Q1 2022 Ouster Inc Earnings Call
Each of rich and affordable for everyone.
With no moving parts outsource the F series is the first solid state digital Flash later on the market.
By absorbing the system complexity into the Kronos Chip Astor suite, a short medium and long range DF sensors offers automakers, greater affordability and flexibility and vehicle design and coverage.
Our automotive can offer a total of up to five DF sensors for roughly $1000, a lower price and smaller overall size than the single forward looking analog ladders offered by some of our competitors.
This price and form factor advantage extend to single sensor rfps as well.
By being small and affordable a suite of these sensors can be integrated around the vehicle just like digital cameras to provide 360 degree awareness and a rich set of safe autonomy features short medium and long range Lidar is looking to the front side and behind the vehicle provides the critical data necessary for <unk>.
Automated lane changes confidence maneuvering through four way intersection reliable high speed mergers and so much more.
Vehicle powered by a single forward looking lidar cannot even navigate four way intersection without driver oversight.
Put simply multicenter digital Lidar suites are the bridge from driver assistance to safe affordable autonomy.
Turning away from automotive and smart infrastructure. Our team was excited to announce the launch of the ouster accurate vision security solution this past quarter.
Alastair accurate vision is a joint security solution that combines our <unk> digital lidar with industry, leading security software from tactical we're actually gone company to target the multibillion dollar security market.
Nearly every high value piece of infrastructure has a security system in place from industrial sites and high value warehouses to airports military and defense buildings and data centers.
This market is dominated by CCTV cameras, and thermal cameras, but possibly record at the events unfolding around them.
<unk> Lidar based systems, our paradigm shift because they can generate a active alerts and real time, while providing all of the path of recording capability of legacy technology.
We see a massive opportunity to disrupt this market with our ouster accurate vision digital light our security solution.
Turning to other product updates we remain on track to release. The <unk> later, this year, which will succeed the <unk> chip empowering all of our <unk> sensors.
<unk> is the culmination of years of R&D inside Alastair and keeps us on the exponential performance path of Moore's law.
The improvement provided by this fully custom and proprietary chip design Leverages technology advancements that revolutionized the camera sensor industry and brings them to the high performance latter industry for the very first time.
Simply can't wait to unveil it to our customers as planned later this year.
Another benefit of our digital road map is our ability to ship continuous over the air software updates to all of our customers, which introduced features that expand our ability to win additional opportunities across our Tam.
Since the introduction of our first sensor we have at least five firmware updates.
<unk> firmware introduces new features to make our sensors more adaptive for remote applications, including data flexibility for faster more efficient edge computing.
We expect these updates to also benefit industrial customers were accustomed processing limited data from legacy TV Lidar sensors, but are eager to adopt high resolution three the latter to improve safety and performance capabilities. We continue to invest in building out our best in class software development experience.
Serves as the foundation of our entire software ecosystem. We recently released an updated version of our software development kit or SDK for Lidar and continue to see tremendous customer adoption with hundreds of download each month.
Again. This is an important tool that accelerates our customers' time to autonomy, enabling them to test and validate our centers faster and bring their applications to market sooner.
This year, we expect to release more products spanning hardware and software than ever before advancements with our DS series for automotive <unk> chip software ecosystem and industry certifications are expected to be major catalysts for digital wider adoption across our four targeted industries and directly contribute to.
Our growth this year and beyond.
Now I'd like to turn the call over to our CFO on April now to provide a full update on our Q1 2022 financial results and business outlook.
Thank you Angus.
We made substantial gains over the course of 2021, nearly doubling our revenue over the previous year.
We continued our momentum in the first quarter of 2022 regarding our second highest quarterly revenue of $8 6 million up 29% over the first quarter of 2021 and aim to double our revenue again in 2022.
We shipped 1550 centers.
<unk> increase over the first quarter of 2021 and produced a record 1368 centers, demonstrating our ability to scale to meet market demand.
As discussed during our earnings call for the fourth quarter of 2021, we expected some revenue variability in the first quarter and remain confident in our commercial pipeline for the year and our ability to continue to win deals and head to head competition across each of our core vertical.
We delivered gross margins of 30% up from the 26% gross margin recorded in the first quarter of 2021 and in line with the 30% gross margin recorded in the fourth quarter of 2021.
