Velodyne Lidar, Inc. (VLDR) Q1 2021 Earnings Call Transcript

Velodyne Lidar, Inc. (VLDR)
Q1 2021 Earnings Call
May 10, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello and welcome to the Velodyne Lidar first-quarter 2021 earnings conference call. [Operator instructions] I would now like to turn the conference over to Moriah Shilton. Ms. Shilton, please go ahead.

Moriah Shilton -- Investor Relations

Good afternoon and thank you for joining us on today's conference call to discuss Velodyne Inc. first-quarter 2021 financial results. With us on today's call are Dr. Anand Gopalan, Velodyne's chief executive officer; and Drew Hamer, the company's chief financial officer.

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 2021 financial results. Velodyne also published an investor presentation. You may access the press release and presentation in the investor relations section of velodynelidar.com. Today's discussion includes forward-looking statements.

Please refer to our press release for a discussion of factors that could cause the company's actual results to differ materially from those forward-looking statements. I would also like to remind you that during the call, we will discuss some non-GAAP measures related to Velodyne's performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in Velodyne's quarterly financial press releases. To ensure that we address as many analyst questions as possible during the call, we request that you please limit yourselves to one initial question and one follow-up question.

Now, I'd like to turn the call over to Dr. Anand Gopalan, CEO of Velodyne.

Anand Gopalan -- Chief Executive Officer

Thank you, Moriah. And thank you to everyone for joining us this afternoon. I'm Anand Gopalan, CEO of Velodyne Lidar. As the leading lidar producer in the world, and the one that is clearly defining the lidar market, we continued to make great progress in the first quarter of 2021.

Once again, Velodyne shift a market leading to 2,684 sensors in the quarter, and continued our leadership position in solid state sensor sales, with more than 600 sensors sold. We shipped 65% of our sensors to customers as spot-buys, which we use to seed the global lidar market, and 35% of our sensors to customers under our multi-year agreements with them. Our strategy of leveraging our manufacturing scale to seed the global lidar market with our products is evidenced, both by the strong spot spot-buy business, as well as the continued conversion of these customers into multi-year agreements, which number 29 as of May 1, up from 26 as of February 19. We are also seeing increased pipeline strength.

Velodyne's pipeline of projects grew to 198 projects as of May 1, up from 194 projects reported on February 19, 2021. When you look at where we were one year ago at this time, we are seeing significant growth in the robotics and industrial segment, which is one of the lidar segments closer to commercialization. In addition, 23 of our projects now include software as a component. We continue to build out that aspect of our business by providing complete hardware software solutions to our end customers.

In the first quarter, we also built out our executive team with seasoned technology and business veterans. We appointed Sinclair Vass, as chief commercial officer; James Barnhart, as chief operating officer; and Mike Jellen was promoted to chief strategy officer. We strengthened our board of directors with the appointment of Hamid Zarringhalam, corporate vice president of Nikon cooperation, and Deborah Hersman, former chair of the National Transportation Safety board, NTSB to our board. Velodyne Lidar is the market leader with a broad portfolio of products at the necessary price points to drive mass market adoption of lidar.

We have been working with companies across various lidar segments on R&D projects for more than 10 years, as lidar technology matured to the inflection point we are at today, with the first wave of mass commercialization ramping across several segments. Our ability to manufacture and ship at scale will be crucial in this new phase. Our lidar technologies are the eyes for autonomous machines, which operate in many diverse markets, each of which having different time to revenue, different TAMs, different sales pipelines and different margin profiles. For example, the mapping an AV markets, considered the traditional market for Velodyne continue to be strong, and have good long term viability as they ramp at a linear pace.

Our rotational products are in high demand in these markets, and continue to be the de facto reference architecture for the industry at large. To break out auto more finely, interest in the ADAS market is growing robustly, with commercial revenue ramping a few years out. In the ADAS market, there is significant and growing interest in our solid state solutions, which are targeted at large volume applications. Further, lidar in consumer vehicles is being accelerated by new EV players in the space, who are adopting lidar and advanced safety technology at a rate that is far outpacing the traditional automotive OEMs.

Companies in the industrial robotics segment are automating everything, from heavy construction machinery to the airborne drones that could deliver packages to your door. Safety and potential cost savings, plus operating in geo-fenced environments are the dynamics driving automation of construction machinery. Additionally, the automation of the supply chain is being driven by the significant growth in e-commerce. We are receiving revenue today from sales of our products for industrial robotics applications, across a variety of different segments relating to getting goods from the port to your doorstep, and all using lidar to do so.

