威力登 (VLDR) 2022 Q1 法說會逐字稿

Hello, and welcome to the Velodyne Lidar First Quarter 2022 Financial Results Call. (Operator Instructions) Please note, today's event is being recorded.

I would now like to turn the conference over to Andrew Chan. Mr. Chan, please go ahead.

Good afternoon, and thank you for joining us. This is Andrew Chan, Head of IR for Velodyne Lidar. With me on the call today are Ted Tewksbury, Velodyne's CEO; and Drew Hamer, Velodyne's CFO.

On this call, we will discuss Velodyne's first quarter fiscal year 2022 financial results. Ted will open with a review of the strategy and 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.

Before we begin, I would like to remind you that shortly after the market close today, Velodyne issued a press release announcing its first quarter 2022 financial results. Velodyne also published an investor presentation. You may access the press release and the presentation 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.

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 Velodyne'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 many new investors on the call and remind you that Velodyne Lidar creates smart technology for a world in motion. Lidar is making our communities safer, our supply chains more efficient and our planet greener. With over 69,000 lidar sensors shipped to-date, Velodyne is leading the way. Our first quarter of 2022 was one of solid execution in the face of significant supply chain headwinds. Billings of $11.5 million was at the top end of expectations.

Revenue, which for the first time this quarter includes the non-cash 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 pricing. 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 3 of our target markets: Industrial and Robotics, Intelligent Infrastructure and Automotive. Approximately 2/3 of our lidar sensors sold during the quarter were for Industrial and Robotics applications and about 1/3 were for Automotive uses. Progress in Industrial and Robotics continued to be driven by automation of the supply chain across diverse applications, including warehouse logistics and port automation. Demand in Automotive was dominated by sales of our high-performance rotational sensors for robotaxis.

In Intelligent Infrastructure, our solutions are being deployed in an increasing number of pilot programs for Smart Cities. Our Intelligent Infrastructure Solution or IIS was selected by Russelsheim am Main, Germany to create a city-wide system for truck passage control. And we are very excited that our IIS won the South by Southwest 2022 Innovation Award in the Smart Cities, Transportation & Delivery category. We are also seeing growing interest in our sensors for military applications, a largely untapped market, which requires the high performance that Velodyne provides.

In Q1, we announced a 5-year sales agreement with QinetiQ, a leading defense and security company to provide perception and mapping capabilities for their unmanned ground vehicle portfolio. And our Automated with Velodyne program surpassed the 100 partners milestone, including global brands like NVIDIA and Siemens. Earlier this year, I laid out our 4 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 Velodyne's organization, processes and culture to ensure the successful execution of this strategy. We built a customer-centric product management group under the oversight of Velodyne's first Chief Product Officer, Sinclair Vass. 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. Anurag Gupta, Velodyne's first Executive Vice President of Engineering, to facilitate the agile development of autonomous vision solutions encompassing both hardware and software. For the first time, Velodyne 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. As a result, commencing in 2023, we expect to increase new product throughput to at least 2 new sensors and 4 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 FPGAs. 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 small quantities of 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 requalification of our hardware and firmware, which we expect to be completed in the third quarter. And finally, we are developing an improved next-generation Puck family using a readily available lower-cost FPGA. This is expected to provide a sustainable solution in early 2023. In addition to Pucks, our solid state Velarray M1600 sensor is experiencing strong demand from customers in the Industrial and Robotics markets. This 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 Velabit and Velarray solid state sensors in 2023, followed in 2024 by our low-cost software configurable sensor platform. We are designing these sensors to sell for just a few hundred dollars, a price 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 as supply chain constraints abate and new lower price sensors 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 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 solutions 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 is a review of our financial results for Q1 2022 and guidance for Q2 2022. The first quarter of 2022 marked the commencement of accounting for the warrants associated with the Amazon agreement that was announced on February 4, 2022. The primary impact of this accounting is that the reported revenues will diverge from cash flow, which is not impacted by the required revenue accounting.

