Q2 2021 Ouster Inc Earnings Call
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Ladies and gentlemen, this is the operator today's conference is scheduled to begin shortly please continue to standby. Thank you for patience.
Once again this is the operator today's conference is scheduled to begin shortly please continue to standby.
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Good afternoon, and welcome everyone to ouster second quarter earnings Conference call.
All lines have been placed on mute to prevent any background noise.
After today's presentation and remarks, there will be a question and answer session.
To ask a question.
And if you would like to ask a question. During this time simply press star followed by the number 1 on your telephone keypad. If he would like to withdraw your question you May press the pound key.
Our call today is being recorded.
And a replay of the call will be available on the ouster Investor Relations Web site an hour after the completion of this call.
I'd now like to turn the conference over to Sarah Ewing Director of Investor Relations Ma'am. Please go ahead.
Thank you good afternoon, I'm joined today by ouster, Chief Executive Officer, Angus for Kala and Chief Financial Officer on our Brunel.
Before we begin the prepared remarks, we'd like to remind you that <unk> issued a press release announcing its second quarter 2021 financial results. Shortly after market closed today.
The company also published an Investor presentation, you may access these materials on the Investor Relations section of ouster Dotcom and.
In our current report on form 8-K filed with the SEC today.
I'd also like to remind everyone that during the course of this conference call <unk> management will discuss forecasts targets and other forward looking statements regarding the company future customer orders and the company's business outlook that are intended to be covered by the safe Harbor provision of the private Securities Litigation Reform Act of 1.
1995 for forward looking statements. While these statements represent management's current expectations and projections about future results and performance as of today.
Actual results are subject to many risks and uncertainties that could cause actual results to differ materially from those expectations.
In addition to any risks highlighted during this call important factors that may affect <unk> future results are described in the most recent filings with the Securities and Exchange Commission.
Including today's earnings press release.
Except as required by applicable law. The company undertakes no obligation to update any of these forward looking statements for any reason after the date of this call.
Lastly, information discussed on this call concerning the company's industry competitive position in the markets in which it operates is based on information from independent industry and research organization.
Other third party sources and management estimates.
Management estimates are derived from publicly available information released by independent industry analysts and other third party sources as well as data from the Companys internal research and are based on assumptions made upon reviewing such data and his experience and knowledge of the industry end markets, which it believes to be.
Reasonable.
These assumptions are subject to uncertainty and risks, which could cause results to differ materially from those expressed in the estimate.
During this call, we'll discuss certain non-GAAP financial measures, which exclude the effects of events and transactions, we consider to be outside of our core operations. These non-GAAP measures should be considered a supplement to and not a substitute for measures prepared in accordance with GAAP.
For any reconciliation of non-GAAP financial measures with the most directly comparable GAAP measures. Please refer to today's press release.
I would now like to turn the call over to our Chief Executive Officer, and Coca Cola.
Hi, everyone. Thanks for joining us today for our second earnings call I look forward to updating you on our performance this quarter, including our latest product developments and forward looking roadmap I'll also talk about a few trends that we expect will drive wider adoption across all sectors and markets and several key milestones that I believe have the potential to unlock.
Even greater market demand over the next few years.
I will then turn the call over to our CFO on a burdell, who will report on our quarterly financial results from that.
As we go through the call I want to draw your attention to 3 key differentiators, which fundamentally set us apart from other lidar companies. The first is our digital approach for Lidar, which we believe allows us to offer the best combination of price and performance today.
As our diversified business model. This was possible due to the flexible architectures of our competitively price sensors, which is helping drive adoption of digital ledger technology across all of our protocols and unlocks the largest multi market Tam.
The third is our proven ability to execute on our strategy I'll start with continued to deliver we aim to do what we say we're going to do and are truly excited about the future ahead of us.
Now before I jump into our quarterly results I am extremely excited to announce that we have appointed Susan hasty for chair <unk> Board of directors.
Susan has been a pivotal contributor to ouster over the last 3 years, serving as a member of our board of directors from September 2018.
And in addition, our interim Chief revenue Officer from January to July of this year. She has held various leadership positions over her career, including senior Vice President of Verizon connect global automotive business and executive Vice President of global sales in the OEM business at for Lotus.
Susan has more than 30 years of experience in software technology, and automotive has been integral for outsource growth trajectory and I could not be more thrilled to have her in this leadership capacity.
Now turning to performance I'm pleased to report that ouster recorded $7.4 million in revenue in the second quarter, our highest revenue quarter to date and with a gross margin of 26% the demand for us for Cmos digital lighter sensors has been driven primarily by new customers across each of our target verticals industrial automotive.
<unk> infrastructure and robotics brings.