We are heading toward a future that involves autonomy, not just in mobile systems, but in the infrastructure that helps these machines navigate through the world. There is a renewed effort by governments across the world to update aging infrastructure. Adding lidar sensors and intelligence to the infrastructure can make cities safer and more productive, without violating personal privacy. In both smart cities and industrial robotics, we see opportunities to sell not just hardware, but complete solutions of hardware plus software, increasing the value we bring to customers.

All of this combines to make a robust business for Velodyne a very robust cohort of customers. We are the category definer and several of those categories are now ramping to mass commercialization with Velodyne playing an important role. It's incredible to see the technology, products and solutions that we develop, touch everyday life in so many meaningful ways. Here are a few examples.

First delivery. We announced in the first quarter, a multi-year agreement with Gatik, the industry leader in automating on-road transportation network for B2B middle mile logistics. Gatik is using Velodyne's lidar sensors as a key part of a fully redundant sensor suite to deliver goods safely and efficiently, between micro fulfillment centers, dock stores and retail locations. A logistics flow known as the middle mile, that is an expansion of supply chain robotics.

Gatik fulfills revenue generating autonomous orders daily for multiple Fortune-500 customers in the U.S. and Canada, including Walmart, reducing customer costs, and keeping delivery times short. Gatik solution helps retailers meet consumer demand for rapid delivery of goods, driven by soaring e-commerce growth, increased road safety for all road users and help consumers and customers meet an unprecedented expectation for contactless delivery. It may surprise you to learn that Gatik AV using Velodyne sensors were likely involved in delivering some of the goods that you are using in your home today.

We have previously talked about other projects in the space around forklift applications, warehouse logistics and last mile delivery. In mapping, in the first quarter, we announced a multi-year agreement with AGM Systems, who provides state-of-the-art hardware and software technology for the collection, processing and analysis of air and mobile mapping data. Some of the largest companies in the world rely on AGM solutions, equipped with our ultra-puck to achieve precise mapping. AGM systems products are an example of how Velodyne sensors enable serving, real time assessment and monitoring applications of valuable energy resources.

In April, we jointly announced with Knightscope, one of our robotics customers, with whom we have been working for seven years, that they had selected our lidar technology to power their future fifth generation autonomous security robots. Knightscope's robots have been patrolling across the country for well over one million hours, and operate across five different time zones. We are seeing an increased interest from potential customers for complete solutions that go beyond just sensor hardware. As you may have seen earlier today, we have introduced our first hardware software solution, the intelligent infrastructure solution or IIS, which is used in the Smart City segment.

When implemented, IIS will enable everything from safe intersections to robust data for city planners. In our cities, the cost of congestion is estimated to be $350 billion annually, and our IIS will help reduce this burden. There is a growing commitment by governments worldwide to rebuild our data transportation infrastructure systems. In the U.S., the Biden Administration has proposed to invest $2.25 trillion to modernize vehicles, roads and transit systems.

As we look at a world with connected and autonomous vehicles, we know that infrastructure will play a critical role in moving this industry forward. Also announced this morning, we signed our first IIS sales agreement with Rutgers Center for Advanced Infrastructure and Transportation, to deploy our IIS equipped alpha prime lidar sensors at multiple intersections in New Brunswick, New Jersey, as part of the Middlesex County Smart Mobility testing ground project, in collaboration with the New Jersey Department of Transportation. The same technology can be used to monitor public and retail spaces, providing valuable real time data and analytics, without violating individual privacy, giving it a clear edge over camera solutions. Now, let's turn to the automotive market.

First ADAS, it is becoming clear as we work with our customers on lidar for mass adoption, that the winning solution needs to have the right performance and cost combination to ultimately win. A great proof point is evidenced by Faraday Future selection of Velodyne to be the exclusive lidar supplier for their flagship FF 91 luxury EV, bringing ADAS and advanced safety to the FF 91. Our solid state Velarray H800 lidar sensors will power the FF 91's autonomous driving system that aims to deliver a comprehensive suite of highway, urban and parking autonomy features. We also continue to work with major high volume OEM customers, such as our ongoing collaboration with Hyundai Mobis for mass production of level three lidar system.

In AV, we continue to bring new technologies to market, supported by the strength of our core foundational IP. We have a product today that already hits 265 meters at 10% reflectivity. But we are certainly not stopping there. We are building the next generation that will see farther and can be manufactured at lower cost and higher volume, which will be the key for mass adoption and commercialization of lidar in this segment.

