Q1 2022 Velodyne Lidar Inc Earnings Call
Hello, and welcome to the Villa in light of our first quarter 2022 financial results call.
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Now I'll turn the conference over to Andrew Chang Mr. Chan. Please go ahead.
Good afternoon, and thank you for joining us this is Andrew Kim head of IR for Ballantyne Lidar.
With me on the call today are Ted Tewksbury, Teledyne's, CEO , Andrew Hamer Teledyne's CFO .
On this call we will discuss <unk> first quarter fiscal year 2022 financial results.
Ted will open with a review of the strategy in Q1 accomplishments and drew will review the financial results and outlook.
Ted will return to summarize and open the call for questions.
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.
Yeah.
Before we begin I would like to remind you that shortly after the market closed today <unk> issued a press release announcing its first quarter 2022 financial results.
No Dan also published an investor presentation.
You may access the press release and the presentation in the Investor Relations section of <unk> Dot com.
Yeah.
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.
In management's financial remarks, non-GAAP metrics will be referenced management provides non-GAAP metrics because it uses them for budget planning purposes, and for making operational and financial decisions and believes that providing these non-GAAP financial measures to investors.
As a supplement to GAAP financial measures help investors evaluate teledyne's core operating and financial performance and business trends consistent with how management evaluates such performance and trends.
In addition management believes these measures facilitate comparisons with the core operating and financial results and business trends of competitors and other companies.
A full description and reconciliation of these non-GAAP measures versus GAAP is included in the company's press release issued today.
Now I'd like to turn the call over to our CEO Ted Tewksbury.
Thanks, Andrew and thank you all for joining us today.
We'd like to welcome any new investors on the call and remind you that fella in Lidar create smart technology for a world in motion.
<unk> is making our communities safer our supply chain more efficient and our planet greener.
With over 69000, Lidar sensors shipped to date <unk> is leading the way.
Our first quarter of 2022 was one of solid execution in the face of significant supply chain headwinds.
The length of $11 $5 million was at the top end of expectations.
Revenue, which for the first time this quarter includes the noncash accounting treatment of Amazon warrants came in at the high end of our guidance range.
This reflected our ability to secure scarce components, and partially offset the cost impact of shortages via price.
Demand for our products remains strong however, we expect component shortages to continue to challenge our ability to fulfill this demand for several quarters.
Even with these near term headwinds, we expect sequential revenue growth in the second quarter of 2022.
Drew will review, our financial results as well as the warrant accounting in greater detail in a moment.
I'd like to begin by reviewing some highlights from the first quarter of 2022.
We continued to see robust customer engagements across all three of our target markets.
Industrial and robotics.
Telegent infrastructure and automotive.
Approximately two thirds of our Lidar sensors sold during the quarter were four industrial and robotics applications and about one third were four automotive uses.
Progress in industrial and robotics continues to be driven by automation of the supply chain across diverse applications, including warehouse logistics and port automation.
Yeah.
Demand in automotive was dominated by sales of our high performance rotational sensors for Robo taxis.
And intelligent infrastructure, our solutions are being deployed in an increasing number of pilot programs for smart cities.
Our intelligent infrastructure solution or.
<unk> was selected by Ruesselsheim on main Germany to create a citywide system for truck passage control.
And we are very excited that our <unk> one in the south by Southwest 2022 Innovation Award in the Smart cities transportation and delivery category.
We are also seeing growing interest in our sensors for military applications, a largely untapped market, which requires the high performance that <unk> provides.
In Q1, we announced a five year sales agreement with kinetic a leading defense and security company to provide perception and mapping capabilities for their unmanned ground vehicle portfolio.
And our automated with Vela Dine program surpassed the 100 partners milestone, including global brands like Nvidia and Siemens.
Earlier this year I laid out our four strategic pillars to accelerate our path to profitable revenue growth.
First by selling existing products into early autonomous markets, including industrial robotics and intelligent infrastructure.
Second by developing an ultra low cost sensor platform to drive mass adoption in automotive and other price sensitive markets.
Third by expanding our software to enable complete AI powered vision solutions.
And fourth by leading the industry in high volume manufacturing at the lowest cost and highest quality.
