Velodyne Lidar, Inc.

Good day, everyone, and welcome to the Velodyne LiDAR Second Quarter 2022 Financial Results Call. All participants will be in listen-only mode. Please also note today's event is being recorded for replay purposes. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then 2. At this time, I would like to turn the conference over to Mr. Jim Finucchi of Darrow Associates. Sir, please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us. With me today on the call are Dr. Ted Tewksbury, Velodyne's Chief Executive Officer, and Mark Wineswood, Chief Financial Officer. On today's call, we will discuss Velodyne's second quarter financial results and provide an outlook for the third quarter. Shortly after the market closed today, Velodyne issued a press release announcing its second quarter 2022 financial results. Velodyne also published an investor presentation, and you may access these documents in the investor relations section of velodynelidar.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. Please also note, unless otherwise stated, all results and projections discussed in this call are non-GAAP. 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 Velodyne's core operating and financial performance and business trends consistent with how management evaluates its 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 Dr. Ted Tewksbury. Ted, please go ahead.

Thanks, Jim, and thank you all for joining us today. Our second quarter of 2022 was one of solid execution in the face of continuing supply chain headwinds. Billings of $12.5 million and revenue of $11.5 million both came in within our guidance range for the second consecutive quarter. Demand for our products remained robust, And thanks to the tireless efforts of our team, we were able to procure adequate quantities of critical components to meet the majority of our customers' requirements. I'd now like to share more about our second quarter business results, provide an update on the status of our transformation, and discuss our outlook for Q3. Mark will then review the financial results in greater detail. Velodyne continues to be one of the most diversified suppliers of LiDAR solutions. with superior performance, power efficiency, and reliability as differentiators across key industries. In Q2, we saw increased customer traction across all three of our target markets, industrial and robotics, intelligent infrastructure, and autonomous vehicles. Roughly half our sensors shipped into the industrial, robotics, and infrastructure markets. Within industrial and robotics, Our LiDAR-based solutions are being used across an increasingly diverse set of applications, including last mile delivery robots, truck docks, cargo handling, and shipping. In the infrastructure, use cases include traffic systems, vehicle to infrastructure networks, and security, space, and asset monitoring. Lastly, we are seeing demand for our solutions in virtual and augmented reality applications, such as mapping, entertainment, and online interactions. The other 50% of units shipped in the quarter were for L4 and L5 robo taxi and autonomous shuttle customers who depend on Velodyne sensors to power their systems. During the quarter, we also expanded our customer reach with several new multi-year agreements. We signed a sales agreement with Boston Dynamics, a global robotics market leader. They selected Velodyne's high-performance sensors to enhance and extend the capabilities of their mobile autonomous robots. Our Intelligent Infrastructure Solution, or IIS, was deployed in Helsinki, Finland for traffic flow monitoring at multiple intersections to improve safety. Along with delivering multimodal traffic counting and classification, our IIS demonstrated its efficacy in detecting near-miss collision situations such as running red lights and jaywalking. This proliferation of non-automotive use cases validates our thesis that the first wave of commercial LiDAR adoption will be dominated by industrial automation, robotics, and intelligent infrastructure. According to research firm Yole, these segments are estimated to be a $2.8 billion per year total available market by 2026. As I enter my third full quarter as CEO of Velodyne, I continue to be pleased with progress we've made on the turnaround plan I announced in the February earnings call. To highlight just a few examples, we accelerated the outsourcing of manufacturing to our low-cost contract manufacturer in Thailand, with completion targeted for next year. This transition will significantly advance our efficiency in operations, allowing us to increase capacity, improve yields, reduce costs, and expand gross margins. We reprioritized and rationalized products in development by deploying our valuable technical resources on opportunities with attractive returns on investment and high contribution margins. This process led to the discontinuation of some products in development, including the Velleray H800. We defined our next generation product roadmaps, encompassing highly differentiated sensors, software, and solutions that we expect to be introduced over the next 18 to 24 months. Recently, we've implemented other changes that will enhance Velodyne's governance and leadership, including the appointment of Mark Weinswig as our new chief financial officer, the addition of seasoned and highly experienced new board members that will help management take the company to the next level, and the redistribution of stock ownership, including a dramatic reduction in founder ownership. From day one, I have emphasized the priority of scaling LIDAR into a profitable, growing business, delivering attractive shareholder returns. I discussed our strategy in detail in the past two earnings calls. And while it will take time to execute fully, we are making progress every day. As we look forward to the remainder of 2022 and 2023, we are taking steps to align our expense structure with our revenue expectations. In parallel, we will continue to invest in strategic, differentiated, high ROI product categories that are essential to our long-term growth. These actions are designed to deliver industry-leading smart vision solutions to our customers while accelerating time to break even. Before handing the call over to Mark, I want to offer some commentary around our guidance for the third quarter. We enter the third quarter with robust demand. However, based on information from our suppliers, we expect supply challenges will extend into 2023, making it difficult for us to fully support all of this demand. Our efforts to modify our sensors to utilize alternative sources is on track and will help us to partially mitigate these supply chain risks. Combining all of these factors, we expect billings to be between $10 million and $12 million, and revenue to be between $8 million and $11 million. The difference between billings and revenue is due to estimated non-cash contra revenue related to the Amazon warrants. Our cost reduction initiatives, including the expanded use of outsourced manufacturers, improvements in operating efficiencies, and the growth of offshore design center capabilities will deliver incremental improvements in the third quarter of 2022 with the full benefit expected to be realized in the second half of 2023. With that, it is my pleasure to welcome Mark to this call. Mark, please go ahead.