We believe that lidar will be the primary sensing modality for fully autonomous vehicles, and that Velodyne's technology will be front and center as AVs rollout in the coming years. Velodyne has been able to create the broadest lidar product portfolio on the backs of its common core technology platform, called the Micro-Lidar Array. This technology forms the common engine that allows us to scale down cost and increase manufacturability, without compromising on performance. This approach continues to be unique in the industry, and gives us the strongest opportunity to capture new applications in this broad emerging space.

The Velabit, our smallest sensor brings new levels of versatility and affordability to 3D lidar perception. It is a cornerstone solution in our mission to democratize lidar-based safety and autonomy. As we show off this incredible technology to our major customers, we are getting tremendous positive feedback with over 25 pipeline projects that include a Velabit sensor. The versatility of our Velabit enables customers to use it in multiple applications, such as, for sidewalk or last mile delivery, and industrial warehouse obstacle detection and path planning, or for pedestrian and traffic monitoring for efficiency and safety improvements, or to assist with blind spot monitoring, rear cross traffic detection and urban PAEB.

Speaking of PAEB , in the first quarter, we demonstrated how Velodyne's affordable lidar based PAEB solution delivered superior performance in all conditions, a decisive advantage over radar camera based systems, which can significantly improve pedestrian safety. With our sensors priced for mass adoption, we truly are democratizing the usage of lidar based safety in level two plus across as many cars as possible. Over the past few months, the world has continued to grapple with incredible challenges. And we have faced them by coming together and focusing on real problem solving.

Velodyne is a microcosm of this. And I am incredibly proud of what we have achieved as a business, building real products, working with incredible customers, and ultimately, by continuing to live up to our mission of bringing lidar technology to many applications that can touch everyday lives meaningfully. Velodyne continues to be the pioneer and leader that it has always been in defining this exciting space and forging a path to a safer future for all. Now, I'd like to turn the conversation over to my colleague, Drew Hamer to go over our financials.

Thank you.

Drew Hamer -- Chief Financial Officer

Thank you, Anand. Before I begin my quarterly financial review and provide our outlook, I want to spend a moment discussing the sales cycle driving our multi-year production agreements. The sales cycle begins with a customer discussion around the need for solution that would benefit from incorporating lidar technology, including potential software requirements. Based on these discussions, potential sensors that align with the use case are identified along with the anticipated start of production date or SRP.

Customers then generally do what we refer to as spot-buys, or book in turn orders to purchase sensors as part of their research and development process related to the solution. When they are ready to put in place in industrial production agreement that includes at least three years of volume and pricing forecasts and share this information with us, the project is added to our multi-year project pipeline. Completion of this cycle comes with a design award or signed multi-year agreement. As Anand mentioned earlier, of the 2,684 sensors we shipped in the first quarter of 2021, 65% of the sensors were spot-buys, 35% of the sensors were shipped to customers with multi-year agreements.

Now, I would like to begin my quarterly financial review. Total Revenue was $17.7 million, compared to $17.8 million in the fourth quarter of 2020. Product revenue was $10.6 million, compared to $14.4 million in the fourth quarter of 2020. The company's weighted average selling price per sensor was $3,887 compared to $3,381 per sensor in the fourth quarter of 2020.

The overall product revenue reduction reflects a previously discussed decline in unit sales due to COVID-19, and ongoing evolution of the product mix. License and Services revenue of $7.1 million included a $5.5 million licensing fee. Total license and services revenue was $3.7 million higher than the fourth quarter of 2020. GAAP gross profit was $1.9 million and non-GAAP gross profit was $2.7 million compared to a fourth-quarter 2020 GAAP gross loss of $5.3 million, and non-GAAP gross profit of $2.1 million.

GAAP gross profit was reduced by $800,000 of stock based compensation expense, compared to fourth-quarter 2020 GAAP gross loss, reflecting $7.4 million stock based compensation expense. GAAP operating expenses were $42.5 million and non-GAAP operating expenses were $28.6 million, compared to fourth-quarter 2020 GAAP operating expenses of $106.1 million, and non-GAAP operating expenses of $22.1 million. GAAP operating expenses included $13.3 million of stock based compensation expense, including employer taxes, compared to fourth-quarter 2020 GAAP operating expenses, including $83.8 million of stock based compensation expense. GAAP and non-GAAP operating expenses included increased spending in research and development, that is in response to the visibility provided by our multi-year agreement pipeline.

GAAP net loss was $40.8 million and included $14.2 million for stock based compensation expense. Non-GAAP net loss was $26.1 million. GAAP net loss per share was $0.22 and non-GAAP net loss per share was $0.14. This compared to a fourth quarter of 2020 GAAP net loss of $111.5 million, included $91.3 million of stock based compensation expense.