In Q1, we made significant progress in transforming <unk> organization processes and culture to ensure the successful execution of this strategy.
We built a customer centric product management group under the oversight of Teledyne's first chief product Officer Sinclair Vas.
This group has been working closely with our customers to understand their system requirements and pain points in order to define the right products with the right features specifications and costs.
We established a solutions oriented engineering organization under Dr. <unk> Gupta <unk> first executive Vice President of engineering to facilitate the agile development of autonomous vision solutions encompassing both hardware and software.
For the first time <unk> has an end to end product development engine to consistently define develop and deliver innovative solutions to our customers while maximizing our return on investment.
Yeah.
As a result commencing in 2023, we expect to increase new product throughput to at least two new sensors and four software releases per year.
We also plan to introduce at least one full stack system solution every year.
Looking to full year 2022, we are experiencing strong customer demand for our puck and ultra puck rotational sensors in the industrial robotics and infrastructure markets.
As we shared last quarter, our ability to supply. This demand has been constrained by shortages of critical semiconductor components, particularly field programmable gate arrays or FPGA.
Our operations and engineering teams are working hand in hand to allow us to satisfy as much of this demand as possible during this challenging period.
We have been able to procure a small quantities the scarce components, albeit at elevated cost.
Which we have been able to partially recover through price increases.
Additionally, we have been able to secure limited quantities of similar components as substitutes.
This requires some redesign and re qualification of our hardware and firmware, which we expect to be completed in the third quarter.
And finally, we are developing an improved next generation <unk> family using a readily available lower cost FPGA.
This is expected to provide a sustainable solution in early 2023.
In addition to Pax or solid state Valerie <unk> Hundred's sensor is experiencing strong demand from customers in the industrial and robotics markets.
The sensor is currently not constrained by component shortages and we recently launched a major marketing campaign to help drive additional sales.
Looking to 2023 and beyond we expect improved revenue growth as we introduce new sensors software and services.
We anticipate these introductions will include our next generation develop bit and Bel Ray solid state sensors in 2023, followed in 2024 by our low cost software Configurable sensor platform.
We are designing these centers to sell for just a few hundred dollars.
<unk> point that we believe will drive mass adoption in advanced driver assistance systems and other price sensitive high volume markets.
Turning now to price and gross margin trends in 2022, we expect asps to Directionally track the prices of key underlying components, many of which are supply constrained.
In 2023, we anticipate sensor asps to revert to a more normal pattern is supply chain constraints abate and new lower priced centers start to contribute to the mix.
We believe that gross margins will improve as these new products, which are designed for low cost and ease of manufacturing are introduced.
Our gross margin improvement plan includes several initiatives launching.
Launching higher value system solutions and software to increase our pricing power.
Developing new sensor architectures to dramatically reduce bill of materials and assembly costs.
And increasing volumes yields and manufacturing efficiencies to drive down the cost of goods sold.
While we still have significant work ahead, we are confident that we're on the right track to deliver turnkey intelligent vision solution to our customers, which we believe will accelerate revenue growth and profitability.
With that I'll turn it over to drew to review, our first quarter financial results.
Thank you Ted Hello, everyone. It's my pleasure to speak with you today, Here's a review of our financial results for Q1, 2022 and guidance for Q2 2022.
The first quarter of 2020 to Mark the commencement of accounting for the warrants associated with the Amazon agreement that was announced on February four 2022.
The primary impact of this accounting is that the reported revenues will diverged from cash flow, which is not impacted by the required revenue accounting.
As a result, teledyne is expanding the financial information and will report to provide more perspective on the company's underlying business performance by including a billings metric.
Billings represents the dollar value of products and services provided during the current period and invoiced to the customer.
For the first quarter of 2022, we are pleased to report total billings of $11 5 million at the top of our expectations.
Revenue, including the impact of the warranty accounting that I just discussed was $6 2 million and it was also at the top end of our guidance.
This was the result of the exceptional work by our operations team to proactively procure components that enabled us to build centers for our customers.
Providing more details product revenue before it was offset by $5 $3 million of Contra revenue associated with the warrants was $9 7 million compared to $13 7 million in Q4 2021.