As a result, Velodyne 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 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 sensors 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 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 2,350 sensors, of which more than 240 were solid state. As a result of the ASP changes discussed earlier, the weighted average selling price per sensor increased to $4,045 in the first quarter compared to $2,738 in the fourth quarter, largely the result of product mix sold and ASP changes discussed above.

We also guided for non-cash contra revenue related to the vesting of the Amazon warrants to range between 5 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 $0.22 per share in Q1 2022 compared to $31.8 million or $0.16 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 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 non-cash contra revenue of [$2.5 million] to [$2 million] related to the Amazon warrants, resulting in total revenues of $9.5 million to $12 million. We continue to expect the number of sensors shipped 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 Velodyne 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 Weinswig. Mark is a seasoned public company CFO with more than 25 years of strategic and operational experience in 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 Velodyne. He helped set up the company for success by ensuring an ongoing strong financial position.

Operator, we will now open the call to questions.

(Operator Instructions) And the first question comes from Colin Rusch with Oppenheimer.

Within the Automotive revenue that you're talking about, can 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?

Yes. Pleased to do that, Colin. So yes, on the 1/3 of our revenue that came from Automotive, most of that came from robotaxis as I mentioned in the prepared remarks. And I think you're familiar with Motional, 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 robotaxi applications, safety is a top priority. And many of these applications are less price-sensitive than what you would see in more mainstream ADAS kinds of applications.

So we're getting very good traction with those customers. We expect that revenue to fluctuate on a quarterly basis. And 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 and Robotics. We expect some of that robotaxi revenue to go to volume in the 2025 time frame and beyond. But that timing is really dictated more by regulatory and other non-technical issues rather than the performance. We have an -- a very good product market fit with our sensors into those robotaxi autonomous shuttles and other Level 4 and Level 5 ADAS kinds of programs.

That's incredibly helpful. And then with the software ecosystem that you guys are developing, the lack of bandwidth for automotive and commercial vehicles around software has been notable on multiple fronts. I mean, can you 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 [structuring out will turn to be]?

The software is adding an incredible amount of value to the total system solution. If you look at what our customers are doing, they're developing autonomous systems, which might be robots, they 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 that's where our software comes in.

So our vision, our long-term vision for the company is to be the leading provider of AI-powered autonomous vision systems. And 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 3 levels. We have 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 Vella portal layer, which consists of a variety of tools and APIs that 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 in previous forums.

And the next question comes from Tristan Gerra with Baird.

This is Tyler on for Tristan. 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 seeing any immediate impact from the China lockdown. Our footprint in China is not as large as I would like it to be. We've actually got a plan right now to pull together a plan to expand our presence in China, expand our customer 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 lidars that are end market agnostic?

So our market focus is really focused predominantly on Industrial and 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. And so I've talked about our strategy for doing that, which we call our 4 pillars strategy. But in terms of time to volume, we see the markets rolling out in 3 waves. So the first wave which is occurring right now is Industrial and Robotics, and that's really being driven by automation of the supply chain.

Second, we expect to see Intelligent Infrastructure rolling out, and we talked about that in the press release, as well as in the prepared remarks. And then Automotive will come sometime later. In Industrial and Robotics, we're getting tremendous traction, especially with our solid state sensors, but also with the rotationals. I talked about Intelligent Infrastructure. There -- there's actually a very strong demand for our rotational sensors at intersections. Why? Because they can see 360 degrees real-time around 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 we're also seeing continuing demand for rotationals in many of these kinds of applications.

If you think about an autonomous vehicle driving through an urban street or a suburban street, where they need to see the environment, 360 degrees around the vehicle, rotationals are a perfect fit for that. And in many of the AVs and the robotaxi kinds of applications, the form factor and the size of the lidar are less important than they would be, say, on a passenger vehicle on a highway. So that's why I talked about the 1/3 of the revenue that we're getting from Automotive, most of the that is coming from the robotaxis precisely that reason. They provide the 360 degree of view, very high resolution, very long range, and it's a very good fit for us. So we're not favoring either rotational or solid state, there's applications for both of those. But in terms of market segments, in terms of timing, we see the first volume production, first commercialization happening in Industrial and Robotics, followed by Intelligent Infrastructure, followed by the Automotive applications.