Non-GAAP net loss was $20.1 million. Fourth quarter of 2020 GAAP net loss per share was $0.64 and non-GAAP net loss per share was $0.12. EPS for the first quarter of 2021 is calculated using weighted average shares outstanding of 189.2 million. As of March 31, actual shares outstanding were 190.8 million.

Velodyne completed the quarter with $383.6 million in cash and short-term investments on its balance sheet, which included $89.3 million in proceeds from the exercise of publicly traded warrants. Now, I would like to review our business outlook. At the end of the first quarter of 2021, we estimate we could have the opportunity for over $1 billion of revenue for signed and awarded projects through 2025, plus, a pipeline of projects that are not yet signed and awarded of $4.5 million. In addition, it continues to be our top priority to invest in scalable lidar architectures, advanced manufacturing technology and software solutions.

This underpins the company's long-term business outlook with total gross margin percentage ranging in the mid to high 50s and EBITDA margin of more than 20%. We also anticipate our multi-year agreements increasing to at least 34 by December 31, 2021. Now, for our full-year 2021 financial statement guidance, revenue is expected to range between $77 million and $94 million. Our revenue comes from a global customer base to whom we are actively shipping products.

We are seeing parts of our market come back and meet the expectations for the second-half, such as the U.S. and China. Other geographies we serve, such as Europe, the rest of Asia and India are impacted more negatively by the continued toll of COVID-19, and are struggling to keep programs on track for spot-buys and multi-year agreements. These remain macro headwinds, another reason we are providing the broad revenue range.

This compares to a full-year 2020 revenue of $95.4 million, which included unique one-time items of $11 million in product revenue from a restocking fee, and $17.5 million in license and services revenue that came from lump sum licensing activity. When we account for these non-periodic elements, we expect to see product based revenues grow year over year, despite various macroeconomic uncertainties. Non-GAAP gross margins are expected to be between 16% to 24%. This reflects fewer units sold to cover remaining fixed overhead costs of our factory in San Jose.

On a GAAP basis, gross margins will include approximately $2 million of stock based compensation expense. On a non-GAAP basis, operating expenses are expected to range between $125 million and $129 million. Based upon the visibility provided by our multi-year agreement pipeline, we are increasing our spend in new product development by approximately 50% in 2021. General and administrative expenses will increase by approximately 30% in 2021, due increased public company and legal expenses.

On a GAAP basis, operating expense will include approximately $84 million of stock based compensation expense, that reflect approximately $52 million to be charged against sales and marketing in the second quarter, related to our 2020 merger with Graf Industrial. On a GAAP basis, income tax expenses are anticipated to be approximately $600,000. Weighted average shares outstanding for the year are estimated to be 193.5 million. Now, I would like to turn the call over to the operator for questions.

Operator?

Questions & Answers:

Operator

[Operator instructions] And the first question comes from Colin Rusch with Oppenheimer.

Colin Rusch -- Oppenheimer & Co. Inc. -- Analyst

Thanks so much guys. You know as you're looking at your over-the-road customers and the cycle times and cadence for their move toward Level 4, Level 5 ADAS. Can you speak to the timeframes on those development programs? Are they ramping as you expected or are we starting to see some slippage on those things?

Anand Gopalan -- Chief Executive Officer

Yeah, I think -- thanks for the question, Colin. As we look at Level 4, Level 5 programs, we are seeing a couple of different things happen. We are seeing our major customers continue to stay on track and ramp their programs as we expected, in a methodical linear fashion. You will see these systems roll out in a couple of cities in one year, and then follow with more cities the next year, and so on.

So that plan stays on track. The other thing, of course, we are seeing consolidation in this space with many of the smaller players getting consolidated into the large customers that we have. But broadly, our outlook for lidar technology, our lidar technology being designed into these systems and being deployed in mass volume continues to be the same and as these major customers roll out their systems over the next three to five years.

Colin Rusch -- Oppenheimer & Co. Inc. -- Analyst

That's super helpful. And then just looking on the cost side, as you guys have started working with automated lines a little bit more. Clearly, are you seeing meaningful opportunities for designing cost out? You've seen additional component suppliers come online that can support that. Just help us understand the cost structure and the cadence of lowering your cost structure as we go forward here.