The decrease in product revenue is attributable to the supply chain constraints that Ted discussed previously.
Partially offset by ASP changes implemented to help recover a portion of our increased costs.
During Q1, we sold more than 2350 sensors of which more than 240, where solid state.
As a result of the ASB changes discussed earlier, the weighted average selling price per sensor increased to $4045 in the first quarter compared to $2738 in the fourth quarter largely the result of product mix sold and ASP changes discussed above.
We also guided for noncash contra revenue related to divesting of the Amazon warrants to range between five and $7 $5 million.
We recorded a charge of $5 $3 million.
License and services revenues was $1 8 million in Q1 2022.
This compares to $3 9 million in Q4, 2021, which included an annual royalty true up of approximately $2 4 million.
As a result of these factors non-GAAP gross loss was $8 8 million in Q1 2022 compared to non-GAAP gross profit of $3 2 million in Q4 2021.
non-GAAP operating expenses were $35 million in Q1, 2022, almost flat compared to $35 2 million in Q4 2021.
Both periods reflect our strategy to invest in our technology and future growth.
Our non-GAAP net loss, including the $5 $3 million Contra revenue was $44 million or 22 per share in Q1, 2022 compared to $31 8 million or <unk> 16 per share in Q4 2021.
We ended the quarter with $256 $4 million in cash and short term investments compared to $294 4 million at December 31, 2021.
Turning to guidance.
Based on currently available information and are reflecting measures taken customer demand and expected sensor shipments, we expect billings of $12 million to $14 million product license and services revenue of $12 million to $14 million and noncash contra revenue of $2 $5 million to $2 million relate.
Related to the Amazon warrants, resulting in total revenues of $9 $5 million to $12 million.
We continue to expect the number of sensor shift and weighted average selling prices to fluctuate each quarter based upon customers' needs market conditions and product mix.
With that I'll turn the call back to Ted.
Thank you drew.
In closing I would like to express my appreciation to the entire <unk> team for helping us achieve the high end of our guided range.
Although we are still in the early stages of customer engagements our system solutions approach integrating software and hardware is proving to be a major competitive advantage across all markets.
We now have the organizational infrastructure and product development engine to successfully scale the company and provide our customers with full stack intelligent vision solutions to accelerate their development of autonomous systems.
Our team looks forward to seeing investors in person and virtually in May and June at conferences held by Oppenheimer Needham Baird and Deutsche Bank.
Finally, before I open the call to questions as you have likely seen in the press release issued earlier today drew will be transitioning the CFO position to Mark wisely.
Mark is a seasoned public company CFO with more than 25 years of strategic and operational experience and technology companies as well as extensive experience scaling new businesses.
We are excited to have him join us for our next phase of growth.
I would like to thank drew for his service to validate he helped set up the company for success by ensuring an ongoing strong financial position.
Operator, we will now open the call to questions.
Yes. Thank you that was mentioned at this time, we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then two.
Consideration of the others. Please limit yourself to one question and one follow up.
We will pause momentarily to assemble the roster.
Yeah.
And the first question comes from Colin Rusch with Oppenheimer.
Thanks, so much guys.
Within that automotive revenue that Youre talking about could you talk about the diversity of customers.
Obviously, there's a couple that are pretty easy to identify but if you could talk about the number of folks you're shipping to right now.
Sure.
Pleased to do that Colin so yeah on the one third of our revenue that came from automotive most of that came from robo taxis as I mentioned in the prepared remarks, and I think youre familiar with emotional we're working very closely with them.
Also some of that revenue came from GM.
As well as some other smaller customers in that segment.
With these robo taxi application safety is a top priority and many of these applications are less price sensitive than what you would see in more mainstream aaas kinds of applications.
So we're getting very good traction with those customers.
We expect that revenue to fluctuate on a quarterly basis.
<unk>.
As I've said before in terms of time to volume, we still haven't changed our opinion that the early volumes will be coming primarily from industrial in robotics, we expect some of that robo taxi revenue to go to volume.
<unk> 2025 timeframe and beyond but.
That timing is really dictated more by regulatory and other non technical issues rather than the <unk>.
Performance, we haven't we haven't actually a very good.