Bringing us to a total of approximately 600 customers over the last 12 months in over 50 countries. This includes our now 53 total strategic customer agreements or FCA is representing growth of $422 million in contracted revenue opportunity through 2025 up from 48.385 million.
As for the last earnings call.
Turning to product I wanted to show you how far we've come in a relatively short period of time with a digital architecture. Since we launched our first generation sales. During 2018, we made considerable improvements from central performance through software updates and new chipsets. After second generation product was launched in the first quarter of 2020 and.
Added high resolution by doubling channels, a wider field of view shorter minimum range improved thermal performance and double the position, making us the first water company offering a 128 channels of resolution across the complete product portfolio. It was met with incredible customer excitement and in addition to outsourcing on manufacturing was a key contributor.
For our growth as of last year.
It is important to note that there was a significant learning curve from making a prototype work in a test setting for manufacturing product that works well on a real world environment. After already knows what it takes to keep a sensor alive in the field for 3 years, we've worked to wide range of real world field applications to address environmental durability and longevity.
Huge related to water and grass shock and vibration and temperature extremes. We believe we've established a meaningful competitive advantage because of our digital platform that has allowed us to quickly improve product performance over time in line with Moore's law.
Our design allows for constant duration, helping us to maintain our competitive advantage. We believe that after is better positioned to respond to market opportunities relative to ladder companies for those.
On analog technology, which is the less adaptive from.
From the beginning our sensors have been engineered to take advantage of continuous over the air updates with.
We've consistently delivered on our ability to improve sensor performance by shifting firmware updates over the past 2 years, but included precision range and even thermal improvements.
We continue this trend into the second quarter with our latest firm were $2, 1 update which is a major step forward in features and can also be easily downloaded off our website today.
1 of the biggest levers we have promote lidar adoption is accelerating the rate at which our customers integrate our sensors into their systems. This past quarter, we launched our first software developer kit for Lidar, which is already had hundreds of external downloads. This is a critical first step in developing a rich software ecosystem and falls along.
Line of companies that deliver not just best in class hardware, but also best in class software tools. This is also 1 area, where we have committed to invest and where we intend to continue to deliver by adding more features and integrations to make development on ouster ladder sensors, the best in the industry.
Lastly, as planned we are nearing completion on the tape out of our <unk> chip, which represents our most significant advancements in product capability to date and will further deliver on our promise to rapidly improve performance through our digital roadmap.
While we've already proven product market fit whether second generation sensors using the <unk> chip we believe the L..3 chip will further extend our performance lead increase our competitiveness and close the door on competition across each of our verticals.
Now we want to share some insight on our forward looking roadmap for automotive because we believe ouster as the only Lidar company currently designing both best in class scanning and true solid state sensors to meet automotive standards, including Asos functional safety certification.
This again is possible because all of our centrally share a common digital architecture.
Another key differentiator for ouster as our progress towards achieving automotive readiness not just for our products, but also for our manufacturing supply chain, we selected a manufacturing partner and benchmark for years ago, and together with benchmark, we start production in Thailand, 3 years ago, and past automotive OEM audits of our Ietf.
<unk> 949 certified Thailand facility, starting 2 years ago is a critical milestone for any lighter manufacturer in its quest to be automotive grade specifications and another example of <unk> lead within the industry. We are in the B sample space now for OS sensors with plans to move into the fee simple phase in 2023.
As far as our solid state road map this past quarter, we defined our full product portfolio locked in the product specs and we're now moving into the engineering design phase in line with past guidance, we expect to have our first solid state samples ready in the fourth quarter of 2022.
While other liner companies are focused on delivering a single forward looking lidar. After it's certifying its entire lineup of short medium and long range scanning sensors and true solid state sensors.
We believe that there will be a real market need for both sensor types and as far as we know ouster, the only company investment in offering and certified votes.
Now I'd like to turn to an ongoing and important trend that is a core driver for growth for after the adoption of automation technology across the worldwide supply chain.
Free aspect of the industrial economy is moving to adopt greater levels of autonomy for improved safety efficiency and quality of life.
In automotive the core Submarkets driving this vertical our robo taxis robo trucking consumer aid us in our fourth sub vertical that we have not called out before which is shuttles and buses.
Ouster is already a top player on automotive today with significant revenue in auto compared with other line are companies. We have the largest publicly reported binding production win for lighter sensors and this industry through our deal with plus and we believe our future products, while we extend our markedly take.
Take trucking for example.
There are approximately $12 million freight trucks from the world of which approximately 10% needs to be replaced annually. Even more there is a near term opportunity to retrofit existing vehicles. This is a business that has historically had razor thin margins and autonomous driving technology is the first opportunity in years to drive a meaningful.
Reduction in costs across the 3 core buckets labor fuel on Capex.