Anand Gopalan -- Chief Executive Officer

Yeah, I think you know, this is really an important part of what will make lidar adopted across all these applications, and why we feel strongly in the choices we have made. The cost starts at the architecture level. And some of the choices we have made from an architecture perspective are really holding us in good stead, as we move toward mass adoption. The other thing that we've talked about is the common core technology platform that we call the Micro-Lidar Array that started off with our solid state products.

But now it's making its way across our entire product portfolio, including the products that are used in the AV segment. And as a result of that, we expect to see our ability not just to continue to push performance further and further, but do that at a lower cost point and much improved scalability. So for that reason, you will see end cost of lidar technologies across the entire AV mapping segment as well come down as we roll out the second generation of products.

Colin Rusch -- Oppenheimer & Co. Inc. -- Analyst

OK. Thanks so much guys.

Anand Gopalan -- Chief Executive Officer

Thank you.

Operator

Thank you. And the next question comes from Rajvi Gill with Needham & Co.

Uknown speaker -- Needham & Company -- Analyst

Hi. This is Dennis taking a question on behalf of Rajvi Gill. If you guys don't mind, could you speak a little bit more about the full-year guidance and maybe provide a bit more color about the basically the spread of the revenue and kind of the gross margin downgrade. Can you speak about some of the key drivers of this change?

Drew Hamer -- Chief Financial Officer

Yeah. So the key things, first is just the revenue. That's really kind of two questions there. So the spread of the revenue is, -- it's a bit back-end loaded here.

We have good line of sight to kind of the low end of the range. But as we get out into the year, we're looking for other markets to open up. And so, as we start to see Europe come back online and other regions of the world become a little bit more successful in their deployment of vaccinations, we anticipate that they could start to ramp back up in their purchases of spot-buys and executing against the multi-year agreements we have with them. In addition, for the upside, we also have a number of larger projects that are also kind of targeted, that could come in here and the second, third and fourth quarter of the year.

It will also provide potential upside revenues that we could see come in, which will allow us to hit the upper range of the revenue guidance which we're targeting. So it's really just, time will pass here, and we'll get an opportunity to close these deals. But for now, this is a higher confidence revenue ratio we can provide. On the gross margins, as it relates to the first quarter, and that affects your whole year, we had lower unit sales, and we're still in the transition of our manufacturing offshore to our contract manufacturers.

So, we had higher kind of overhead costs that we had to absorb here in Q1 and potentially Q2, as we get further out into the Europe and going to continue those transfers to the contract manufacturers, or anticipate can continue that transfer to contract manufacturers. There is a risk there, as I think we're all well aware of countries like Thailand and Japan, are also seeing increased COVID-19 cases. And so it makes it a little bit more challenging to get these transfers completed, because people can't travel to those countries and accelerate them. It doesn't mean we won't get them done, but it might take a little bit longer than we originally expected.

Uknown speaker -- Needham & Company -- Analyst

Got you. Thank you. And then for my follow-up, could you speak a little bit about the non-auto design pipeline with regard to maybe what parts of the pipeline we could see kind of hit the top-line first and which aspects of that pipeline make you most excited?

Anand Gopalan -- Chief Executive Officer

I can start and Drew feel free to jump in as well. The fastest growing parts of our pipeline definitely are around the industrial segment. We see tremendous growth in robotics in general. I frankly accelerated in the post-COVID world that we live in, we see this across the entire supply chain of delivering goods to your doorstep.

We also see it in other applications, such as forklifts, and smart agriculture and so on. We have seen lidar adoption clearly pick up at a fast clip. And this is a very exciting part of our pipeline, because time to revenue is shorter, and we see our ability to provide the products exists today. And further, many parts of this pipeline also involve a software opportunity, where we have the ability to add more value to the end applications of our customers, not just by providing hardware, but we're also providing software hardware solutions.

And that's actually a really exciting growth opportunity for the company.

Uknown speaker -- Needham & Company -- Analyst

Great. Thank you. I'll get back in the queue. Thanks.

Operator

Thank you. And the next question comes from Itay Michaeli from Citi.

Itay Michaeli -- Citi -- Analyst

Great. Thanks. Good afternoon, everybody.

Drew Hamer -- Chief Financial Officer

Hi, Itay.

Anand Gopalan -- Chief Executive Officer

Hey, Itay.

Itay Michaeli -- Citi -- Analyst

Just the first question on going back to the gross margin. Drew, any color you can share just given I guess the lay in the transfer? And where you think you might exit the year, let's say in the fourth quarter to try and think about the trajectory of gross margin over the next couple of years, see if anything has changed?