Product market fit.
With our sensors into those railroad taxi autonomous shuttles and other level four and level five Adas programs.
That's incredibly helpful. Thank you and then with the software ecosystem that you guys are developing.
It's a lack of bandwidth.
For automotive and commercial vehicles around software has been notable on multiple fronts.
Guys talk about.
How much leverage you're getting from that effort in terms of building sticky customer relationships.
And position yourself for high volume sales as these some of these programs start to ramp up.
The software is adding an incredible amount of value to the total system solution. If you look at what our customers are doing they are developing autonomous systems, which might be robots.
Might be autonomous vehicles, or they could be intelligent traffic systems, but regardless all of those systems are observing the environment.
And.
They need to be able to understand the environment and then be able to make real time decisions autonomously in order to take action or to provide analytics and thats, where our software comes in so our vision our long term vision for the company is to be the leading provider of AI.
High powered autonomous vision systems.
Those include Lidar as an essential component, but it also includes an enormous amount of software.
As well as AI ml and in many cases other types of sensors and so if you look at our software stack. It consists of three levels. We have the the core level that interfaces with those sensors and does the sensor fusion provides the user interface.
Reads the point cloud data.
Does analytics and diagnostics and then the second layer is the perception layer that provides the object detection identification tracking.
Time to collision measurements and those kinds of things basically translates the raw point cloud data into actionable information that can make those autonomous decisions and then sitting on top of that we have what we call. The vela portal layer, which consists of a variety.
Of tools and Apis.
Users can download and use to develop their own custom autonomous.
Systems, so that entire stack is providing tremendous value to customers and probably the best example of that is our intelligent infrastructure solution.
Which we've talked about at length.
Previous forums.
Thank you and the next question comes from interest in Gara with Baird.
Hi, This is Tyler on for Christian Thanks for taking the questions could you talk about the impact you're seeing if any of the China lockdowns either directly to you or to your customers.
We're not we're not seeing any immediate impact.
Impact from from the China Lockdown.
Our our footprint in China is not as large as I would like it to be we've got we've actually got a plan right now.
We pulled together a plan to expand our presence in China and expand our customer.
The profile in China, but right now it doesn't have a lot of impact on us most of our customers are in the EU or in the North American continent.
Great for my follow up are there specific end markets, you're accelerating your focus on such as solid state Lidar for automotive or does your approach continue to be focused on high end rotational lighters better end market agnostic.
So our market focus is really focused predominantly on industrial in robotics and the reason for that is quite simple.
Our top priority as a company right now is to become profitable as soon as possible and to do that we need to intersect high volume markets at the right time with products that have the right product market fit.
<unk>.
So I've talked about our strategy for doing that which we call. Our four pillars strategy, but in terms of time to volume, we see the markets rolling out in three waves. So the first wave, which is occurring right now is industrial and robotics, and thats really being driven by autumn.
<unk> of the supply chain.
Second we expect to see intelligent infrastructure rolling out and we've talked about that.
In the press release as well as in the prepared remarks, and then automotive will come sometime later.
In industrial or robotics, we're getting tremendous traction, especially with our solid state sensors, but also with the rotational I talked about intelligent infrastructure there.
There is actually a very strong demand for our rotational sensors at intersections why because they can see 360 degrees.
Real time round the clock in any weather condition, and it's really an ideal fit for those kinds of markets. So we're seeing I would say a trend towards increasing solid state sensors because of the lower cost, but but we're also seeing continuing demand.
Four rotations in many of these kinds of applications, you think about an autonomous vehicle driving through and urban street or suburban street, where they need to see the environment 360 degrees around the vehicle.
Rotational are a perfect fit for that and many of the avs in the robo taxi kinds of applications the form factor and the size of the light are less important than they would be say on a passenger vehicle on a highway so thats why I'd.
Talked about the one third of the revenue that we're getting from automotive most of that is coming from the robo taxis for precisely that reason they provide the 360 degree of view.
Very high resolution very long range.
It's a very good fit for us so we're not we're not favoring.
Either rotational or solid state there is applications for both of those but in terms of market segments.
A timing we.