For these like plus or taking advantage of this opportunity to reduce these costs not in 5 to 10 years, but today by retrofitting existing fleets with marquee customers like Amazon, while pursuing mid term OEM integrations on new trucks.
While our long term goal of many of our trucking companies to reduce operating cost by around 40% the ability to save even 5% with driver and systems today is still a potentially significant savings opportunity for companies like Amazon.
With <unk> manufacturing scale, our affordability and performance. We believe we're on a great position to be the volume line of supplier for this next wave trucking fleets.
Core sub markets driving the industrial vertical our mining agriculture, construction Portland yard logistics factory manufacturing and warehousing. We think there are 2 key drivers for latter adoption and industrial applications.
First this task optimization through automation and the second is safety and Theres already a $1 billion market for legacy <unk> industrial Lidar sensors, partially addressing these needs today, we believe we offer our customers an incredibly compelling value proposition by enabling them to simplify their system with fewer digital ladder sensor.
While increasing safety and efficiency.
Just looking at the forklift market there are millions of forklifts deployed around the world today and over $1.5 million forklift sold annually with less than 1%, having any level of automation. There is a significant potential market opportunity to retrofit and build new machines with greater levels of intelligence using Cmos digital either.
We believe could rival in the automotive series production and unit volume.
Customer volume, a France based leader in autonomous Forklift is a great example of this they were able to increase the focus productivity by up to 15% from availability by up to 30% drop on nation.
Another example is the massive potential we see to automate distribution yards, we previously announced our customer outrider, which aims to replace over 50000 diesel yard trucks with autonomous zero emission vehicles that could feature ouster sensors over the road trucks weight on average 1 hour to pick up and drop off of trailer at human operating.
Resulting in roughly $12 million combined days waiting on distribution yards each year, if automating yard operations trends. This right time by just 10% to 20% productivity would increase by an additional 1 to 2 million days per year. There is also potential to deploy 6 sensors in the distribution yards for the trucks operate.
And there are over 400000 yards in the U S alone.
We're also working with a leading port automation customers like Lhasa cone cranes, and SME, which use our Cmos digital lidar on large crane equipment for anti collusion systems are the decrease loading times. If you take the world's 835, most active seaports and conservatively assume an average of 10 gantry cranes per port.
And fix sensors for Crane, there is an opportunity to supply over 50000 sensors in the single use case. This type of industrial equipment can cost millions of dollars in digital lighter sensors allow a more significant return on investment given the increased speed and reduce accidents after incorporating new systems.
These are just a few examples of the value proposition and the market potential for digital Lidar within industrial and <unk> is also as an opportunity to unlock even more market share through additional certifications like Phil too, which would allow us to displace dedicated safety sensors on many of these systems.
The core Submarkets driving the robotics vertical our last mile delivery defense Treaty mapping and University research. While some of these applications are in pilot phase now others are beginning to move for large scale deployments.
Our customer serve robotics and other customers focused on last mile delivery are great. Examples of large scale opportunities for robot robotics last mile delivery is the most expensive part of the supply chain, often representing more than 50% of the overall cost the cash.
Cost per last mile delivery today is the $1.60 via human drivers, but could drop to just 6 central mile as autonomous delivery robots proliferate.
As expected to be a quarter billion dollars market by 2027, with a 34% CAGR and these delivery robots require small form factor high reliability and high resolution Lidar with an average of 1 to 2 centers for robot.
<unk> robotics is already completed tens of thousands of contactless deliveries in major U S cities with plans to scale to robotic fleet significantly over the next few years industry forecasts show. This market reached 200000 units by 2035.
And smart infrastructure, the core Submarkets driving this vertical our intelligent transportation systems security and Smart places.
Our Cmos digital ladder has already deployed on intersections local streets and highways around the world new customers like pair effects are deploying us for sensors across French roads for speed enforcement and analytics.
We were also recently co 1 the ITT Smart cities North America Award for Transportation infrastructure in Chattanooga, Tennessee. The project uses lidar to improve pedestrian safety in a way that was previously not possible using camera and radar about.
The latest data shows that there are over 1 million signalized intersections in the United States and a top 2 legacy camera based providers have installed from 600000 units.
Intersections to day tend to use at least for traffic cameras at each intersection or Cmos digital Lidar can reduce this number to 2 sensors for a lower cost for camera system. In addition to providing better accuracy and durability for.
For Gartner there'll be at least 85 million security surveillance systems installed in the U S. By the end of this year and nearly $1 billion globally. As we've said before we believe that everywhere. There is a camera on CCTV system. Today, there is an opportunity to augment or replace that system with a higher performing digital lidar sensor, which can better price.
<unk> tried to seize on cameras.