Drew Hamer -- Chief Financial Officer

Yeah, so we're expecting to be kind of coming out of the year, at kind of approaching those ranges where we originally discussed, probably, I think it's going to be a linear trajectory coming through the year. So kind of starting low and going out high such you can hit to the average as we gave you for the full year.

Itay Michaeli -- Citi -- Analyst

Got it. OK. That's helpful. And just secondly, on the higher R&D, based on the visibility from the multi-year agreements, hope you could elaborate more about kind of what you're seeing there? Is that that sort of new product development because of greater revenue opportunities or an acceleration in launch? It's kind of curious sort of more details around the product spending there.

Anand Gopalan -- Chief Executive Officer

Sure. I mean, I would say that there's a couple of areas that are really exciting, as we just talked about. We're seeing a tremendous uptick in opportunities to not just provide hardware, but provide hardware software solutions, and that's definitely going to drive some additional R&D investment on our part to develop and deliver the solutions to market, that's definitely happening and it's happening at a faster rate. And then further I would say that we are seeing on the backs of technology like development, we're seeing an incredible expansion in the number of applications that use lidar.

And there's opportunity for innovation around new lidar architectures and technologies as well. So that's driving increased investment on our part, so that we can capture the huge upside opportunities that are coming into the pipeline.

Itay Michaeli -- Citi -- Analyst

That's helpful. And just to sneak one quick one. In the five additional awards you expect by year-end, any color or kind of which end market is ADAS? Is it non-auto robotics in terms of what you expect to those additional links?

Drew Hamer -- Chief Financial Officer

Yeah, we're actually expecting that they'll be a spread across all those markets you just described, honestly. And we're going to see that we anticipate we have some in the pipeline that are larger than others. So I think it's very relevant that there are some very strong conversations going on around some ADAS opportunities. We also have some strong conversations going on with a couple of people with robotic solutions, that are going to be coming to market.

And then, it's going to be a nice spread, I think of different opportunities across different markets that are forming to use lidar, now that we have something that's at a price point that people can incorporate it in their solutions.

Itay Michaeli -- Citi -- Analyst

Excellent. That's very helpful. Thank you.

Anand Gopalan -- Chief Executive Officer

Thank you.

Operator

Thank you. And the next question comes from Tristan Gerra with Baird.

Tristan Gerra -- Baird -- Analyst

Hi, good afternoon. I think you had mentioned on the last call about your expectation for pricing to decline about 20% this year? With you whether you forecast for the year, is that implying a low teens increase in units? Is that in the ballpark of what's embedded in your guidance?

Anand Gopalan -- Chief Executive Officer

Yeah, I think that we're definitely seeing the guidance, again, it will be a linear thing. So you have for example, last quarter was lowers ASP than we saw this quarter. But the trend is that they will yes, continue to go down at those levels.

Tristan Gerra -- Baird -- Analyst

OK. So if we look at the growth from a unit standpoint, given the increasing adoption rate that you've described in the past for Velabit, which is lower price than the 360 lidar. How do I reconcile the two? I mean, is it fair to assume that the 360 units are actually coming down year over year, but then you have a double digit increase in the solid state lidar for this year? As you've been targeting a percentage, adoption rate, exceeding this year, how should we look at that? And should we see an acceleration unit growth next year?

Drew Hamer -- Chief Financial Officer

Yeah, so we are expecting the solid state sensors, the volumes to at least double this year. They are sold at a lower ASP so that they'll -- as the volume starts to pick up, the ASP will continue to come down because we can volume price them accordingly. So as we get out into this year, we do see that representing a larger portion of that overall revenue, which will affect product metrics, which affects the weighted average ASPs.

Anand Gopalan -- Chief Executive Officer

Yeah, I think the only color I would add to that is, we are as Drew described, there are several opportunities that we are seeing around the solid state lidar technology, both the Velarray and Velabit. So definitely we will continue to see an acceleration of adoption of that technology, across many different applications. So, I think that's definitely happening.

Tristan Gerra -- Baird -- Analyst

Great. Thank you very much.

Operator

Thank you. And the next question is coming from Richard Shannon with Craig-Hallum.

Richard Shannon -- Craig-Hallum Capital Group -- Analyst

Hi, guys. Thanks for taking my questions as well. I think my first question is on ADAS as you provided in your investor presentations, we see the number of projects by quarter here. And a number of projects come down last couple of quarters, if I caught the numbers, right from 70 down to 56 here.

Can you discuss what's going on there? Do you see this as a retrenchment in use of lidar and ADAS or is it just higher quality projects that are still around here? Could you kind of help us understand the situation there?