And the next question comes from Sam Peterman with Craig-Hallum Capital Group.

I wanted to ask on ASPs. It sounds like they were up quite a bit quarter-over-quarter just because of supply environment with -- I guess, how large that hike was quarter-over-quarter? Curious, how much visibility you have into units growing to -- units growing quarter-over-quarter to drive the sales growth that you're seeing in your 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 challenged 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 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.

Got you. 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. I guess on shortages that you're 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 in the solid state?

I -- 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 did happen to see a very strong demand for rotationals in Q1, which was limited -- our ability to supply that was limited by the availability of components as I indicated. We actually can supply the M1600 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 customers were not building as much product.

And the next question comes from Mark Delaney with Goldman Sachs.

This is [Bruno] on for Mark. The company previously talked about an $800 million of signed and awarded revenue through 2025. I -- really the company is no longer updating that metric. But do you have any recent commercial wins you can speak to or an update on the number of projects?

So it's a great question, Mark. We talked about 2 multi-year agreements or wins today, one was QinetiQ and one was Russelsheim am Main, Germany for the IIS. We are currently not reporting on the design win metrics. We are looking for a new metric that will provide a leading indicator to future revenue growth. The previous design -- or actually it was a multi-year agreement metric that we had. It was problematic for several reasons. Number one, in a highly competitive environment such as we're in, I want to -- I 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 multi-year agreement numbers, and that is the conversion rate, what is the probability of those design wins or those multi-year agreements going to production. And that conversion rate can only come out of an analysis of historical data, which we don't yet have. And so that's the second piece.

And then third, the multi-year agreement 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 3-year multi-year agreement. So for them, we're looking at other metrics, whether it's design wins or some metric that takes into account LOIs or SOWs that would be more appropriate. So we're working on finding a new metric that will give you the information you're looking for without showing our customers where the gold is buried. And so I -- we -- I'm going to hold off until we have our new CFO on board before we disclose that, but we are working on that.

Okay. Great. Yes, that would be very helpful. And just shorter term, how should we think about cash use in 2Q? 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. We've been holding OpEx flat ever since I arrived. It was [$35 million], a little bit over $35 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. We've got a very strong balance sheet. As you saw, we had a very strong quarter. We're executing very well to our plan. And even if we burn $40 million a quarter, we've still got 6 to 7 quarters' worth of cash runway.

We're currently completing our 5-year plan, and we're rationalizing our product road map. 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. And anything we do will not happen until after our new CFO comes on board.

And the next question comes from Aileen Smith of Bank of America.

So I wanted to follow up on the question around 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? And more specifically, can you talk about the customer receptivity to this effort? You've been on a bit of a product journey over the past few years working to lower ASPs for your sensors. So how does that conversation go with your customers as you try to raise them?

Yes. 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 #1 challenge that the lidar industry has today relative to other sensor modalities like radar or camera. So in order to drive the mass adoption of lidar in applications like ADAS and other price-sensitive use cases, the prices have to come down. And that's why that second pillar of our strategy is to develop a very aggressively priced new architecture that we can sell for $200 or $300.

So that is the long-term secular trend to bring down the pricing. However, that will not start to happen until we have those new products introduced, which will take anywhere from 18 months to 2 years. In the meantime, we've got this very 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 ASP 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 cost increases to customers without a great deal of pushback. I mean we are -- our suppliers are putting us on allocation, and we're essentially putting our customers on allocation. But as the tide starts to come down, hope -- which it hopefully will in 2023, and these components become more readily available, then we -- 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. What is encompassed in that? Is it just pivoting on the business model to focus on capturing the early lidar markets first or are there some more aggressive efforts internally around restructuring that we should be aware of, and where are those initiatives focused? I know you've had kind of quite the executive turnover in the past year or 2. So just trying to get a sense of whether there's a broader reorg going on?

