Q3 2021 Velodyne Lidar Inc Earnings Call
[music].
Yes.
Good day and welcome to mobile banking at our third quarter 2021 financial results Conference call.
All participants will be in listen only mode.
Assistance, Please signal conference specialist by pressing the star Keefe over about zero.
After todays presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.
Like the call conference over.
Mr.
Andrew Chang head of Investor Relations. Please go ahead, good afternoon, and thank you for joining us on today's conference call to discuss Valentine Lidar <unk> third quarter 2021 financial results drew.
Drew Hamer, the company's Chief Financial Officer will run through the calls prepared remarks, then Ted Tewksbury, the incoming Chief Executive Officer drew and Jim by Heart, but Chief operating officer will be available for Q&A.
Before we begin I would like to remind you that shortly after the market closed today <unk> issued a press release announcing its third quarter 2021 financial results.
I'd also published an Investor presentation, you may access the press release and the presentation in the Investor Relations section of Teledyne Lidar Dot com.
Today's discussion includes forward looking statements. Please refer to our press release, and our SEC filings, including our most recent 10-K and 10-Q 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.
Finally, 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 one initial question and one follow up question now I'd like to turn the call over to drew.
Thank you Andrew and welcome to valid.
Ladies and gentlemen, as most of you saw on November 10th we will have a new CEO, Ted Tewkesbury, leading our company.
Ted is a seasoned technology executive who brings to <unk>, a proven track record and more than three decades of experience leading innovative businesses.
A true visionary I am looking forward to working with him to expand our lead in the global Lidar industry execute on our strategic growth plan and drive long term value for all shareholders.
I also would like to welcome our New Board member, Virginia Boule.
She is a renowned corporate governance expert who has expertise and deep experience will further strengthen our board of directors.
Since our last earnings call in August we've done a number of things.
We signed one additional multi year agreement for a total of 35 on track for our goal of 38 by year end.
We've grown our pipeline to 220 projects with an increasing concentration in the industrial and robotics market, which make up one third of the pipeline projects and has grown nearly 50% when compared to last year at this time.
We believe the industrial and robotics market is one of the Lidar market is closest to commercialization and we expect our activity with customers in this market will only accelerate.
We shipped more than 4400 sensors in the third quarter, continuing our market leadership.
Our customers today are giving us purchase orders for larger volumes as they move into the first wave of mass commercialization.
We are the global Lidar leader shipping more sensors in the third quarter than the aggregate of all our peers combined that have reported shipping sensors year to date.
We expect to ship more than 15000 sensors in 2021 up at least 28% over 2020.
Significantly more than our peers.
The interest for our new solid state products continues to grow.
We shipped over 630 solid state sensors in the third quarter more than double the prior quarter.
We are excited about the potential for these next generation products and anticipate long term growth in the linear fashion smoothing out what could be volatility from quarter to quarter.
Fell a bit projects continue to grow.
We now have 33 opportunities, including solid state validates up from 25 in the prior quarter.
We anticipate shipping <unk> samples for revenue late in 2022.
Overall, the use of Lidar today in our served markets continues to gain momentum.
In automotive, we continue to make progress in our relationships with both emerging and major high volume OEM customers for the use of our Lidar and Adas systems.
And Avi, we are working with new customers and existing customers, who are looking to extend their current agreements with us to include additional products within our portfolio.
In robotics, and industrial we announced a multiyear agreement with renew robotics to use our pucks sensors and Theyre vegetation management for solar energy facilities.
And mapping we have new customers such as top of drug which is based in Switzerland, and develops affordable high precision solutions for aerial surveys.
They signed a multiyear agreement for our sensors to be used for high precision mapping and three D modeling and demanding environments, including farms for us and infrastructure to support development that advances economic sustainability goals.
We are also collaborating with move dot AI to provide robot manufacturers with enterprise grade automation solutions, including mapping navigation obstacle avoidance and risk avoidance.
We also expanded our relationships with existing customers such as AGM systems, who has deployed our alpha Prime Lidar sensor on the AGM Ms five prime.
Their latest high performance mobile scanning solution.
This is the second sensor type AGM systems has purchased from validate.
Last but not least our smart cities.
Our intelligent infrastructure solution or Iis.
<unk> was selected for a major deployment and the University of California, Irvine Smart cities initiatives.
Where it will be used at 25 intersections as part of a $6 million Road network project in Irvine.
We continue to expand our eyes proof of concept deployments across North America.
Now for our financials.
I will first review, our third quarter and nine months results and then provide our full year 2021 guidance and business outlook.
Total revenue for the quarter was $13 1 million compared to $13 6 million in the second quarter of 2021.
Product revenue was $11 8 million slightly down from $12 million in the second quarter of 2021 due to a combination of the lower weighted average ASP than the prior quarter, reflecting the ongoing evolution of our product mix towards consumer affordable solid state sensors and ensuring consistent performance.
Across and within our product lines crucial for our customers as they ramp towards mass commercialization.
The weighted average selling price per sensor was 2000 and $622 compared to $3106 per sensor and the second quarter.
License and services revenue was $1 $3 million.
Compared to $1 6 million in the prior quarter.
Yeah.
GAAP gross loss was $4 7 million and non-GAAP gross loss was $4 2 million <unk>.
Compared to our second quarter GAAP gross loss of $5 $8 million.
Non-GAAP gross loss of $5 3 million.
Yeah.
GAAP operating expenses were $50 million and non-GAAP operating expenses were $33 4 million compared to the second quarter GAAP operating expenses of $83 3 million and non-GAAP operating expenses of $28 $8 million.
Third quarter GAAP operating expenses included $16 3 million of stock based compensation expense, including employer taxes.
This compares to the second quarter GAAP operating expenses that included $53 6 million of stock based compensation expense, including employer taxes of which $41 $6 million was charged against sales and marketing a majority of which was accelerated vesting of stock based compensation related to our 2020.
<unk> with graph industrial.
Included in general and administrative expenses are $1 $3 million in legal and professional expenses connection with our audit committees of investigations into 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 the nine months ending September 32021, this figure was $4 $7 million.
GAAP net loss was $54 7 million and non-GAAP net loss was $37 5 million.
GAAP net loss per share was 28.
And non-GAAP loss per share was <unk> 19.
This compared to a second quarter of 2021, GAAP net loss of $79 $2 million non.
Non-GAAP net loss was $34 $4 million.
Second quarter 2021, GAAP net loss per share was <unk> 41.
And non-GAAP net loss per share was <unk> 18.
EPS for the third quarter of 2021 is calculated using weighted average shares outstanding of $196 2 million.
As of September 30, actual shares outstanding were $195 9 million.
We completed the quarter with $324 $5 million in cash and short term investments on our balance sheet.
For the nine months ending September 32021.
Total revenue was $44 $4 million.
Apprised of $34 3 million in product revenue.
And $10 million in license services revenue.
This compares to $77 5 million in the nine months ended September 32020 of which $53 $9 million was product revenue, including a one time $11 $1 million stocking fee.
At $23 6 million was license and services revenue.
GAAP net loss for the nine months ended September 32021 was $174 8 million and non-GAAP net loss was $98 million.