This past quarter, we announced that <unk> achieved by America and by American certifications for sensors manufactured in our San Francisco facility. This is a major milestone given that many U S state and local transportation projects depend on federal funding, which require by American certified products when available these certifications.
Further differentiate our products from other Lauder companies and demonstrate our ability to scale with our federally funded customers.
All of our verticals in each of their submarkets represent significant market opportunities for digital light on over the next few years, when and just a fraction of these production deals could equate to a major automotive win each of these opportunities coupled with our product market fit and exciting product roadmap for why we believe so strongly in our <unk>.
The market approach and with that I'd like to turn it over to Anna to walk you through our financial performance for this quarter.
Thank you Angus before I begin I want to reiterate the 3 takeaways that separate ouster from the rest of the light our industry, our differentiated technology, our diversified business and our proven ability to execute.
These are the reasons I'm, such a big believer in ouster and why I'm excited to report that Alastair ended the second quarter with a record $7.4 million in revenue.
This is our highest revenue quarter to date up 11% from last quarter and up 72% over the second quarter of 2020.
We also delivered positive gross margins of 26% up from 9% in the second quarter of <unk>.
The prior year.
We shipped over 1460 sensors in the second quarter, a 49% increase over Q1, and a 342% increase over the second quarter of the prior year.
This means we have already shipped more sensors in the first half of 2021, then we shipped all of last year.
Clearly demonstrates our ability to scale production with our contract manufacturing partner benchmark.
To deliver on our projection to more than triple sensor production this year.
Demand for ouster Cmos digital Lidar has continued to grow as we have now sold sensors to approximately 600 customers over the last 12 months.
And while we grow this pipeline, we continue to both add and convert preproduction and production level customers to our strategic customer agreements are.
To date ouster assigned 53, SBA, representing over $422 million in contracted revenue opportunity up from 40, SDA and $385 million at the time of our last earnings call.
Mark for ouster and the customer.
Binding customer forecast.
Contracted revenue opportunity represents the sum of both binding and non binding purchase commitment.
For customers that provide less than 5 year forecast no additional revenue opportunity beyond the term of the customers' forecast has been imputed.
We are excited about our customer traction as we continue to sign additional SBA fees SBA.
If you can provide us with long term forecast visibility manufacturing predictability and enable us to move down the cost curve and drive customer stickiness.
That being said we are at the very beginning of the lighter adoption curve and some customers are still learning the ramp rate, which can impact the timing of purchase orders quarter to quarter.
As we grow our business, we expect to improve predictability into our customers' needs and timelines and expect the timing of orders will have a less notable impact on our quarterly results.
We are proud of our positive gross margins and belief that Cmos digital lidar is the lowest cost platform.
Sba's include multiyear negotiated pricing, we expect to continue to experience some temporary downward pressure on margins from signing anticipated large multiyear deals in the near term. However.
However over time as sales volumes over the term of the SBA has increased we anticipate that our cost of goods sold will continue to decline faster than our average selling prices, allowing us to meet our targeted margin.
Turning to our forward looking opportunity, we expect the total addressable market or Tam for lidar across our for target vertical to reach $8.6 billion by 2025, and nearly $48 billion by 2030, we're.
We're already seeing this can take shape through our existing customers growth.
In automotive for example, it was reported that 1 of our marquee customers plus 1 on contract with Amazon to supply autonomous driving systems for 1000 trucks in its delivery fleet in this quarter alone. We brought on new customers like pair effects blue light robotics, and volume and smart infrastructure.
<unk> robotics and industrial respectively.
We believe these customer wins not only demonstrate that we have the ability to build our customer pipeline in each vertical but we are also capable of penetrating diverse submarkets and it is our belief that each sub market represents a significant revenue opportunity for ouster.
Our multimarket approach allows us to take advantage of near term opportunities across each of our for vertical which we believe sets us up to achieve a stable long term commercial run rate ahead of other Lidar company. It is our belief that capturing approximately 20% of the total addressable market for digital Lidar by 2025 would generate.
Close to $2 billion in revenue.
And remember, we see very little competition for 3 D lidar outside of the automotive vertical.
Not only does our Cmos digital lidar technology unlock on larger multi market Tam for lidar.
It has also allowed us to outsource manufacturing lower costs and quickly achieved positive growth margin.
And while other line our company they are still working to manufacture at scale and reduce costs to make their product viable for the market ouster has an operational business is ramping volume and reducing cost of goods sold.
Oster is already a low cost leader within the line our industry due to our excellent AD technology approach and we have continued to drive a steady reduction in cost of goods sold in line with our expectations.
Prior year quarter through reductions in our bill of materials across FPGA, Nixle ethics, and micro optics, and addition to yield improvements and reductions in our value added manufacturing scrap and overhead costs.
Importantly, during the same period, our Cogs have declined faster than our ASP.