So there was a broader reorg that went on, and it was a very important one. When I joined this company, it had a very strong engineering base and a very strong CTO organization. But several things we're lacking, most important of which was a strong customer-focused product management front end that could go out and understand customer systems, understand their -- 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 was a major organizational change. And then in addition, 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 has a systems focus versus just a sensor focus. And so that was also a major change in 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 life cycle management system. I can't claim credit for that. That was started before I came on board, but we've tightened it up.

We are running engineering in a very disciplined way. We have robust processes for design for manufacturability, 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 exceptional execution in Q1 despite very strong supply headwinds. We've got 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 6 months ago when I joined. And it's -- 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.

And the next question comes from Rajvindra Gill with Needham & Company.

And nice working with you, Drew, best of luck, and welcome, Mark. Just 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 Velarray and 20% of the Alpha Puck are being built in Thailand. I wanted to get a sense of kind of what's the progress, the road map of additional offshore production across the product lines while we kind of wait for the pricing to normalize, because the biggest -- as you said, the biggest impediment to a lidar adoption over time is 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. You're absolutely right. So this is a key element of our strategy, which we call the fourth pillar here. And right now, 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 in 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 $200 or $300. In order to do 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 dramatically reduce our costs.

The other thing that we are doing, which we're already doing actually through our Micro Lidar Array and TROSA architectures is developing 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 more agile, 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. So those are some of the things that we're doing to reduce costs.

And then long-term to design in.

Yes.

I appreciate. And just for my follow-up. 2/3 kind of Industrial Robotics, 1/3 Automotive, that seems to be the really big TAM and most immediate TAM for you guys. Despite kind of the ASPs that are kind of moving up, which could be transitory, any kind of specific details in terms of what segments within that area are you seeing a lot of hyper adoption? Is it more on the Robotics side? Is it more on Intelligent Infrastructure? Any thoughts there would be helpful?

Sure. So again, in terms of time to volume, we see it rolling out Industrial and Robotics first, followed by Intelligent Infrastructure, followed by Automotive. And the reason, Intelligent Infrastructure is #2 rather than Automotive is simply because the design cycles are very short in that segment. The design cycle in Intelligent Infrastructure can be 5 or 6 months, whereas in Automotive, it's upwards of 2 years. It takes a long time to get a product designed into an OEM or a Tier 1. So our strategy is to, number one, sell our existing products into existing Industrial and Robotics markets. That's where we have the best product market fit and that's where we have the quickest path to revenue.

Those markets are highly diversified. So we don't talk a lot about specific customers. It's a lot of fragmented customers that add up to a $2.8 billion market by 2026. In Automotive, while we see the volumes further out, as I just mentioned, we're investing today in developing the right product with a $300 ASP to intersect that market when it starts to ramp.

Now in Automotive, there are really 2 segments that are important. There's the Level 4 and Level 5 autonomous vehicles. And that's where we're getting excellent traction with companies like Motional 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 in ADAS, what we've learned through engagements with many OEMs and Tier 1s is that the prices do need to come down to $300 or $400. And the reason for that is that lidar, while we believe it's an essential technology in the sensor suite for ADAS because of the safety requirements, it is not mandatory today. And that means that the only way the OEMs will adopt ADAS is if they can sell more vehicles by adopting it. And so it can't increase the MSRP of the vehicle. And that's what's driving the need for the price to be $300 or $400.

Now the other thing we can do to help make lidar mandatory for ADAS 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 lidar 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 mandates in place that require lidar as part of the ADAS sensor suite.

And also to test ADAS systems in low light conditions and dark conditions, where lidar really shines, no pun intended. But that's where cameras and radar fail, and lidar will really have 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 than the Robotics and Industrial and the Intelligent Infrastructure.

Very good. Thank you. And this does conclude the question-and-answer session. I'd 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.