GAAP net loss for the nine months ended September 32021 was $174 8 million and non-GAAP net loss was $98 million.
This compares to a GAAP net loss of $38 4 million for the nine months ended September 32020, and $45 million and non-GAAP net loss.
Now for our full year 2021 guidance.
We expect to ship over 15000 units in 2021.
Our growth of at least 28% as compared to 2020.
Revenue is expected to range between $60 million and $63 million as.
As I mentioned earlier in my remarks, we are moving into the first wave of mass commercialization with customers, who are now are expecting consistency of performance within our various product lines.
This is a natural evolution from the R&D purchases, our customers had done with us historically, where test samples were acceptable.
We are refining our engineering and production processes to meet customer delivery and performance expectations.
As a result of this focus on customer satisfaction.
Approximately $4 $3 million of product sales shifted out of the third quarter into the fourth quarter of 2021 and first quarter 2022.
Our revenue forecast also reflects the removal of any contribution from nonrecurring engineering fees that aren't already signed.
Non-GAAP gross margins are expected to be between negative 8% to 10%.
This reflects volume in weighted ASP mix and ongoing delays in moving manufacturing offshore due to COVID-19.
On a GAAP basis gross margins are expected to include approximately $2 3 million stock based compensation expense.
On a non-GAAP basis operating expenses are expected to range between $125 million and $129 million.
We expect general and administrative expenses will increase by approximately 55% in 2021 when compared to 2020.
Primarily due to increased legal expenses and other related public company expenses.
On a GAAP basis operating expense will include approximately $89 million of stock based compensation expense.
On a GAAP basis income tax expenses are expected and are anticipated to be approximately $800000.
Weighted average shares outstanding for the year are estimated to be $193 7 million.
Finally, I would like to review our business outlook.
At the end of the third quarter of 2021, we estimate we could have the opportunity for approximately $800 million of revenue from signed an order projects through 2025, plus a pipeline of projects that are not yet signed and awarded with an opportunity for approximately $4 2 billion.
As certain of our customers are progressing with our lidar solution Rollouts, we are seeing variability in their rollout schedules.
As they get into their projects some have reduced their initial ramp rates, while maintaining the ramp rates in outlying years. This is reflected in these aggregated business outlook numbers.
We anticipate providing updated project pipeline data through 2026, plus 2022 financial guidance in our fourth quarter 2021 earnings call.
This will allow our new CEO, Ted Tewksbury, the opportunity to address these metrics.
This concludes my formal remarks, operator, Ted Jim and I are now ready to take questions.
Well now begin the question and answer session. Patrick a question you May Press Star then one on your Touchtone phone.
We are using a speakerphone please pick up your handset before pressing the keys.
Draw your question please.
Please press Star then two.
This time, we'll pause momentarily to assemble the roster.
First question from Colin Rusch of Oppenheimer. Please go ahead.
Hi, Good afternoon. This is Christian on for Colin. Thank you so much for taking the question.
I wanted to follow up on some of those final remarks that you made about.
Just sort of the variability in rollout schedules really wanted to ask about.
Your customers have been operating in this sort of hand to hand combat environment for the last year now.
How are you seeing the pace of <unk>.
Asian and design cycle time, right now with your customers and if you could provide just some context around that the end markets and how that differs among that the end markets that would be helpful. Thank you.
Fair enough I think I'm going to start with the final question first I guess, then because each of the different market I'm sorry. This is drew.
Each of the different markets certainly has its own pace and what we're seeing.
In the industrial markets and the kind of the last mile delivery markets.
As well as some of the mapping and other industrial sectors. The peso of design is increasing we see that in our pipeline. The number of projects that have entered our multiyear agreement.
Pipeline has increased substantially in that space very nicely in fact, and the time to market for a lot of their solutions tends to be.
About a year, maybe two years at the most when we start talking about the automotive manufacturing solutions those solutions tend to be further out there could be four or five years away from that from the design win to design completion and the start of production. So.
So they tend to take a much longer and require a much larger investment by valid and lidar.
And so really the shift we're seeing right now is there is a more rapid movement in the industrial space to commercialization of revenues for valid on Lidar.
And for the automotive space, we are feeling like Thats still feels any real rapid movement. There is still going to be four or five years out.
Yeah.
That's really helpful and then one.
Wondering if you can touch on any.
Any changes in the competitive environment.
We are certainly seeing some indications of industry consolidation, but also you know as you're focusing on this.
And on this customer engagement and quality are you seeing any customers come back after working with other platforms.
Okay.
It's our belief that now that we're getting into more of a higher volume production. Our focus is on the.
The higher quality on a consistent basis and what we delivered.
The sensors that are going out to customers. They want the sensors to be the same kind of performance every time when they when they opened up the box and they take it out.
Being the one company that's doing that on a regular basis.
<unk> has created opportunities for customers have come back and let us know that the reason they want to go to <unk> because those sensors are consistent when they receive them we.
Also during this quarter with the assistance of Jim Barnhart spec.
Spent a lot of effort and really closely our relationships with the existing customers who are buying some of those sensors and making sure that we're meeting that requirement, which has allowed us to put us in a position where we had to move some of this revenue out to Q3 as we've ensured that the quality of the products and the performance was consistent from sense.
<unk> sensor is they opened each box and the impact of that is definitely something that customers have given us a lot of feedback is much appreciated.
It's something that they are counting on and looking forward to and then our continued evolution and along those lines on there is something that they expect.
And the fact that we're the leader in that space should lead to additional deals coming not only.
Going forward, but also.
In the current quarter should say, but out into 2022 and beyond.
Thanks for that and if I could fit one more and I did just wanted to ask as we're looking at that first wave.
Mass commercialization yet.
How are you feeling about component availability and your confidence in ramping production.
Yeah.
Jim you want <unk> sure.
Yeah. This is Jim excellent question there Christian.
We are seeing increased lead times of course, we're working with our suppliers, giving them advanced forecast on a rolling 12 month availability right now we are having some near term.
Surprises here and there, but nothing that has guided our production yet and we're working daily with customers excuse me with suppliers to make sure we're getting the components in and.
The constraint is there everyone seeing but we are overcoming that on a regular basis and as we see the pre shortages since were looking out.
At least a quarter in advance for our production needs with our contract manufacturers as well as the direct to reach out to our suppliers. We're addressing the shortages as we see them and so far we've been able to mitigate all of them and we're continuing to do that like I say on a regular basis. It is rather tactical at this point, but.
Working with customers to make sure we had the clear demand from them and sending those signals to our supply chain, we've been able to.
Keep those supply continuity and we anticipate being able to continue doing that.
Great. Thank you so much I'll turn it over.
Thank you.
Thank you next question Michael.
Bahrenburg. Please go ahead.
Hi, Thanks for taking my question guys.
I guess, it's really a pretty straightforward one.
We anticipate revenue increasing next year.
Yes.
Okay, Great no based on based on the based on the contracts that we have in place some of the Pos that we have already received from customers.
We are expecting in the conversations we've had with the number of customers we do as.
As we go through this next two three months, we talked to all of the 300 plus people that we sell sensors too and we get some feedback from them on what they expect their needs to be and what they are expecting.