And while on the near term, we may experience an impact on our gross margin for the reasons I mentioned earlier, we anticipate that as we sign more SBA and the customers already under FCA mature and ramp purchase volume or cost of goods sales will continue to decrease and we will continue to meet our targeted margin.
In spite of recent supply chain pressures due to the current macro environment, including increased lead times from suppliers related to the global material shortage on us.
<unk> maintained positive gross margins in the second quarter at 26%.
In fact, our margins would have been higher had we not experienced some unfavorable purchase price variance and situational expedite fees in order to meet production and delivery timeline.
We expect the global net material shortages to continue through the rest of the year, which could continue to put pressure on our margin.
However, we are actively taking steps to mitigate the impact of this material shortage on our business.
We closed the second quarter with approximately $240 million in cash during our public day do we announced a targeted capital allocation plan focused on 3 areas building out our sales and marketing teams strengthening investments in software development and accelerating our hardware roadmap to expand our <unk> product.
Australia investing to build a best in class and industry, leading commercial organizations.
For any of our revenue was driven by inbound.
So on developing a mature sales organic.
Station geared towards ramping our sales pipeline through targeted outbound in.
To this end we have grown our commercial team from under 30 employees at the end of 2022, approximately 60 employees year to date across the Americas, EMEA and Asia Pacific markets.
Specifically, we have brought on experienced leaders for.
Sales operations and cash.
So for success.
As a result of these investments our customer base increased by around 100.
During the second quarter with our overall customer account increasing from approximately 500 to around 600. This.
This is all in line with our commitment asset opportunity, we have in front of us.
Uh huh.
Additionally.
We are expanding our internal development team to build a rich software for ecosystem, including taking our first steps to bring online a branch in Canada that will focus on that.
The launch of our software developer kit and the second quarter was a critical first step in that direction.
We are also partnering with leading solutions providers for each of our vertical to access new markets and accelerate customer adoption.
We plan to continue to invest here and look forward to sharing more overtime.
Lastly, we're also investing significantly in our hardware roadmap Angus highlighted some of our second quarter product development, including our firmware update on progress on our <unk> share, which we believe will be a game changer for all of our vertical.
We are fully committed to our multifaceted automotive product roadmap for both standing and true solid state sensors and have even more on development, which we are excited to share when the time is right.
As we announced in March we intended to use the initial proceeds of our public offering on these initiatives and as a result, we increased opex to deliver on these initiatives such that our adjusted EBITDA loss increased from approximately $10 million in the first quarter of 2021 to approximately $14 million in the second quarter of 2021.
In closing I'm incredibly optimistic about our growing commercial organization as well as our forward looking hardware and software solution, which we expect will bring new levels of autonomy to thousands of applications over the next few years.
As such we are pleased to reiterate our full year 2021 guidance of 33% to $35 million in revenue and 25% to 27% gross margin.
And with that I'd like to turn the call back to <unk> for some closing remarks.
Thank you Ana ouster is here to build a safer and more efficient world by delivering best in class Lidar and software solutions that will transform industries and improve quality of life.
Our digital platform is why we have a highly diversified business compared with other lidar companies, while others are betting on just a single application or vertical our structure is executing on our multi market strategy, which allows us to drive real revenue today, while we continue to enhance our products build solutions and achieve certification by continue.
Moving to execute on our strategy, we expect to capitalize on on our first mover advantage and lead in each of our for verticals for a long time.
We now look forward to answering your questions.
Thank you and we will now begin the question and answer session to ask a question you May Press Star then 1 on your phone.
We are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then 2.
When called upon him please limit yourself to 2 questions.
Our first question comes from the line of Blayne Curtis.
From Barclays. Please go ahead.
Thanks for taking my question.
Maybe first I guess, you made a point for us.
Highlight auto and your traction with plus.
You even talked about leadership on that in that category.
I wanted to ask you when you look at the performance that Youre, just a lidar solution.
Particularly the solution flow confusing I think in on.
Auto defense.
And looking at.
Metrics like 10% repo activity and getting over 200 meters as important or at least that's the beauty pageant is going on with a lot of companies pursuing auto just kind of curious to hear your.
Your view you obviously got to win in autonomous trucking, that's kind of how your solution fits in and when you talk about leadership and maybe if you could talk about your roadmap to getting your performance maybe.
For those specs.
On the auto market seems to be circling in on.
Yes sure so.
Keep in mind auto.
Needs all types of Lidar and short range Lidar long range Lidar midfield lidar.
Net and core to our product strategy is offering every single type of lidar that a an automaker could conceivably geek.
And 1 thing that we've highlighted in this earnings call is just to talk for.
The fact that we are investing in automotive certification not only of that multi product suite of true solid state Lidar sensors, but also from the beginning we've been auto certifying all of our scanning systems as well so.