We see the first volume production first commercialization happening in industrial and robotics, followed by an intelligent infrastructure followed by <unk>.
The automotive applications.
Thank you and the next question comes from San Pedro <unk> with Craig Hallum Capital Group.
Hi, guys. Thanks for taking my question I wanted to ask on Asps. It sounds like they were up quite a bit.
Over quarter, just because of the supply environment.
With I guess, how large that HEICO is horrible quarter curious how much visibility you have.
Units growing too.
Units growing quarter over quarter to.
To drive our sales growth that youre seeing.
Guidance.
So.
We're still not giving guidance more than a quarter out we have very limited visibility most of the lack of visibility is not due to the fact that we don't see demand, we see plenty of demand across all of our end markets for our products.
But we are extremely challenge on the supply side as I talked about so it really comes down to our ability to supply I think.
In Q2, we're confident that we can hit the guided range.
Because we do have backlog and we do have supply to meet that demand, but as we get into Q3 and beyond things become pretty cloudy and then of course, you've also got all the macroeconomic challenges of the interest rates inflation, Ukraine and other geopolitical uncertainties.
Layered on top of that so as a result, we are still not providing guidance beyond Q2.
Yes, Okay. That's helpful.
Second question I wanted to ask on solid state sales it looks like those were down pretty substantially year on year, alright, yes, our shortages.
Seeing in the supply chain weighted more towards solid state rather than rotational at all or is the decline kind of more so driven by demand and the solid space.
It's an interesting question I wouldn't read too much into the fact that solid state was down for the quarter.
We see fluctuations quarter to quarter, depending on demand and depending on customers' builds.
We didn't happen to see.
Very strong demand for rotations in Q1.
Which was limited our ability to supply that was limited by the availability of components as I indicated we actually can supply Vms <unk> hundred solid state. So that one is not supply constrained.
And there is plenty of demand that we see for the remainder of the year. It just so happens that in Q1 our.
Our customers were not building as much product.
Okay. Thank you and the next question comes from Mark Delaney with Goldman Sachs.
Hi, This is <unk> on for Mark Thank you for taking the questions.
The company previously talked about an $800 million signed an awarded revenue through 2025.
It really is the company is not no longer updating that metric but.
Do you have any recent commercial wins, you can speak to or an update on.
The number of sites.
Projects.
So it's.
It's a great question, Mark we talked about too.
Multiyear agreements.
Wins today, when one was kinetic and one was ruesselsheim.
Main Germany for the Iis.
We are currently not.
Reporting on the <unk>.
Design win metrics, we are looking for a new metric that will provide a leading indicator to future revenue growth.
Previous design.
Actually it was a multiyear agreement metric that we had was problematic for several reasons number one.
In a highly competitive.
Relative environment, such as we're in I want to and need to balance keeping investors informed with disclosing confidential information that could help our competitors. That's really the first and foremost reason, but secondly, not all of the projects. The active projects that we have in our funnel will go to production.
And so I need to give you a second piece of information for you to make sense out of those multiyear agreement numbers and that is the conversion rate. What is the probability of those design wins are those multi year agreements going into production and that conversion rate can only come out of an analysis of historical data with which we don't yet have.
And so.
So that's the second piece and then third the multiyear agreement at metric while appropriate for automotive.
Is not necessarily the best metric to use for customers in the industrial and robotics segment, who many of whom don't want to sign a three year multiyear agreement.
So for them, we're looking at other metrics, whether it's design wins or some metric that takes into account LOI.
<unk>.
It'd be more appropriate so we're working on.
A new metric that we'll give you the information you are looking for.
Without showing our customers where the gold is very prepared and.
And so I'm going to hold off until we have our new CFO on board before we disclosed that but we are working on that.
Okay, great that'd be very helpful.
And just shorter term how should we think about cash use in <unk> and.
Do you have any thoughts on potential plans to strengthen the balance sheet.
So.
Historically, our burn rate has been between 30 and $40 million.
<unk> been holding opex flat ever since I arrived.
Was $35 million little bit over $3 5 million in Q4, when I came on board, we've held that flat it was actually a little bit down.
In Q1, but we're very carefully monitoring our cash usage and managing costs to ensure that we have no issues with cash.