We have changed here in the forecast.
We've provided for the rest of this year. So we've taken out the NRA portion. So in the past we've had customers tell us that they'll have a contract and it will have a piece of entry where we're finding the dose tend to take a little bit longer to close and then theyre going to be lumpy. So what we're really looking at right now.
If you look at our kind of revenues from last year and you take out the kind of the onetime items that we have.
A onetime restocking fee in Q3, and we had some other license revenues that came in from somebody who is now a license customer of ours.
We're expecting you're going to see some nice growth growth in our product revenues this year and what we anticipate as we go forward in 'twenty two and beyond.
Is that these product revenues will continue to maintain a <unk>.
Growth and then to the extent that the NRA types of relationships do come in we're going to leave those to be kind of an upside and instead focus on product product quality and delivery of sensors to customers and then I will take those things as they opportunistically present themselves.
Got it thank you for the thorough answer.
Just following up on that I mean, you guys have lowered the.
Non-GAAP gross margin guidance again, and I'm kind of curious do you have sort of a target revenue level in mind for when you expect.
To reach maybe breakeven on the operating income line or EBITDA level.
Target revenue threshold, you are expecting or a timeframe youre expecting to reach breakeven so sorry.
The avoidance of not giving 2022 guidance.
It's our belief that.
With some of the work that we're doing it does have something to do with the mix of products. We're continuing to work of getting our production done offshore which will also contribute to that but it will be the increase in the product volume. So we should expect that as we come out of next year, we should be getting to that breakeven and maybe even better as we go out into 'twenty three 'twenty four but again.
Subject to a review of.
Everything that we're going to be providing for the 2022 plan now that we have Ted on boardwalk, giving everything a thorough review.
Got it alright ill leave it there thank you.
Thank you Michael.
Thank you. The next question Mark Delaney of Goldman Sachs. Please go ahead.
I guess good afternoon, and thanks for taking the questions.
I believe you said ted's on as well and so I was hoping to start with a question for Ted and maybe talk about your.
Your experience with <unk> and so far what led you to take the job and any.
Initial.
As you may be able to share with us.
Sure sure. So first of all let me let me. Thanks drew for the generous introduction and just say how excited I am to be a member of the <unk> team.
It truly is an honor to have been unanimously selected for this position by the mill going forward.
Im really looking forward to rolling up my sleeves, and working with the team to do a deep dive across the company.
<unk> areas.
I was attracted to <unk> for a very simple reason, which is as you. All know the company is the undisputed lidar technology pioneer and market leader.
The company has the broadest product portfolio has shipped more central units than all the other competitors in the industry combined and very importantly, <unk> is really the only company that has demonstrated the ability to manufacture at scale.
They were concerned.
Tighter accuracy in some cases and other cases of different sensors.
We are seeing.
On the <unk> as we call. It we're seeing both high temperature requests as well as even back to the Alta flex for freezing temperature requests. So we're taking all of that feedback in and we actually did pause shipment, while we made sure.
The individual sensors.
The product families I should say make sure we understood really well what the customers were looking for we in some cases modified firmware to enable us to go to the freezing temperature type operations other cases.
The components to enable some of the higher temperature operations and just bottom line is as drew mentioned, we have received very positive feedback from customers on that they appreciated. The fact that we kept them informed of what we were doing we did delay some shipments to them, but made sure that what we were shipping was going to be conforming to their actual use case requirements.
Again, the feedback has been quite positive from the customers on that and I will say, it's actually been positive amongst the employees as well. They appreciate the fact that we are making sure that what we're shipping out to customers are.
Really we're conscious of what their use case needs are and performing to their needs.
Drew mentioned in his prepared remarks that we've been refining both the engineering practices for how we actually released the products as well as the production processes for producing them. So it's really coming altogether, the holistic approach to quality, we really dove.
Double down on it.
Q3, the third quarter, and we're continuing that going forward. So so far the momentum is quite positive there.
Thank you. Thank you.
Thank you.
Yes.
Go ahead Nick.
Alright, thank you.
<unk> will come from Aileen Smith Bank of America. Please go ahead.
Good afternoon, everyone. Thanks for taking the questions.
Big business that they were planning on entering into as they've continued to evaluate their business and restructure their business model and focuses for the future they've decided to spend less in one of those segments.
And there'll be so they anticipate the volume of purchases would be declining.
There are other areas, where as with a number of customers who are moving forward with their projects, but as they have gotten into the projects and they better understand their capabilities of launching <unk>.
<unk> reduced the amount of sensors that they might be buying on the front end, even though there are still expecting to achieve the total volumes year 234 out which have also impacted those numbers again, we're talking to them on a regular basis and as these customers are launching their very close contact with us.
What their needs are so that we can set up the production lines and meet their needs. So that has also affected what we're seeing in the pipeline. So this is this is a living breathing pipeline. This is the normal business.
A lot of disclosure, but we think it's right so that people understand the opportunity and the potential for lidar in the future and Thats why we continue to provide it.
Okay, Great understood. That's helpful. And then I wanted to ask a question around the average selling price and specifically in comparison to the first quarter.
Paul I think these numbers are right, but when I'm looking at the mix of units sold that are solid state and some of your lower price sensors youre absolute units from the first quarter to the third corner were about comparable but the percentage of the total was much lower and yet your weighted average selling price was also much lower in <unk>.
<unk>, so that that will lead us to conclude that you're dropping price.
Substantially across some of your older and more legacy products is that a fair interpretation or are we missing something.
Around 600 units about 600 units in the first quarter out of a base of 2700 versus out of a base of 4400 in the third quarter on a mixed basis, that's actually accretive for you guys and in the third quarter. Some I'm also trying to square away that average selling price would imply that across your other products some of those routes.
<unk> products that you were taking down price on those units.
There have been some some price reductions on those units because customers have increased the volume that they're purchasing so on a.
Yes.
That volume versus price agreement, there will be some of those happening, but I think it'll be.
Like I said, it's not going to be something we could look at it on a sequential basis, we should see things like this happening I'm wondering if linear basis, but we could also see those rotational sensors go up in price as well on an ASP basis in future quarters.
Okay, Great. That's helpful. Thanks for taking the questions.
Thank you for joining the call.
Thank you. The next question comes from planned Peterman, Craig Hallum Capital Group. Please go ahead. Thank you John.
Hi, Andrew Thanks for taking my questions.
First of all I was going to be.
On that same slide in your in your Investor deck that shows your pipeline.
Seven five versus 9 million units, but if you look at kind.
Just as a percent of whole graph, where aaas is that.
It looks pretty similar to prior quarters, where it's trending up.
Pretty strongly in later years and it doesn't look like there's a huge change to kind of what youre expecting from Ada Es and yet your.
Adas projects in that pipeline are down quarter over quarter and year over year.
Quite a bit year over year. So just curious how you would reconcile that and kind of if you can give us give us any color on what kind of is going into your thinking on an eight out there and what youre seeing from customers.
Yes, so on the Aaas customers we are seeing.
Those projects arent moving as quickly as we have indicated they could take three to four to five years.