Our our goal is to provide the complete suite of scanning and solid state sensors short medium and long range wide field of view and narrow field of view sensor.
It's for different different types of systems.
Some automakers are working on parking.
Systems. Some automakers are working on highway autopilot systems and.
1 sensor is not good.
It cannot be used for both.
Just the reality and and of course, we're doing this all with digital technology is the underpinning.
We are offering customers is.
The ability to come where 1 stop shop.
Yes.
And on.
Understand that there may be.
Our roadmap to achieve the exact spec that they need literally no automaker ever comes to us on size.
Right and so and.
For our competitors automakers need a somewhat.
Customized solution.
And so we have our standard product roadmap and then we're able to customize that somewhat to each automakers requirement and so but they understand the business roadmap.
And we can achieve all of their requirements, whether its long range or short range scanning or solid state and it depends on the automaker what they need and we can be that 1 stop shop, and so our customer rates like like plus.
Has started with wide field of view Lidar sensors, and they were able to provide under NDA 1 of the things that we're doing through our SCA is net.
Our confidential relationships is providing much more insight into our longer term or the medium term roadmap for our expanded product suite and no debt.
This is something we're not releasing the exact specs of all of our solid state and scanning products 123 years out but the reality is the bay completely encompass every possible spec that is required by an automaker for any conceivable application they're using.
They need it for beta 1 stop shop on the only Lidar company that an automaker ever needs to work with and for that.
That's what we're providing we think thats unique in the industry.
Really we don't see any other company.
Company, that's providing such a broad.
On swap swath of products into the market.
And then maybe just 1 for <unk> on the Opex line.
Roadmap and software et cetera, if any thoughts on opex for the year that'd be helpful.
Yeah, I mean I think.
We at the beginning of the year, we gave some guidance on what.
We thought our hiring would be when we kind of came out and said that we plan to use the proceeds for those 3 areas that I just addressed in my prior remarks, and so we really haven't changed from that and we're right on track to where we said we would be so I think looking into the back half of the year. We we.
And kind of intending to continue to hire at a similar rate.
Thanks.
It is now open.
Hi.
Great. Thanks, good afternoon, everyone.
Maybe just 2.
2 quick ones first on the gross margin on the other kind of supply chain inefficiencies.
Do you see costs in Q2 was hoping you could you could perhaps quantify what those were and then maybe the second half of the year. It looks like you're guiding for revenue to grow sequentially gross margin about flat I think you alluded to some of the factors there maybe could you provide a little bit more on the assumptions around asps and particularly on the second half of the year.
Yeah, I mean, I think to address your first question on margin Gino first of all I just I can't let a margin question go by without reiterate.
How proud I am debt as far as dine on where the only.
Light our company out there with positive gross margins on our hardware and we're very proud of that and so we manage to keep those flat this year I'm, sorry, this quarter versus the prior quarter.
And and that was in spite of the pressure that we mentioned, which would have added to margin had we not.
And for the global semiconductor shortage or had to expedite some shipping fees and things of that nature and so obviously, we expect that.
To mitigate them and ensure that arent.
Customers receive product timeline.
Got it thank you.
Go ahead.
On the second half of the year.
Please.
Uh huh.
Well as you know we reiterated our margin guidance. So that's what we're aiming towards and then on the Asps I think what's really important.
Turning to keep reiterating here is that our cost of goods sold are declining faster than our asps.
We think of Asp's and really these SBA debt, we're signing add on.
Our business initiatives that we have to get a lot of predictability and to both on revenues and costs over time and so.
When I think about.
SCA as an ASP and Cogs, we know that as we are able to grow our volumes that our Cogs will continue to decline at a very steady rate as we improve our purchasing power and just have more units over which to spread our fixed costs and so that's very predictable.
For instance, we're already working with benchmark, we know when it comes to manufacture our products at scale.
<unk> to better understand their longer term needs and gather for kraft from them such that we are driving negotiated pricing that insurers or that we believe allows us to predict both our comps and our revenue and ensure that our revenue.
Our asps are not declining faster than our Cogs and so as an example, if you look at our ASP.
In Q2 of this year versus Q2 of the prior year day <expletive>.
<unk> declined by about 40%, but our comps declined.
Average Cogs per unit over the same period declined about 68%.
And so we.
We expect that there may be some variability in that we have in the 600 customers that we mentioned we have many customers who are progressing through the funnel and getting closer to signing SBA and as we.
Already and are quite confident that we will meet our mid and long term margin goals.
Helpful. Thanks for all that detail and then just sticking on <unk>.
1 question on the FCA.
I think if you kind of alluded to a little bit your prepared remarks, but on the growth that you saw versus last.