Got a very strong balance sheet as you saw we had a very strong quarter, we're executing very well to our plan.
Even if we burned $40 million a quarter, we've still got six to seven quarters worth of cash runway.
We're currently completing our five year plan and we're rational rationalizing our product roadmap.
And like any well managed company, we're always evaluating our capital allocation and looking at all our options, which includes opportunities for M&A as well as future financing but.
We don't have any plans at this time.
<unk>.
We do will not happen until after our new CFO comes onboard.
Thank you and the next question comes from Aileen Smith with Bank of America.
Good afternoon, everyone.
So I wanted to follow up on the question on the price increases and specifically is that solely a function of what is going on from a supply chain perspective, meaning you're just passing on your higher input costs to your customers or is that indicative of some strategic move to establish some pricing power.
More specifically can you talk about the customer receptivity to this effort.
A bit of a product journey over the past few years working to lower Asps.
Your centers so how does that conversation go with your customers as you try to raise them.
Yes, great Great question.
And it's complex because.
We are increasing pricing power.
As a result of software and system solutions as I talked about earlier, but also it is a key element of our strategy to bring down the price of Lidar.
Price and cost is the number one challenge that the lidar industry has today relative to other sensor modalities like radar or camera. So in order to drive the <unk>.
Adoption of Lidar in applications like Adas and other price sensitive.
Use cases.
The prices have to come down and Thats why that second pillar of our strategy is to develop a very aggressively priced.
New architecture that we can sell for two years or $300. So that that is the long term secular trend.
To bring down the pricing.
However that will not start to happen until we have those those new products introduced.
It will take anywhere from 18 months to two years in the meantime, we've got this.
Challenging supply constrained environment, which is driving costs up across the industry.
And our price increases that we're talking about today, which was essentially a doubling of asps from Q4 to Q1 is being driven by those component shortages now Fortunately the entire industry is seeing the same kinds of.
Supply constraints and so all ships are rising with the tide and we're able to pass on those those cost increases to customers.
Without a great deal of pushback.
Our suppliers are putting us on allocation and we're essentially putting our customers on allocation, but as as the tide starts to come down.
Which should hopefully will.
In 2023 and.
These components become more readily available.
Then.
I expect to see our competition start to lower our prices their prices and we will have to respond in kind.
Okay got it.
And then I wanted to follow up on a comment in the press release on what you define as comprehensive organizational transformation and why.
Encompassed in that is it just a pivoting of the business model to focus on capturing me early lidar market or are there some more aggressive effort internally around restructuring that we should be aware of and where are those initiatives I know you've had kind of quite executive turnover in the past guarantee so just trying to get a sense on whether theres a broader we are selling.
Right.
So there was a broader re org that went on and it was a very important one.
When I joined this company had a very strong engineering base.
And in a very strong CTO organization, but several things were lacking.
Most important of which was a strong customer focused product management front and that could go out and understand customer systems understand the problems. They were trying to solve and then bring our technologies to bear on solving those problems.
And parlay that information into market requirement documents product requirement documents, new product definitions business plans and so forth. So we put that organization together.
Under the company's first chief product officer, so that that was a major organizational change and then in addition.
We.
We combined and consolidated our software and hardware groups under one umbrella.
Which is now being led by our new executive Vice President of Engineering and it has a systems focus versus just a sensor focus and so that was also a major change.
And the way we operated.
In addition to organizational changes we've put in place very rigorous and disciplined processes everything from the way, we select products and staff products.
To the way, we manage products through engineering, we have a robust product lifecycle management system I can't claim credit for that that was started before I came on board.
But we've tightened it up.
Our.
Running engineering.
In a very disciplined way, we have robust processes for design for manufacture ability test yield cost.
And so all of these are.
Keeping the trains running on time, and that's really what enabled us to achieve the.
The exceptional execution in Q1, despite very strong supply headwinds.
A very disciplined operations group now under Jim Barnhart, our COO and so the company just looks very different than it did.
A year ago, or even six months ago, when I joined in.
We have a much more.
Disciplined way of planning.
Managing products and making sure that we deliver on what we say we're going to do which is exactly what we did in Q1.