Customer priorities are shifting on a pretty regular basis and it's an area, we're very carefully evaluating.
The Adas space.
While we're getting tremendous activity from the industrial space. So we are seeing that some of those projects are.
Pipeline went up here for quite substantial bit I'm curious if you give any color on the market that you're seeing some activity in and where those additional eight wins alright.
Others into your pipeline coming from.
Yeah. So we are seeing a normal demand for us to get the villa bits to market.
It's a product that really don't have planned for.
Sorry to production commercial availability until about 2023.
And the amount of interest from customers has made it a top priority for us to keep that moving along.
We're seeing across the board demand for that solution a lot of activity in the OEM shops, there is a lot of activity and all of our industrial customers.
And it's interesting there's even.
Breakdown the industrial customers between the last mile deliveries, the kind of the robotics and even in in newer spaces like.
Delivery using drones and things like that it's really tremendous response from the market for us to get that product.
Out and to them so.
It's really widely spread that we're seeing it across all the markets the interest in buying that and.
We're very aggressively moving to get that to beat their standards.
Okay. Thanks for.
Thank you. Thank you next.
Next question will be from Tricia and Gareth Baron. Please go ahead.
Hi, This is Tyler on for Tristan.
Maybe hydro staff can you talk about what effort you are putting into the software platform that maybe I extends beyond just object recognition and into car actualization.
Yeah. So we.
Have actually got we've already built add a kind of a platform of products that can be incorporated into those systems.
We are working very closely to identify additional features and functionality that to customers who would want to require so that we can incorporate that into our development plans as we go out to 2022 beyond.
And then we will work closely with them on any feedback they have as we continue to develop that and work towards some kind of a commercial agreement.
Or.
<unk> bit and then we're also seeing that in the Iis solutions, where people use them in an intersection it gives them again it gives them more data so that they can see the whole intersection with one sensor.
So we're really and then we also have it in mapping a lot of people use our rotational sensors are puck lights, and they'll put them on drones and they'll still use them to do top topographical mapping and we also have a customer who is using it for backpacks. So they put them on backpacks and they use them walk around People's neighborhoods and do the mapping of the neighborhoods as well.
So really seeing rotational sensors are still very much a product that people want as well as <unk>.
Giving them that option to be able to go with a solid state sensors.
Alright, great. Thanks for all the color.
Okay.
Thank you next question.
From Raj Gill with Needham <unk> Company. Please go ahead.
Good afternoon, everyone. This is Dennis on for Ravi.
Thank you Brian.
Thank you. So for my first question I will I just wanted to ask can you talk about your current kind of mix of the in house versus outsource production and how much of the guidance reduction that we're seeing here from from the <unk>.
Previous one was due to supplier component challenges that you're having versus this issue about improving consistency.
Yes, so we don't usually speak specifically to the.
To the particular components of in house versus outhouse out of house, but what we have shared previously is it number of our sensors are being produced by our contract manufacturers. So our pucks.
To the particular components of in house versus outhouse out of house, but what we have shared previously is it number of our sensors are being produced by our contract manufacturers. So our pucks.
A number of other products are often alpha ultra pucks.
Our <unk> 128 are now being produced by contract manufacturers.
However, as we started looking at our solid state products, we haven't been able to move as many of those offshore because of delays we've talked about in previous quarters.
Although a number of the components are being produced offshore and then they come back to the United States for final Assembly.
And then the newer products as they are being assembled and stood up those will continue to be done here in the San Jose facility. So the split is generally.
Done across the line.
I'm sorry, I think there was a second question there and I missed it would you like to repeat it. Please.
Sure. So essentially and then we had the guidance reduction here versus last quarter.
Moving to 661, and a half from 85% or so how much of this.
Was it due to component shortages.
Now that are affecting the entire semiconductor industry versus just the ones that are versus this issue of you guys trying to improve consistency for volume production.
It's actually none of it has to do with supplier shortages or anything of that nature.
It's mostly around.
The.
10% is that correct.
Now its negative eight to negative <unk> 10.
Okay got you.
Thanks for clarifying that I'm, just looking at sort of the full year revenue guidance again, I mean, if you look back at the original stack deck it was $157 million.
For 2021, and now it's in the sixties and.
Margins are obviously down quite a bit I mean, what would you characterize as the main driver of that quite significant change in the revenue and margin expectations for this year.
What is the primary driver of that.
Yeah for us the primary driver now that we're at the end of the year versus when we came into the year.
He actually when this guy you know these numbers were provided during the merger honestly. So these werent even guidance for the company for the year.
The main thing that we're seeing that's different from what we saw back in the beginning of 2020 versus to where we were today is of course.
Throughout the year, there was the impact of Covid slowing programs down and creating that dynamic for the first two three quarters here of not being customers just sort of slowing everything down pushing it out reluctance to Smith <unk>.
We've definitely been impacted by that.
And then some of that is resulting in some of the projects that we were expecting to get this year pushing out to next year. So that people are as they come back they are starting to pick those projects back up again.
We look forward to those coming back into Vogue.
In 2022.
And then lastly.
<unk>.
The key thing for US now of course in this forecast is a lot of those pipeline numbers there were consistently that in our EPS and by taking that out it's gotten us to where we are with the current forecast that we're sharing with everybody.
So basically what you said it seems like things are just kind of gotten shifted back does that imply that in the next year or two we could see that $150 million plus revenue.
Become realized.
We have seen things shift back and what we wanted to be really careful of especially given the benefit of having <unk> come on in evaluating all the different components of the business as we talked about earlier.
That debt.
Would be the fact that would be the case, so I can't verify or deny that right now, but we are certainly going through every single project in our pipeline, having deep conversations with those customers to gain better understanding of where they're at with their projects and what their intentions are going forward. So that when we speak to you again.
We're giving you.
Cleaned up.
If you will of what we're looking at.
Alright, thanks very much.
Okay.
They need to check in order to be able to use the letter sent to every one of their solutions. So thank you very much for your time today, we look forward to talking with you more as we go forward and hope you all have a good evening bye bye.
That concludes today's conference. Thank you for attending you may now disconnect.
[music].
[music].
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Season Technology, executive who brings <unk>, a proven track record and more than three decades of experience leading innovative businesses Ah.
A true visionary I am looking forward to working with him to expand our lead in the global Lidar industry execute on our strategic growth plan and drive long term value for all shareholders.
I also would like to welcome our New Board member, Virginia Bulette.
She is a renowned corporate governance expert who has expertise in deep experience will further strengthen our board of directors.
Since our last earnings call in August we've done a number of things.
Yes.
Okay.
And mapping we have new customers such as top of drone, which is based in Switzerland and develops affordable high precision solutions for aerial surveys.
They signed a multiyear agreement for our sensors to be used for high precision mapping and three D modeling and demanding environments, including farms for us and infrastructure to support development that advances economic sustainability goals.
We are also collaborating with move dot AI to provide robot manufacturers with enterprise grade automation solutions, including mapping navigation obstacle avoidance and risk avoidance.
We also expanded our relationships with existing customers such as AGM systems, who has deployed our alpha Prime Lidar sensor on the AGM Ms five prime.