Last quarter, maybe talk about what particular end markets drove that incremental growth and then I was hoping you can also comment on just what you're generally seeing in terms of demand from existing.
And customers as well as sort of new customers.
Yeah, I mean, I think across end markets. We continued design SBA is across all of our for vertical I'm, just kind of a split between existing customers as well as sort of new customers coming in.
Well, obviously, we're getting barrels really because you can tell by the rate that we're signing SBA and how we added 100, new customers approximately in the second quarter, you can get kind of an idea that there is it's coming from both.
Perfect. That's all very helpful. Thank you.
Our next question comes from the line of Tristan Gara Baird. Please go ahead.
Yes, Hi, this is Tyler bomba on for interest and thanks for taking my questions on you.
You mentioned on your style, let's say on later will be introduced in the fourth quarter of 'twenty for.
Because of the Mark for timing reasons, and then could you elaborate on the choice for price.
Perfect rotation on lighters.
<unk> made thus far versus solid state in terms of end market applications.
Sure so the.
Sure.
We've said that we'll release.
The prototypes and solid state sensors in Q2, 2003 Q4 of 2022.
And the reason for that is simply just the <unk>.
On cycles for introducing new products.
No specific delay there's no new technology that has to be created because it's the same fundamental bichsel spot architecture for digital out of architecture powers all of our products.
And if you were to pull apart 1 of our scanning systems you would see a true solid state digital Lidar module that looks very very similar almost identical to the fully solid state devices that were developing for debt prototypes ready by the end of next year.
So it's just it's just the inertia and designing new products, but and then the systems.
It's really just it's more strategic 1 and.
This goes back to the realization that there is an immense market today for a wide field of view scanning systems and thats essentially the entire market for lidar today is for either.
The sensors debt scanning sensors, the analog sensors from companies like bolt on or industrial ladder sensors, which are also mostly still scanning systems.
Net produced by by industrial water companies for the last 20 to 30 years and so businesses.
It's immense established market that we don't need to reeducate, we just need to out compete and we can do that very effectively both on affordability and performance with scanning dishwater sensors. So we want to go out and provide those sensors and we were able to do that continuously developing.
True solid state sensors.
And to be Frank it doesn't matter to ouster, particularly.
Which customers decide that they want true salted countries, which were scanning sensors were solely on automotive and other specifications so that customers from any vertical construction.
From an shoes from the entire product portfolio.
So it's yes.
So hopefully that answered your question yes.
Great Thanks, and as a follow up how should we look at the unit ramp for rotation on liners versus ASP declines maybe 1 of the 2 of them in our stock.
Okay.
Well I mean, I guess I can jump in and start in maybe English.
Our units are ramping steadily.
So Q2 of last year, we sold.
330 units and then Q2 of this year, we sold $14.62, so our units are definitely ramping.
And as I mentioned on on the last question I asked our cost of goods sold their declining much faster than our asp's. So it's always been our goal to see our asps declined to really widen adoption by customers over time.
And to do that while meeting our margin goals as we grow the business and so we've taken a very kind of thoughtful approach to how we price our product on our products as we are ramping volume and we'll continue to do that into the future.
Great. Thank you so much.
Our next question comes from the line of Richard Shannon.
Craig Hallum capital.
Please go ahead.
Thanks.
15 during the quarter range.
We know the average on those.
2 to 3 million roughly where we had average.
Because there was a fair amount more I suspect there was 1 or 2 large deals on that number you quoted for this last quarter.
<unk> can you give us some perspective on how should we see size of deals and maybe if you on a couch. It in terms of end markets, but maybe an interest in perspective.
Yes, and so the entire goal of <unk> is to provide credible visibility into our long term pipeline with customers that is the status.
That's kind of our stated goal with SaaS and so if anything we want to be under.
Estimating or are under communicating the size of the opportunity for their customers.
And also we want to run a diversified business are highly diversified with hundreds of thousands of customers and hopefully hundreds and hundreds of customers under FCA in the relatively near term for next couple of years and so on.
Im kind of Im extremely pleased that we're seeing if we have several hundred SBA customers that are each 5 million dollar opportunities. That's a fantastic kind of foundation for the business.
While we also.
We'll be winning when a certain customers that have much larger.
10, $10 million to $100 million opportunities and so I think thats the right way to build the business.
Some are $5 million opportunities and that's just great.
And I'm really happy about it.
But we also will have some that have much larger opportunities and what I'm looking for in those deals with larger opportunities Im always looking to make sure that the customer has a reputable and customer.
Supporting those larger volume right. We don't we don't want to because we reported on that.
Support for the Street, and we do not.
I don't want to be a lot of volatility on <unk> numbers. So.
And for that reason, we're really making sure that for larger opportunities here have reputable kind of end customer.
