license and services revenue if you back out the lump sum sort of 1 time.

Adjustments I guess from the prior year it looked like maybe sort of a baseline coming into this year would be $10 million for the license and services revenue, but even if you annualize the first half and back out that 1 time.

Number from the first quarter it looks like maybe license and services can be like $10 million or less I don't know maybe you can tell me if I'm wrong, there, but on top of that with Asps coming down. It seems like your your volume growth unit growth would have to be pretty robust in the back half I mean, we're talking.

Maybe 50 plus percent unit volume growth in the back half.

On step up in the run rate. So I guess is that achievable. I mean is that is that sort of what you're targeting in terms of unit volume growth or is there maybe.

I'll make them packaged can drive the back up in the back half of the year.

So I did talk about.

The volume of sensors, we expect.

At least in the second half of the year by quarter. So you can you can put that together, we think asp's I like I said, they're probably not going to be.

It's going to be more of a linear trend for Asps, and then trying to take 1 quarter and applying that so it could be overly conservative for you just use Q Q2's asp's.

And then the any delta between what you might get from taking unit volumes and Asps, who will probably be made up in <unk>.

The <unk> opportunity is pretty significant for us right now.

Got you. Thanks, and then 1 last question just around sort of the 8 activity recently I mean, we've seen from other competitors in the space Awards from several Oems.

I'm curious I mean, obviously you guys have been competing for those awards I'm just wanted to get your thoughts as to why you think.

No. It hasnt been selected for the sort of the near term awards outside of Fair day future.

Just any commentary on why you think that that could be.

Yes, it's an interesting conversation because when we talk about the awards Im not sure on your near term is but we're not expecting anybody see anything significant in the next year or so.

So they don't the awards most of the awards. We've heard discussed we've seen out there are a couple of years out.

We believe that a lot of those will still be in play. We've had we've mentioned earlier, we've had some conversations with customers who are coming back to us because the ones who are more near term are finding that the people they selected or who might have previously announced their relationship.

Aren't able to produce and they're not confident in the sensors to be able to perform at the level that was expected were valid on lidar is currently producing sensors and can deliver sensors at the volumes they need to meet their startup production targets.

<unk> are also going to be capable of providing the levels of.

Accuracy that they need in order to be able to release their systems.

So this is Tim.

On evolving story, but that's why we've gotten so far so we are aware that some of them. We look at them and we feel like some of them are kind of really still kind of R&D stage and they are still there.

This could change and we'll see the dynamic we just discussed.

Play out more so in the coming years.

Understood. Thank you for the color I appreciate it okay.

This concludes our question and answer session I would now let's turn the conference back over to Mr. Drew Hammer for any closing remarks.

Thank you very much everybody for joining us today.

We're very excited here at Vela and Lidar for the we're starting to see is the traction of the lidar sensors in their adoption in so many different industries and so many different parts of the world and in so many different.

Customers so.

We go forward, we look forward to talking with you more and looking forward to seeing this evolving market take shape.

And continuing to be the major player in the space and leading it as it goes forward hope Youll have a wonderful afternoon. Thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.