Their latest high performance mobile scanning solution.
This is the second sensor type AGM systems has purchased from validate.
As loss of $5 8 million and non-GAAP gross loss of $5 3 million.
GAAP operating expenses were $50 million and non-GAAP operating expenses were $33 4 million compared.
Compared to the second quarter GAAP operating expenses of $83 3 million and non-GAAP operating expenses of $28 $8 million.
Third quarter GAAP operating expenses included $16 3 million of stock based compensation expense, including employer taxes.
This compares to the second quarter GAAP operating expenses that included $53 6 million of stock based compensation expense, including employer taxes.
Of which $41 $6 million was charged against sales and marketing and <unk>.
Majority of which was accelerated vesting of stock based compensation related to our 2020 merger with graph industrial.
Included in general and administrative expenses are $1 $3 million in legal and professional expenses connection with our audit committee investigations into 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 the nine months ending September 32021, this figure was $4 $7 million.
Yeah.
GAAP net loss for the nine months ended September 32021 was $174 8 million and non-GAAP net loss was $98 million.
This compares to a GAAP net loss of $38 4 million for the nine months ended September 32020, and $45 million and non-GAAP net loss.
Now for our full year 2021 guidance we.
We expect to ship over 15000 units in 2021.
Our growth of at least 28% as compared to 2020.
Revenue is expected to range between $60 million and $63 million as.
As I mentioned earlier in my remarks, we are moving into the first wave of mass commercialization with customers, who are now are expecting consistency of performance within our various product lines.
This is a natural evolution from the R&D purchases, our customers had done with us historically, where test samples were acceptable.
We are refining our engineering and production processes to meet customer delivery and performance expectations.
As a result of this focus on customer satisfaction.
Approximately $4 $3 million of product sales shifted out of the third quarter into the fourth quarter of 2021 and first quarter 2022.
Our revenue forecast also reflects the removal of any contribution from nonrecurring engineering fees that aren't already signed.
Non-GAAP gross margins are expected to be between negative 8% to 10%.
This reflects volume in weighted ASP mix and ongoing delays in moving manufacturing offshore due to COVID-19.
On a GAAP basis gross margins are expected to include approximately $2 3 million of stock based compensation expense.
On a non-GAAP basis operating expenses are expected to range between $125 million and $129 million.
We expect general and administrative expenses will increase by approximately 55% in 2021 when compared to 2020.
Primarily due to increased legal expenses and other related public company expenses.
On a GAAP basis operating expense will include approximately $89 million of stock based compensation expense.
On a GAAP basis income tax expenses are expected and are anticipated to be approximately $800000.
Weighted average shares outstanding for the year are estimated to be $193 7 million.
Finally, I would like to review our business outlook.
At the end of the third quarter of 2021, we estimate we could have the opportunity for approximately $800 million of revenue from signed an order projects through 2025, plus a pipeline of projects that are not yet signed and awarded with an opportunity for approximately $4 2 billion.
As certain of our customers are progressing with our lidar solution Rollouts, we are seeing variability in their rollout schedules.
As they get into their projects some have reduced their initial ramp rates, while maintaining their ramp rates and outlining years. This is reflected in these aggregated business outlook numbers.
We anticipate providing updated project pipeline data through 2026, plus 2022 financial guidance in our fourth quarter 2021 earnings call.
This will allow our new CEO, Ted Tewksbury, the opportunity to address these metrics.
This concludes my formal remarks, operator, Ted Jim and I are now ready to take questions.
Well now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
We are using a speakerphone please pick up your handset before pressing the keys.
Your question please.
Please press Star then two.
This time, we'll pause momentarily to assemble the roster.
First question from Colin Rusch of Oppenheimer. Please go ahead.
Hi, Good afternoon. This is Christian on for Colin. Thank you so much for taking the question.
I wanted to follow up on some of those final remarks that you made about.
Just sort of the variability in rollout schedules.
I wanted to ask about.
Your customers have been operating in this sort of hand to hand combat environment for the last year now.
How are you seeing the pace of innovation and design cycle time, right now with your customers and if you could provide just some context around the end markets and how that differs among those end markets that would be helpful. Thank you.
Fair enough I think I'm going to start with the final question first I guess, then because each of the different market I'm sorry. This is drew.
Each of the different markets certainly has its own pace and what we're seeing.
In the industrial markets and the kind of the last mile delivery markets as.
As well as some of the mapping and other industrial sectors. The peso of design is increasing we see that in our pipeline. The number of projects that have entered our multiyear agreement.
Pipeline has increased substantially in that space very nicely in fact, and the time to market for a lot of their solutions tends to be.
About a year, maybe two years at the most when we start talking about the automotive manufacturing solutions those solutions tend to be further out there could be four or five years away from the from the design win to design completion and the start of production.
They tend to take a much longer and it will require much larger investment by valid and lidar.
So really the shift we're seeing right now is there is a more rapid movement in the industrial space to commercialization of revenues for valid on Lidar.
And for the automotive space, we are feeling like Thats still feels any real rapid movement. There is still going to be four or five years out.
That's really helpful. And then wondering if you can touch on any.
Any changes in the competitive environment.
We are certainly seeing some indications of industry consolidation, but also as you're focusing on this.
On this customer engagement and quality are you seeing any customers come back after working with other platforms.
Got it.
Our belief that now that we're getting into more of a higher volume production or.
Our focus is on the <unk>.
Higher quality on a consistent basis, and what we deliver to them.
Answers that are going out to customers. They want the sensors to be the same kind of performance every time when they when they opened up the box and they take it out.
Being the one company that's doing that on a regular basis.
<unk> has created opportunities for customers have come back and let us know that the reason they want to go sell down is because those sensors are consistent when they receive them.
We've also during this quarter with the assistance of Jim Barnhart.
A lot of effort and really closing our relationships with the existing customers who are buying some of those sensors and making sure that we're meeting that requirement, which has allowed us to or put us in a position where we had to move some of this revenue out to Q3 as we've ensured that the quality of the products and the performance was consistent from sensors.
Sensor they opened each box on the impact of that is definitely something that customers have given us a lot of feedback is much appreciated.
It's something that they are counting on and looking forward to and then our continued evolution and along those lines is something that they expect.
And the fact that we're the leader in that space should lead to additional deals coming not only.
Going forward, but also.
I'm sure in the current quarter should say, but out into 2022 and beyond.
Thanks for that and if I could fit one more and I did just wanted to ask as we're looking at that first wave of.
Mass commercialization.
How are you feeling about component availability and your confidence in ramping production.
Yeah.
Jim you want to take that one sure. Yeah. This is Jim excellent question there Christian.
We're seeing increased lead times of course, we're working with our suppliers giving them.
<unk> forecast on a rolling 12 month availability right now we are having some near term.
Surprises here and there, but nothing that has guided our production yet and we're working daily with customers excuse me with suppliers to make sure we're getting the components in and.
The constraint is there everyone's seeing but we are overcoming that on a regular basis and as we see the pre shortages as we're looking out.