Anand Gopalan -- Chief Executive Officer

Yeah, I think what you're seeing is really the quality of the projects is getting defined much better, as the customers are further along in their evaluation of lidar, as a key technology, pray that. So broadly, we don't see the retrenchment in the ADAS market, we see actually a very robust set of opportunities that are just getting more -- better and better defined. Further, I would say that really we are seeing the ADAS opportunities settle into two buckets. What I would call the fast EV adopters where players like Faraday Future are looking to come in, and leapfrog existing traditional players by adopting both electrification and lidar technology, as part of ADAS offerings.

And you see these players move very fast and adopt lidar at fast rate. Combined with that, you are seeing the traditional OEMs also continue to make good progress, especially the leaders in the pack around creating sophisticated level three ADAS systems that incorporate lidar in them. So you are seeing both those buckets move forward. So broadly, I would say we don't see this at all as a retrenchment for the usage of lidar in the ADAS market.

Richard Shannon -- Craig-Hallum Capital Group -- Analyst

OK. Helpful perspective on that. Thanks for that. Second question is on software, if I caught the numbers right here is increasing the number of projects that are looking at that.

Can you give us a sense of how far down some of the more advanced discussions are going? Can we see some agreements signed in the next quarter of by the end of the year? Are these all automotive? Are you seeing any opportunities outside of automotive?

Anand Gopalan -- Chief Executive Officer

Yeah, we're seeing a broad base set of opportunities for software, both in automotive and non-automotive. But as I said before, the really exciting part for us is, in the industrial segment, where time to revenue is much faster, we are seeing opportunities for us to provide both hardware and software. So certainly, we believe that we will see some of these opportunities materialize into signed multi-year agreements in the near future. In addition to that, earlier today we announced the intelligent infrastructure solution, which is our first hardware software solution that we have publicly talked about.

And really, this is focused on the Smart City segment, where again, we see our ability to work across different state DOT, city organizations and commercial companies. We have the ability to provide not just the lidar hardware that makes this possible, but also the entire solution, including the data analytics platform that these companies can use to really mine the valuable data that exists, whether it's a city intersection or whether it's retail or public space. So we are pushing forward fast and creating products around these different segments that incorporate both Velodyne's hardware, compute and software.

Richard Shannon -- Craig-Hallum Capital Group -- Analyst

OK. And could you specifically comment on the progression of software within the auto space too?

Anand Gopalan -- Chief Executive Officer

Yeah. I think, the progression of software in the auto space, as we've always talked about is on the backs of the hardware installed. So as we continue to see traction and get installed into these ADAS systems, we see opportunities for software there. One of the things that we showed in the first quarter of this year is lidar-based, automatic emergency braking system, comparing it with the state-of-the-art camera and radar system, where you could see significant advantages, especially in the nighttime for the lidar-based system over the camera radar base systems.

As you can imagine, this has led to some very deep conversations, not just around level three, but on level two, level two plus sorts of applications, where we could provide not just, again the lidar hardware, but our PAEB software solution as part of the offering. So lots of great progress there. But ultimately, the time to revenue for software in paid ads will be combined with when the hardware gets installed on the vehicles. And so that that continues to be the critical path.

Richard Shannon -- Craig-Hallum Capital Group -- Analyst

Got it. OK. Thanks for the detail. And that's all for me.

Anand Gopalan -- Chief Executive Officer

Thank you.

Operator

[Operator instructions] And the next question comes from Aileen Smith with Bank of America.

Aileen Smith -- Bank of America Merrill Lynch -- Analyst

Good afternoon, guys. First question, when we look at the 2021 revenue outlook, it's a pretty notable shortfall versus what I think was $150 million, plus that you outlined upon going public in September of last year. But it's also the lowest annual revenue that you've reported since 2016. I think we can all appreciate that there's some near-term headwinds associated with semiconductor shortages and supply chain disruptions.

But 2021 looks like it could be more of a structural air gap as you try to make the shift from R&D project-based lidar to commercial multi-year contract lidar. So why or why not would that be a fair characterization for 2021? And what gives you confidence that some of the out year financial targets you've outlined are still valid?

Drew Hamer -- Chief Financial Officer

Yeah. So the key thing for us, Aileen is the fact that we are still having deep conversations with customers across a broad base of contracts, about these discussions, where they are actively interested in looking forward and moving forward with these different production agreements that we're talking to them about. And they provide a baseline, as the world starts to accelerate, again, hopefully here in the second-half of the year, we'll be able to see that pickup, and we'll be able to get back on pace for the expectations of the forecast for 2022. So it's really, if there's anything in the air gap, we really feel it's more kind of a macro headwind.