Alright, Thank you and our next question comes from <unk> Gill with Needham <unk> Company.
Yes, thanks for taking my questions and nice working with you drew best of luck and welcome Mark.
A follow up question on the pricing situation when the pricing environment begins to normalize.
Over time.
How are we looking at the cost side.
With respect to offshoring and operational improvements I know you had mentioned in the past roughly 80% of bill array and 20% of the Alpha blocker being built in Thailand wanted to get a sense of kind of what's the progress the roadmap of additional offshore production across the product lines, while we.
Wait for the pricing to normalize.
The biggest as you said the biggest impediment to a lighter adoption over time, there's going to be pricing in order to get for the pricing to be below 500, the cost has to come down so that's crucially important.
Yes.
Youre absolutely right. So this is a key element of our strategy, which we call the fourth pillar here and.
Right now we have.
We have already transferred as you said, 80% of our sensors to Thailand, which is a very low cost manufacturing site.
We will have that transfer 100% completed by the end of the year.
That that's going to enable us to improve our manufacturing efficiencies, but that alone that alone is not going to get us all the way to the low cost that we need to be able to sell a lidar sensor for two years or $300 in order to do there.
That we also need to.
Do some design level innovation, and so I talked about the new architectures that we're developing which will be simpler fewer components lower cost components that will allow us to do.
Dramatically reduce our costs.
The other thing that we're doing.
We're already doing actually through our micro lidar array and <unk> architectures is developing very.
Very building block style platform based design methodologies, whereby we can reuse.
A given building block in multiple sensors.
Making it easy to design, making it.
It's more agile.
Making.
Making it easier for us to get products to market on time and also facilitating the assembly of these products for workers in Thailand, because we have these very building block style.
Assembly processes.
Those are some of the things that we're doing to reduce costs.
And then long term is to design in yes.
I appreciate it and just for my follow up.
Two thirds kind of industrial robotics, one third.
Automotive.
That seems to be really.
Big Tam and most immediate Tam.
For you guys.
<unk> kind of the Isps that are kind of moving up.
Which could be transitory.
Any kind of specific details in terms of what segments within within that area are you seeing a lot of hyper adoption is it more on the robotics side is it more intelligent infrastructures any thoughts there would be helpful. Thank you.
In automotive, while we see the volumes farther out.
As I just mentioned we are investing today in developing the right product with the.
$300 ASP to intersect that market when it starts to ramp.
Now.
In automotive there are really two segments that are important there is the level four and level five autonomous vehicles.
And that's where we are getting excellent traction.
With companies like motion will.
And various others.
Those customers value safety above all else and since they are businesses.
They have the business model to.
Be able to pay higher prices for lidar.
So we're getting very good traction with those customers however, as I mentioned.
The time to volume is still fairly far out because of regulatory and other non technical issues.
And then a dash.
What we've learned through engagements with many Oems and tier ones is that the.
The prices do need to come down to 300 $400 and the reason for that is that lidar. While we believe it is an essential technology in the sensor suite for Adas because of the safety requirements. It is not mandatory today and that.
That means that the only way the Oems will adopt a das is if they can sell more vehicles.
By adopting it.
And so it can't increase the MSRP.
Of the vehicle.
That's what's driving the need for the price to be three or $400.
Now the other thing we can do to help make lidar mandatory for Aaas is to work with government agencies, which is exactly what we're doing.
To help.
Persuade them to put in place regulations and laws that will require liner as part of the Adas sensor suite. So we're working with government agencies like the National Highway and Transportation Safety administration, and working with congressional leaders in order to.
Get get mandates in place that require.
<unk> is part of that.
Sensor suite and also to test.
<unk> systems in low light conditions and dark conditions.
We're light are really shines no pun intended but.
That's where cameras and radar fail and Lidar will really.
Yeah.
A strong advantage. So those are some of the things that we're doing in automotive but.
We still feel that the time to volume.
Is going to be farther out in the robotics and industrial in the intelligent infrastructure.
Okay very good. Thank you and this does conclude the question and answer session I would like to turn the floor to management for any closing comments.
Thank you for joining us today, and we look forward to speaking you speaking to you in the weeks to come.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
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