Velodyne Lidar, Inc. (VLDR) Q1 2022 Earnings Call Transcript

Velodyne Lidar, Inc. (VLDR)
Q1 2022 Earnings Call
May 05, 2022, 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 2022 financial results call. [Operator instructions]. Please also note, this event is being recorded. And I would now like to turn the conference over to Andrew Chan.

Mr. Chan, please go ahead.

Andrew Chan -- Head of Investor Relations

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 the 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 closed 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 at 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 new CEO, Ted Tewksbury.

Ted Tewksbury -- Chief Executive Officer

Thanks, Andrew, and thank you all for joining us today. We'd like to welcome any new investors on the call and remind you that 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 counting 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 remain strong. However, we expect component shortages to continue to challenge our ability to fulfill this demand for several quarters. Even with these near-term headwinds, we expect sequential revenue growth in the second quarter of 2022.

Drew will review our financial results as well as the warrant accounting in greater detail in a moment. I'd like to begin by reviewing some highlights from the first quarter of 2022. We continued to see robust customer engagements across all three of our target markets, industrial and robotics, intelligent infrastructure, and automotive. Approximately two-thirds of our Lidar sensors sold during the quarter were for industrial and robotics applications.

And about one-third 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 and automotive was dominated by sales of our high performance rotational sensors for robo taxis. 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 citywide system for truck passage control. And we are very excited that our IIS won the SXSW 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 five-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 four strategic pillars to accelerate our path to profitable revenue growth. First, by selling existing products into early autonomous markets, including industrial, robotics, and intelligent infrastructure. Second, by developing an ultra-low cost sensor platform to drive mass adoption in automotive and other price sensitive markets.

Third, by expanding our software to enable complete AI powered vision solutions, and fourth, by leading the industry and 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 two new sensors and four software releases per year.

We also plan to introduce at least one full stack system solution every year. Looking to full year 2022, we are experiencing strong customer demand for our Puck and Ultra Puck rotational sensors in the industrial, robotics and, infrastructure markets. As we shared last quarter, our ability to supply this demand has been constrained by shortages of critical semiconductor components, particularly field programmable gate arrays or 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 $100 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 constraint. 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.

Drew Hamer -- Chief Financial Officer

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; it will report to provide more perspective on the company's underlying business performance by including a billings metric. Billings represents the dollar value of products and services provided during the current period and invoiced to the customer.

For the first quarter of 2022, we are pleased to report total billings of $11.5 million at the top of our expectations. Revenue, including the impact of the warranty accounting that I just discussed was $6.2 million and it was also at the top end of our guidance. This was the result of the exceptional work by our operations team to proactively procure components that enabled us to build 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 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 mixed 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 five and $7.5 million.

We recorded a charge of $5.3 million. License and services revenues was $1.8 million in Q1, 2022. This compares to $3.9 million in Q4 2021, which included an annual royalty true-up of approximately $2.4 million. As a result of these factors, non-GAAP gross loss was $8.8 million in Q1 2022, compared to non-GAAP growth 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 end 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 in reflecting measures taken, customer demand, and expected sensor shipments. We expect billings of 12 to $14 million product license and services revenue of 12 to $14 million, and non-cash contra revenue of 2.5 to $2 million related to the Amazon warrants resulting in total revenues of 9.5 to $12 million. We continue to expect the number of sensor shifts 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.

Ted Tewksbury -- Chief Executive Officer

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.

Questions & Answers:

Operator

Yes, thank you. [Operator instructions]. And the first question comes from Colin Rusch with Oppenheimer.

Colin Rusch -- Oppenheimer and Company -- Analyst

Thanks so much guys. Within that automotive revenue that you're talking about, could you talk about the diversity of customers? Obviously there's a couple that are pretty easy to identify, but if you could talk about the number of folks you're shipping to right now.

Ted Tewksbury -- Chief Executive Officer

Sure. Please, to do that Collin. So yes, on the one third of our revenue that came from automotive, most of that came from robo taxis, as they 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. We with these robo taxi 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 robo taxi revenue to go to volume in the 2025 timeframe and beyond. But that timing is really dictated more by regulatory and other non-technical issues rather than the performance. We have an act, a very good product market fit with our sensors into those robo taxi, autonomous shuttles and other level four and level five, ADAS type of programs.

Colin Rusch -- Oppenheimer and Company -- Analyst

That's incredibly helpful. Thank you. 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 and 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 start [Inaudible]?

Ted Tewksbury -- Chief Executive Officer

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 AIML and in many cases, other types of sensors. And so if you look at our software stack, it consists of three levels. We have the 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 that 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 forms.

Operator

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

Unknown speaker

Hi, this is Tyler on for Tristan. Thanks for taking the questions. Could you talk about the impact you're seeing, if any of the China lockdowns either directly to you or to your customers?

Ted Tewksbury -- Chief Executive Officer

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.

Unknown speaker

Great. For my follow up, are there specific end markets, you were 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?

Ted Tewksbury -- Chief Executive Officer

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 four pillars strategy, but in terms of time to volume, we see the markets rolling out in three waves. So the first wave, which is occurring right now is industrial and robotics, and 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 rotational, I talked about intelligent infrastructure there. There's actually a very strong demand for our rotational sensors that intersections why, because they can see 360 degrees real time round the clock in any weather condition.

And it's really an ideal fit for those kinds of markets. So, we're seeing, I would say a trend toward increasing solid state sensors because of the lower cost, but we're also seeing continuing demand for rotational's in many of these kinds of applications. If 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 robo taxi 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 one third of the revenue that we're getting from automotive. Most of that is coming from the robo taxis, 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 an intelligent infrastructure, followed by the automotive applications.