And that it really should start to take shape here in the second-half of the year, as the vaccinations and other things start to take hold and the market starts to come back.

Anand Gopalan -- Chief Executive Officer

Just to add some color to that. We should keep in mind while we talk about that, that as we sit here today, we still have the highest revenue of all the lidar companies in the market. We have a maximum number of units produced and shipped across the broader set of applications, as a broad product portfolio, the largest pipeline of projects in the space. So I think this is what gives us confidence that we can we can hit the numbers that we outlined in the in the future, as we sign these multi-year agreements, and will these deep relationships with our customers and manufacture and scale and deliver these products at scale?

Aileen Smith -- Bank of America Merrill Lynch -- Analyst

OK, that's helpful. And then, I wanted to ask another question around the gross margin. Some of the comments today are a little bit counterintuitive, versus how you describe the company upon going public of shifting more toward that fabulous model and manufacturing with partners. And then also relative to some of the factors that you outlined is driving margin expansion, like the Micro-Lidar Arrays and low cost country sourcing.

Again, I think we can understand COVID delayed the manufacturing transition a little bit, and it's going to be a pressure point this year. But if you think about the business going forward, is there a certain volume or revenue level that we should be thinking about above which you can leverage fixed costs? And what I'm trying to get out with this is, as we think about bridging that 16% to 24% gross margin this year versus 50% plus of the long-term, is it something that can be achieved in the next year or so as you complete the shift toward stem balanced manufacturing or are your targets based on certain volume levels that may have been pushed out along with COVID?

Anand Gopalan -- Chief Executive Officer

So I can start and then Drew feel free to jump in as well. Again, keep in mind that we build and ship real volumes of products. And as we make these transitions, these transitions are not a step functions. So you have to transition starting from subsystems and work your way to building an entire lidar.

So yeah, these transitions really are driving our ability to switch to the gross margins that we have talked about. And as those transitions get completed, we will be able to move toward those targets that we are talking about. In terms of the Micro-Lidar Array, the ASICs, these things are in production both in our factories as well as our partner factories. And as the product mix evolves and more and more of the products are using the Micro-Lidar Array, you will see that part of the rewards also being transferred into the gross margins.

So I think it is it is more complicated, because we -- again, we have a broad portfolio of many different products that we build and ship. At the same time, the plants that we laid out are still absolutely valid. The transition for the Micro-Lidar Array the ASICs across the product line is happening. As we talked about before by end of 2021 we will have the entire product line will have the benefit of Micro-Lidar Array, and the transition to overseas manufacturing is happening.

And we continue to make progress on that despite COVID.

Drew Hamer -- Chief Financial Officer

We share that by giving you kind of a direction of the gross margins as we come out of the year, so that, that will be a linear trend that should continue upward as we go out of 2021, and into 2022 and beyond.

Aileen Smith -- Bank of America Merrill Lynch -- Analyst

OK. Great. Thanks for taking the question.

Operator

Thank you. And this concludes our question-and-answer session. I would like to turn the conference back over to management for any closing comments.

Anand Gopalan -- Chief Executive Officer

Thank you. As we started off saying, Velodyne Lidar is the leading producer of lidar in the world, and we are clearly the ones defining the lidar market. And this happens to be because we have the highest revenue in the space, we build and ship more units than all the other players put together combined, in multiple product categories. We have a broad portfolio of products.

We have a robust pipeline of products across many different applications. We have the manufacturing leadership and ability to scale up to meet the demand, and whether the inevitable uncertainties that exist in the marketplace. And finally, we are moving forward fast and including software as part of our offerings with our first software product that we announced today. With all of this, we have very high confidence in our ability to continue to grow, continue to execute, as we have done so consistently, and continue to be the pioneer in bringing lidar-based safety, across all of these different applications to all of our customers.

Thank you very much for your time and your questions.

Drew Hamer -- Chief Financial Officer

Thank you.

Operator

[Operator signoff]

Duration: 52 minutes

Call participants:

Moriah Shilton -- Investor Relations

Anand Gopalan -- Chief Executive Officer

Drew Hamer -- Chief Financial Officer

Colin Rusch -- Oppenheimer & Co. Inc. -- Analyst

Uknown speaker -- Needham & Company -- Analyst

Itay Michaeli -- Citi -- Analyst

Tristan Gerra -- Baird -- Analyst

Richard Shannon -- Craig-Hallum Capital Group -- Analyst

Aileen Smith -- Bank of America Merrill Lynch -- Analyst

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