Customers associated with them wherever possible.
And I can add to that.
A little bit of additional perspective of highlights.
I think about it if you don't mind Richard Richard.
I think you said Michael is design quite a few SBA over the near term I would like to sign.
1 or 2 billion and and and in that way because the SBA.
Any of them cover on a 3 year time period from cover on 5 year time period, you start to get to a very predictable business for considerably less than a year $22 million, Mark where nearly 25% there and I think that will just can.
Add new customers into the funnel convert them through the pipeline and build that very predictable business.
We're ramping that SBA agreement.
Great.
And just my second question is.
Looking at your market share outside of.
So put an implant on the positive and negatives on the flows of the markets, where you're seeing the most.
Increasing pension have you seen any of that would slow down just any broader perspective would be great.
If you look at the I mean going back a day.
The FDA signed for unit shifts are up on.
On the revenue was up.
We're going to continue to signing and announcing customers.
This is <unk>.
What I see is the momentum in our non auto markets.
For the question asked.
And and I'm incredibly pleased I mean, I think it is.
Just it's such a different industry to be working on windows on the market debt.
It's been established.
That.
That.
That is a customer base is incredibly receptive to lidar technology technology, and what they want to hear it.
For them a product.
For bolt on.
And as a drop in replacement to what they currently are our purchasing and that.
Large swaths of the of the industrial market on the smart infrastructure market on the robotics market that is all true today and so we just feel we have fantastic product market fit.
And all of those verticals and and it's certainly paying off in kind of.
Results.
Perfect. That's all from me thank you.
Our last question comes from the line of Joseph Osha.
Guggenheim.
Please go ahead.
Hey wanted to first question.
Okay.
Our topic.
It's like Big Gantry cranes are.
Okay.
Materials growth.
For a complete suite of products.
Okay.
Are those markets likely to end up having.
Rotating scanners or do you think you need a lower a lower price point to really true.
You kind of take those opportunities and then I have 1 other question.
I think a lot of those will continue to be scanning systems for the next decade or more.
Yeah, because you can.
Debt you can get the price points are coming down what are achieved EBITDA.
$400000.
The robot.
Spinning water to narrow that market can you amplify your thinking here on the industrial Lidar market the Isps.
So on already.
Quite high.
Momentum different price points than consumer a consumer automotive.
The second is that the platforms that they are going on are much commonly multimillion dollar platforms like gantry cranes for.
For or warehousing robots or something like that and then are having.
Heavy construction mining vehicles.
And then the cash.
Customers understand the ROI much better.
The can model the ROI for the investment in capital equipment, much better than net consumer can and.
And so for and then there are safety certifications that.
Make it hard for incumbent to come in and for this to be a commodity industry.
Excuse me for the patient so.
And for Us.
All of those reasons.
Price points are already well are you able to hit competitive price points.
Scanning system subset the precedent in the last 20 to 30 years. So.
I think that ouster will be able to shift the industry towards true solid state with our products long term.
But it's going to tick up.
There's a lot of inertia in the industry, which is a good thing for US now that we're on major entrance and and for that reason alone It will take better part for decades for.
Are there to be any significant share from the scanning systems.
Both interest me it makes sense.
Secondly, just 2.
For more technology running on question, obviously, you've gotten a great deal done with.
Integrating the statin.
Other attributes for the product with Cmos on I'm, just wondering as you look forward.
What other potential awards or I mean could you ever.
Our meters and sensors on the same.
Growth from our roadmap here.
Yes, there is so much potential and the digital roadmap and in the <unk> chip is incredibly exciting. It really is the biggest jump in product performance will have ever seen and we've already delivered on the huge jumps in product performance to date, but this is this is as though everyone in the analog.
World is playing with the cards the.
Handle cards that they were dealt at the start of the game and Alastair is being handed Trump cards every round.
In the form of new chipsets, new semiconductor improvements that our partners are and so it's just the paradigm shift.
And the capacity we have.
And for the <unk> chip.
We got to be all for the <unk>, 6 and Thats, just keeps going and and it is youre right. Its not just on the silicon side, it's on the digital side as well for laser side and Theres immense investment there and we'll be in hand, and new technology.
Deep partnerships with our supplier base for that side of the credit equation as well. So this is very much the beginning for this technology and despite all that we're already in this market leading position across most most relevant metrics and so.
Yes, I'm incredibly excited for the future and there's just huge opportunity to push the technology forward.
Okay. Thank you very much.
And this does conclude our question and answer session I would like to turn the conference back over to Mr. Angus Mccullough for any closing remarks.
Well, great I just wanted to.
Have a great day.
Ladies and gentlemen.
Conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Okay.
[music].
Yes.
Yes.
Sure.
Sure.
Thanks.
Yes.
Right.