Operator

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

Sam Peterman -- Craig-Hallum Capital Group -- Analyst

Hi, guys. Thanks for taking my question. I wanted to ask on ASPs, it sounds like they were up quite a bit quarter over quarter just because of the supply environment with, I guess how large that, 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.

Ted Tewksbury -- Chief Executive Officer

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 you know, 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.

Sam Peterman -- Craig-Hallum Capital Group -- Analyst

Got it. OK. That's helpful. Second question, I wanted to ask on solid state sales looks like those were down pretty substantially year on year.

I guess our shortages that you're seeing in the supply chain weighted more toward solid state rather than rotational at all, or is the decline kind of more so driven by demand in the solid state?

Ted Tewksbury -- Chief Executive Officer

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 they 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.

Operator

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

Unknown speaker

Hi, this is Bruno on for Mark. Thank you for taking the questions. The company previously talked about an 800 million of signed an awarded revenue through 2025. I realize the company's not long -- 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?

Ted Tewksbury -- Chief Executive Officer

So that, it's a great question, Mark. We talked about two multiyear 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 are actually was a multiyear agreement metric that we had was problematic for several reasons. Number one in a highly competitive environment, such as we're in, I want -- 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, 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 sign a three 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'm going to hold off until we have our new CFO on board before we disclose that, but we are working on that.

Unknown speaker

OK, 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?

Ted Tewksbury -- Chief Executive Officer

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, 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 still got six quarters to seven quarters worth of cash runway. We're currently completing our five-year plan and we're rationally rationalizing our product roadmap.

And like any well managed company, We're always evaluating our capital allocation and looking at all our options which includes opportunities for M&A as well as future financing. But we don't have any plans at this time. And anything we do will not happen until after our new CFO comes on board.

Operator

Thank you. And the next question comes to Aileen Smith with Bank of America.

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

Good afternoon, everyone. 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 establishing 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?

Ted Tewksbury -- Chief Executive Officer

Yes. Great, great question. And it's complex because we are increasing pricing power as a result of software and system solutions, as I talked about earlier, but also it is a key element of our strategy to bring down the price of Lidar price and cost is the number one challenge that the Lidar industry has today relative to other sensor modalities like radar or camera. So in order to drive the 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, those new products introduced which will take, anywhere from 18 months to two 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 I expect to see our competition start to lower our prices, their prices, and we will have to respond in kind.

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

OK. Got it. And then I wanted to follow up on a comment and a press release on what you define as comprehensive organizational transformation. What is encompassed in that? Is it just a pivoting of 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 two.

So just trying to get a sense of whether there's a broader reorg going on.

Ted Tewksbury -- Chief Executive Officer

So there was a broader reorg that went on and, and it was a very important one. When I joined this company, it had a very strong engineering base and in a very strong CTO organization, but several things were lacking most important of which was a strong customer focused product management front 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 partly that information into market requirement, documents, product requirement documents, new product definitions, business plans, and so forth. So we put that organization together under the company's first chief product officer. So that, that was a major organizational change.

And then in addition we combined and consolidated our software and hardware groups under one umbrella which is now being led by our new executive vice president of engineering. And it has a systems focus versus just a sensor focus. And so that was also a major change 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 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 six months ago, when I joined, and it's we have a much more discipline 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.

Operator

Thank you. And the next question customer is Rajvindra Gill with Needham & Company.

Raji Gill -- Needham and Company -- Analyst

Yes. Thanks for taking my questions, and nice working with you, Drew, best 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 off-shoring in operational improvements? I know you had mentioned in the past, roughly 80% of the Velarray and 20% of the Alpha Puck are being built in Thailand, wanting to get a sense of kind of what's the progress, the roadmap 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 Lidar adoption overtime is going to be pricing.

And in order to get for the pricing to be below 500, the cost has to come down. So that's crucially important.

Ted Tewksbury -- Chief Executive Officer

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 a 100% completed by the end of the year. That's going to enable us to improve our manufacturing efficiencies, but that in a loan -- 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 cost. The other thing that we're doing, which we're already doing actually through our micro Lidar array and 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.

Drew Hamer -- Chief Financial Officer

And then long-term to design in.

Ted Tewksbury -- Chief Executive Officer

Yes.

Raji Gill -- Needham and Company -- Analyst

I appreciate. And just for my follow up. Two-thirds kind of industrial robotics, one-third 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 robotic side? Is it more intelligent infrastructures? Any thoughts there would be helpful? Thank you.

Ted Tewksbury -- Chief Executive Officer

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 number two, rather than automotive, is simply because the design cycles are very short in that segment. The design cycle in intelligent infrastructure can be five months or six months, whereas an automotive it's upwards of two 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 farther 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 two segments that are important. There's the level four and level five 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 they mentioned, the time the 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, $400. And the reason for that is that Lidar while we believe it is an essential technology in the sensor suite for ADAS, because of the safety requirements.

It is not mandatory today. And that 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, is going to be farther out than the robotics and industrial and the intelligent infrastructure.

Operator

Very good. Thank you. And this does conclude the question-and-answer session. I would like to turn the floor to management for any closing comments.

Ted Tewksbury -- Chief Executive Officer

Thank you for joining us today. And we look forward to speaking you -- speaking to you in the weeks to come.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Andrew Chan -- Head of Investor Relations

Ted Tewksbury -- Chief Executive Officer

Drew Hamer -- Chief Financial Officer

Colin Rusch -- Oppenheimer and Company -- Analyst

Unknown speaker

Sam Peterman -- Craig-Hallum Capital Group -- Analyst

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

Raji Gill -- Needham and Company -- Analyst

More VLDR analysis

All earnings call transcripts