At least a quarter in advance for our production needs with our contract manufacturers as well as the the direct reach out to our suppliers, we're addressing the shortages as we see them and so far we've been able to mitigate all of them and we're continuing to do that like I say on a regular basis. It is rather tactical at this point, but.
Working with customers to make sure we have the clear demand from them and sending those signals to our supply chain, we've been able to.
Keep those supply continuity and we anticipate being able to continue doing that.
Great. Thank you so much I'll turn it over.
Thank you.
Thank you next question Michael from Apollo.
Bahrenburg. Please go ahead.
Hi, Thanks for taking my question guys.
I guess, it's really a pretty straightforward one.
We anticipate revenue increasing next year.
Yes.
Okay, Great based on based on the based on the contracts that we have in place some of the Pos that we have already received from customers.
We are expecting in the conversations we've had with the number of customers we do as.
As we go through this next two or three months, we talked to all of the 300 plus people that we sell sensors too and we get some feedback from them on what they expect their needs to be and what they are expecting.
We have changed here in the forecast.
That we've provided for the rest of this year. So we've taken out the NRA portion. So in the past we've had customers tell us that they'll have a contract and it will have a piece of entry where we're finding the dose tend to take a little bit longer to close and then theyre going to be lumpy. So what we're really looking at right. Now if you look at our kind of revenues from last year and you take out the kind of the one <unk>.
Items that we have.
A onetime restocking fee in Q3, and we had some other license revenues that came in from somebody who is now a license customer of ours.
We're expecting you're going to see some nice growth growth in our product revenues this year and what we anticipate as we go forward in 'twenty two and beyond.
Is that these product revenues will continue to maintain a <unk>.
Growth and then to the extent that the NRA types of relationships do come in we're going to leave those to be kind of an upside instead focus on product product quality and delivery of sensors to customers and then I will take those things as they opportunistically present themselves.
Got it thank you for the thorough answer.
Just following up on that I mean, you guys have lowered the non-GAAP gross margin guidance again, and I'm kind of curious do you have sort of a target revenue level in mind for when you expect.
To reach maybe breakeven on the operating income line or EBITDA level is there a target revenue thresholds youre expecting or a timeframe that you are expecting to reach breakeven so sorry.
The avoidance of not giving 2022 guidance.
It's our belief that.
With some of the work that we're doing it does have something to do with the mix of products. We're continuing to work of getting our production done offshore which will also contribute to that but it will be the increase in the product volume. So we should expect that as we come out of next year, we should be getting to that breakeven and maybe even better as we go out into 'twenty three 'twenty four but again that.
Subject to a review of.
Everything that we're going to be providing for the 2022 plan now that we have Ted on boardwalk, giving everything a thorough review.
Got it alright ill leave it there thank you.
Thank you Michael.
Thank you. The next question Mark Delaney of Goldman Sachs. Please go ahead.
I guess good afternoon, and thanks for taking the questions.
I believe you said <unk> as well and so I was hoping to start with.
A question for Ted and maybe talk about your.
Your experience with <unk> and so far what led you to take the job and any.
Sure.
As you may be able to share with us.
Sure sure.
So first of all let me let me thanks drew for the generous introduction and just say how excited I am to be a member of the <unk> team.
Truly is an honor to have been unanimously selected for this position by the <unk> Board and I'm really looking forward to rolling up my sleeves, and working with the team to do a deep dive across the company and all the.
The business areas.
I was attracted to <unk> for a very simple reason, which is as you. All know the company is the undisputed lidar technology pioneer and market leader.
Company has the broadest product portfolio has shipped more central units than all the other competitors in the industry combined.
And very importantly, <unk> is really the only company that has demonstrated the ability to manufacture at scale and.
So I looked at that and just saw an enormous opportunity to build on that strong foundation.
For those of you who are familiar with my background, you will know that I have a proven track record of building and scaling innovative technology businesses and driving revenue growth profitability and shareholder value, which in my view is exactly what <unk> needs. Today. So this was a perfect fit and.
I said before I look forward to working with developers and team to unlock the company's potential and make that a reality.
Thank you and if I could ask a second question I'm, hoping to better understand the consistency issue with the product that was mentioned in the prepared remarks.
And if you could talk about it from a few different.
As I mentioned I mean, maybe first of all how did you identify the issue do you have a good handle now on what's causing area have you come up with the FX and the timeline to fully remediate the consistency issue with the product.
Sure Yes. Good question this is Jim.
We found during the quarter that customers in some cases, we're actually using sensors in applications beyond the original intent for example, ultra <unk> originally.
Released with the anticipation of being for more automotive abuse and customers are starting to use them for mapping and surveying.
Type applications, where they're concerned.
Tighter accuracy in some cases and other cases of different sensors.
We're seeing on the.
<unk> as we call. It we are seeing both high temperature requests as well as event, but back to the ultra flex for freezing temperature requests. So we're taking all of that feedback in and we actually did pause shipment, while we made sure.
The individual sensors.
Product families I should say make sure we understood really well what the customers were looking for we in some cases, it's modified firmware to enable us to go to the freezing temperature type operations. Other cases, we changed the components to enable some of the higher temperature operations.
Bottom line is as drew mentioned, we have received very positive feedback from customers on that appreciated. The fact that we kept them informed of what we're doing we did delay some shipments to them, but make sure that what we're shipping was going to be conforming to their actual use case requirements and again.
The feedback has been quite positive from the customers on that than I will say, it's actually been positive amongst the employees as well. They appreciate the fact that we are making sure that what we're shipping out to customers are.
We're conscious of what they are used case needs are and performing to their needs.
Drew mentioned in the prepared remarks that we've been refining both the engineering practices for how we actually released the products as well as the production process for producing them. So it's really coming altogether the holistic approach to quality, we really.
Double down on the Q3, the third quarter and we're continuing that going forward. So so far the momentum is quite positive there.
Thank you thanks, Jim.
Thank you that was my next question.
Go ahead Nick.
Alright. Thank you next question will come from Aileen Smith Bank of America. Please go ahead.
Good afternoon, everyone. Thanks for taking my questions.
Just one on the number of projects and theoretical units that you have in the pipeline I just wanted to square this away with the presentation last quarter. I think you had 213 projects that you were citing for 9 million possible unit versus this quarter youre pointing to 220 projects with $7 5 million units I think we can understand that some of the more incremental.
<unk>, you're winning are coming from non automotive end markets and those are more spot by then the multiyear high volume programs, but how do you explain the change in the one 5 million centers that are so called missing from quarter to quarter and are the contract terms really changing that much and you are in RFID <unk> other stages.
So this is over first of all I just want to be careful there is nothing missing.
We are gathering this information from the customers that comes from them, specifically and we provide to you our pipeline. So this isn't necessarily a this is a pipeline of the business that we're currently tracking and the opportunities that are presented and when you when I share with you a pipeline youre seeing the dynamics of any normal business, where it goes in and out based upon customer needs.
So the change that we saw this quarter as a result of direct conversations with a number of our customers.
Where they are saying they are seeing changes in the priorities of their business a big chunk of this change actually came from the pre RFE category.
Where our customer has indicated that a big business that theyre planning on entering into as they've continued to evaluate their business and restructure their business model and focuses for the future they've decided to spend less in one of those segments.
And there'll be updates so to anticipate the volume of purchases would be declining.
There are other areas, where as with a number of customers who are moving forward with their projects, but as they've gotten into the projects and they better understand their capabilities of launching.
We've reduced the amount of sensors that they might be buying on the front end, even though there are still expecting to achieve the total volumes year 234 out which have also impacted those numbers is again, we're talking to them on a regular basis and as these customers are launching their very close contact with us.
What their needs are so that we can set up the production lines and meet their needs. So that has also affected what we're seeing in the pipeline. So this is this is a living breathing pipeline. This is the normal business.
A lot of disclosure, but we think it's right so that people understand the opportunity and the potential for lidar in the future and Thats why we continue to provide it.
Okay, Great understood. That's helpful. And then I wanted to ask a question around the average selling price and specifically in comparison to the first quarter.
Paul you have these numbers right, but when I'm looking at the mix of units sold that are solid state and some of your lower priced sensors youre absolute units from the first quarter to the third quarter were about comparable but the percentage of the total was much lower and yet your weighted average selling price was also much lower in <unk> versus.
<unk>, so that that would lead us to conclude that youre dropping price.
Substantially across some of your older and more legacy products is that a fair interpretation or are we missing something.
Well first of all in the first quarter, we had look over almost 2700 units that we shipped in this quarter, we shipped over 44 hundreds so the volumes are up substantially.
It's affected a bit because we are seeing an increase.
And the number of solid state sensors that we're shipping.
Those are shipped at a lower price so when you're doing a weighted average ASP of course, that's going to have an impact.
And then as it relates to the traditional.
The rotational sensors there are some contracts we have with customers that have certain volumes, we do normal volume unit volume commitments with those people or sorry, a volume price commitments with those customers and so there are some that may be sold at lower prices versus some that are sold to others. That's really not an isolated thing but as we.
Go forward, we're expecting that on a linear basis, we try not to take it one quarter at a time or sequential quarters. We do expect that we're going to see asps coming.
Coming down on a linear basis, but we'll also see movement inside the number of units leadership and as we get further out in the mix between solid state and rotational and higher priced and low price sensors starts to come into play and we'll see this dynamic continuing as we go forward that volumes will go up as volumes increase.
We'll offset some of the decreases are coming from the Asps.
And that will give us the appropriate contribution so we need to the business.
Okay, but as a as a clarification I was referencing be the solid state units from <unk> versus <unk>, which I think we're both around 600 units under that 600 units in the first quarter out of a base of 2700 versus out of a base of 4400 in the third quarter on a mix basis, that's actually accretive for you guys.
And the third quarter I'm, Martin I'm trying to square away that average selling price would imply that across your other products into those rotational products that you were taking down price on those units.
There have been some some price reductions on those units because customers have increased the volumes that they're purchasing so on a.
Unit volume versus price agreement, there will be some of those happening, but I think it'll be.
Like I said, it's not going to be something we could look at it on a sequential basis, we should see things like this happening.
Linear basis, but we could also see those rotational sensors go up in price as well on an ASP basis in future quarters.
Okay, Great. That's helpful. Thanks for taking the questions.
Thank you for joining the call.
Thank you. The next question comes from planned Peterman, Craig Hallum Capital Group. Please go ahead. Thank you.
Hi, Andrew Thanks for taking my questions.
My first one is going to be.
On that same slide in your in your Investor deck that shows your pipeline.
Seven five versus 9 million units, but if you look at kind of.
Yes.
Just as a percent of whole graph, where eight apps is that.
Yes.
It looks pretty similar to prior quarters, where it was trending up.
Pretty strongly in later years it doesn't look like there's a huge change to kind of what youre expecting from Ada Es and yet your.
Hey, that's projects in that pipeline are down quarter over quarter and year over year quite.
Quite a bit year over year. So just curious how you would reconcile that and kind of if you can give us give us any color on to what.
Going into your thinking on <unk>.
<unk> asked there and what youre seeing from customers.
Yes, so on the Aaas customers we are seeing.
Those projects arent moving as quickly as we have indicated they could take three to four to five years.
And customer priorities are shifting on a pretty regular basis and it's an area, we're very carefully evaluating.
The Adas space.
While we're getting tremendous activity from the industrial space. So we are seeing that some of those projects.
Are they are shifting.
The Oems priorities are changing.
Their commitment to incorporating <unk> into their solutions.
Have varying priorities as we go forward.
Okay.
And then.
One more on Ddos is.
You talked last quarter about your 2026.
Agreement with OEM I believe in Asia for around your <unk> solid state product I'm curious if you could.
Any update on that and.
How thats looking and then I'm not sure. If this is clarifying for them in an RFID or RFP stage or just any color around that would be great.
Yes, that's actually.
We're focusing on.
<unk> stage with that.
It's a very close partner one of the Oems in Asia, and we work with them, we've set up an operation close to them and we work with them on a regular basis and have daily calls with them on that project and getting to that point, where we can have those sensors moved to the.
Yeah.
Signed and awarded category.
Okay. Thanks, and then quick last one for me on Bell a bit pipeline went up here for.
Quite substantial I'm curious if you could give any color on the markets that you are seeing some activity and where those additional eight wins alright.
Products into your pipeline coming from.
Yes, so we are seeing a enormous demand for us to get the <unk> to market.
It's a product that they really don't have planned for.
Sorry to production commercial availability until about 2023.
And the amount of interest from customers has made it a top priority for us to keep that moving along.
We are seeing across the board demand for that solution a lot of activity in the OEM shops, there's a lot of activity in all of our industrial customers.
And then it's interesting there is even.
So we break down the industrial customers between the last mile deliveries.
Kind of the robotics and even in newer spaces like.
Delivery using drones and things like that.
So really tremendous response from the market for us to get that product out into them. So it's really widely spreads that we're seeing it across all the markets the interest in buying that.
We're very aggressively moving to get that to beat their standards.
Okay. Thanks sure.
Thank you. Thank you.
Next question will be from Tristan <unk> of Baird. Please go ahead.
Hi, This is Tyler on for Tristan.
Maybe first off can you talk about what efforts you're putting into the software platform that maybe.
Beyond just the object recognition and into car actualization.
Yes, so we.
Have actually got.
<unk> built out a kind of a platform of products that can be incorporated into those systems.
We are working very closely to identify additional features and functionality that the customers who would want to acquire so that we can incorporate that into our development plans as we go out to 2022 and beyond.
And then we will work closely with them on any feedback they have as we continue to develop that and work towards some kind of a commercial agreement.
Okay, Great and then for my follow up do you expect to rebound in 360 degree lighter shipments and if so what would the timing of that inflection and then maybe what applications would you see that inflection point in.
A rebound and rotational sensor so we actually haven't seen it.
The decline in demand of the rotational sensors.
We're actually in a number of very very steadily selling our pucks sensors, our alpha <unk> sensors actually had a nice uptick this quarter contributing to the unit volumes as alien currently pointed out earlier.
We are also engaged with the number of customers around the next generation Lidar sensors, which will use our MLA in our ASIC chips. So.
So we have a number of customers who want to use some of our sensors that'll be it.
Kind of moving towards that automotive grades.
Capability.
They're working very closely with us in defining how that should work on the running tests on the sensors today.
On their vehicles.
And so I really don't think it's as much a rebound as we do expect it to continue to be a strong products are valid on lidar.
Our market, leading product as well as our <unk> products.
And or sorry, our solid state products, and we do have agreements with customers to incorporate it into solutions. So I think youll see it in the automotive vehicle solutions.
The Avi sorry autonomous vehicle solutions, and we're also seeing an interesting dynamic where with the robotics. Some people want to use rotational because it gives them more data and guests gives them a full surround view from one sensor where others just want to use of solid state sensor, whether it's <unk>.
Or.
Sure.
<unk> and then we're also seeing that in the Iis solutions, where people use them in an intersection that gives them again it gives them more data so that they can see the whole intersection with one sensor. So it really and then we also have it in mapping a lot of people use our rotational sensors are puck lights, and they'll put them on drones and they'll still use them to do.
Top topographical mapping and we also have a customer who is using it for backpacks. So they put them on backpacks and they use them Walker and People's neighborhoods and do the mapping of the neighborhoods as well so really seeing rotational sensors are still very much a product that people want as well as giving them that option to be able to go with a solid state sensors.
Alright, great. Thanks for all the color.
Okay.
Yeah.
Thank you next question.
From Raj Gill with Needham <unk> Company. Please go ahead.
Good afternoon, everyone. This is Dennis karate.
Thank you Brian.
Thank you. So for my first question I will I just wanted to ask them can you talk about your current kind of mix of the in house versus outsourcing production.
And how much of the the guidance reduction that we're seeing here from from the previous one was due to supplier component challenges that you are having versus this issue of improving consistency.
Yes, so we don't usually speak specifically to the.
As to the particular components of in house versus outhouse outhouse, but what we have shared previously as a number of our sensors are being produced by our contract manufacturers. So our pucks.
A number of other products, our alpha Alpha Ultra pucks even.
Given our <unk> hundred 28 are now being produced by contract manufacturers.
However, as we started looking at our solid state products, we haven't been able to move as many of those offshore because of delays we've talked about in previous quarters.
Although a number of the components are being produced offshore and then they come back to the United States for final Assembly.
And then the newer products as they are being assembled and stood up dose will continue to be done here in the San Jose facility.
The split is generally.
Done across the line.
I'm sorry, I think there was a second question there and I missed it would you like to repeat it. Please.
Sure So essentially and then we.
The guidance reduction here versus last quarter.
Moving to 661, and a half from 85% or so how much of this was due to component shortages.
That are affecting the entire semiconductor industry versus just the ones that are versus this issue of you guys trying to improve consistency for volume production.
It's actually none of it has to do with supplier shortages or anything of that nature.
It's mostly around.
The.
Improving production consistency for our customers, but it's also just an expectation that we finding MRE very difficult to forecast. So we have customers who are talking to us about long term contracts and.
And we had some of that in the pipeline because they felt like they should move forward in Q3 or certainly in Q4.
And we are believing that they are taking longer than expected.
So that part we've decided to take out of the forecast and we're leaving it as upside unless we have the signed agreement in hand, as we go into the guidance.
Great and then so with regards to these issues of moving production offshore up so in the current quarter would you say the situation is getting worse at the same rate is improving can you provide some more color on some of these issues and kind of what's going on as we speak essentially.
I'll, let Jim speak to that.
Okay.
This is Jimmy I don't see any issue with moving.
Offshore I mean were continuing with the stated strategy as we do our development in house due to the initial.
Prototyping up to pilot in our San Jose facility and then once we have the technical transfer documentation done what the manufacturing process constructions are et cetera, we hand that package after the contract manufacturers for production and that's actually that's progressing well.
Yes.
Alright, that's it for me thank you.
Yes.
Again, if you have a question. Please press Star then one.
Our next question comes from Michael Hall of Talbot Bahrenburg. Please go ahead.
Our next question comes from Michael Hall of Talbot Bahrenburg. Please go ahead.
Hi, sorry, just another one for me.
I would look at just to confirm the non-GAAP gross margin guidance for years at negative 8% to positive 10% is that correct.
Now its negative eight to negative 10.
Okay got you.
Thanks for clarifying that just looking at sort of the full year revenue guidance again, I mean, if you look back at the original stack Jack It was $150 million.
For 2021 and now it's in the sixties.
And margins are obviously down quite a bit I mean, what would you characterize as the main driver of that quite significant change in the revenue and margin expectations for this year.
What is the primary driver of that.
Yes for us the primary driver now that we're at the end of the year versus when we came into the year.
Actually in this these numbers were provided during the merger honestly. So these these weren't even guidance for the company for the year.
The main thing that we're seeing that's a difference from what we saw back in the beginning of 2020 versus to where we were today is of course.
Throughout the year, there was the impact of Covid slowing programs down and creating that dynamic for the first two or three quarters here of not being customers just sort of slowing everything down pushing it out reluctance Smith pose we've definitely been impacted by that.
And then some of that is resulting in some of the projects that we were expecting to get this year pushing out to next year. So people are as they come back they are starting to pick those projects back up again.
We look forward to those coming back into <unk>.
Logan in 2022.
And then lastly.
<unk>.
The key thing for US now of course in this forecast is a lot of those pipeline numbers there were consistently that in our EPS and by taking that out it's gotten us to where we are with the current forecast that we're sharing with everybody.
So based on what you said it seems like things are just kind of gotten shifted back does that imply that in the next year or two we could see that $150 million plus revenue.
Become realized.
We have seen things shift back and what we want to be really careful of especially given the benefit of having <unk> come on in evaluating all the different components of the business as we talked about earlier.
Is that would be the fact that would be the case, so I can't verify or deny that right now, but we are certainly going through every single project in our pipeline, having deep conversations with those customers to gain a better understanding of where they're at with their projects and what their intentions are going forward so that when we.
Peak to you again.
<unk>.
Cleaned up.
<unk>, if you will of what we're looking at.
Alright, thanks very much.
Okay.
Thank you and that concludes the question and answer session I will now turn the call back to management for closing remarks.
Okay, Hello, everybody I just wanted to thank you very much for joining our call today I want to thank you. We're very excited to have Ted joining the company.
It is honored to be working with him and looking forward to working with you going forward.
Again I also just wanted to reiterate we are very excited about what we're seeing in our unit volumes increasing.
The activity that we're seeing with our industrial customers is really exciting for valid on lidar, because we expected at least in the near term that will be the key generator of revenues as we go forward. It will allow us to build out our products our ability to produce at scale and consistency in our level of quality of the customers.
<unk>.
And then as we get out into the into the future as other projects get closer to start of production, we're looking forward to being able to satisfy customers needs in ways that other lidar companies can't because we'll be the proven technology that has evolved to having all of the various components of your boxes, they need to check in order to be able to use the letter sent to every one of their solutions.
So thank you very much for your time today, we look forward to talking with you more as we go forward and hope you all have a good evening bye bye.
That concludes today's conference. Thank you for attending you may now disconnect.