Our proven manufacturing and operations team continued to secure our first material and scaled production of our own sensor despite headwinds from continued supply chain challenges.
Over the course of the first quarter, our average cost per unit was up slightly from the fourth quarter of 2021, primarily due to lower absorption of overhead cost per unit.
However, similar to the trend shown throughout 2020, one we expect our average cost per unit.
We will continue to decline faster than our average selling price.
As our sales volumes continue to increase.
We believe <unk> has the highest hardware gross margin profile of our public Lidar peer group valid.
<unk>, our leading cost structure associated with our Cmos digital light architecture, which enables high scalability in both performance and cost.
Over the last quarter, we converted additional pre production and production level customers to a strategic customer agreement for SBA.
They also have signed 72, SBA, representing over $550 million and contacted revenue opportunity through 2026.
While we remain excited about large customer deals in our pipeline timelines and uncertainties exist.
Customers are still learning their ramp rate, which can impact the timing of purchase orders quarter to quarter.
We continue to improve predictability into our customers' Nathan timelines as new ground.
The timing of orders, we will have a smaller impact on our quarterly results as we scale.
We believe our diverse group of SBA exemplifies the success and the importance of our multimarket approach and.
<unk> is not dependent on a single or small handful of customers or even one market vertical with revenues expected to ramp in 2025 and 2020 debt.
But rather on both auto and non auto opportunity that offer revenues and attractive margins in both the near and long term.
Our capital allocation plan continues to focus on three key areas.
To accelerate our product roadmap to expand our software offering and to build out our global sales and marketing team.
These initiatives will support our aim to at least double revenue growth this year.
Increased our market share across our four market verticals and continue to extend our technical advantage over our peers.
We continue to ramp our commercial engine and sales pipeline over the first quarter and subsequently shipped new software update with the release of a new firmware and software development kit.
And made headway towards the future really of our own vertical software solution.
We also shipped our first digital flash heres a sample.
Achieving a major milestone within our strategic development agreement.
With our global auto OEM partner as we advance towards automotive readiness for series production starting in 2025.
We were able to make these strategic investments, while maintaining a cash balance of approximately $163 million at the end of the first quarter.
Following the close of the first quarter and as described in our 8-K, Alastair further strengthened its financial position with a $50 million term loan with no dilution to equity holders, including immediate access to $40 million in cash and a potential additional $10 million in 2023.
Subject to satisfying certain conditions.
With this that we are putting in place corporate finance best practices to ensure access to capital as needed.
In the first quarter, we added 90, new customers and expanded sales to existing customers in line with the three major market trends playing out across our target industry.
The shift to electrification advanced safety and autonomy in automotive.
The automation of our global supply chain and industrial.
And the widespread investment in privacy safety and efficiency of our day to day lives and smart infrastructure.
While we continue to execute on our product roadmap and advanced negotiations for automotive series production program starting in 2025, we.
We have a rich automotive business today across the robo tracking robo taxis shuttles and buses.
In 2021, Michelle 34% of our sensors within the automotive vertical which represents a $1 9 billion total addressable market by 2025.
In the first quarter, we should sizable orders to multiple tracking customers, both upfront and Oems in the U S and Europe as well as the autonomous shuttles and robo taxi customers in the U S and Asia.
Within automotive our story is emerging as a leader in robo tracking with customers like plus AI and TORC robotics and other large trucking Oems and we expect this sub market to continue to be a primary driver of growth through 2022.
There are approximately $12 million freight trucks in the world of which approximately 10% need to be replaced annually.
Customers are already deploying protection fleets today and are using Alastair lidar to bring LTE plus autonomy features to freight delivery trucks on our highways saving fuel and other costs for end customers.
Within industrial and robotics, we are benefiting from macroeconomic trend as companies take steps to automate their supply chain to increase productivity and solve for a lack of skilled labor in the market.
We saw significant demand from the material handling market in the first quarter of 2022, especially for warehouse automation, where we signed new SBA customers and booked large spot buy.
We also continued to expand our commercial traction and off highway vehicles for mining and agricultural applications as well as collision avoidance systems for railcars.
And finally, we saw a significant uptick in the adoption of Lidar for more Greenfield robotics application across the supply chain, such as drone and rail based inspection system and volumetric monitor installations for raw materials.
Based on our current pipeline, we expect to warehouse automation and logistics automation and raw material processing applications for mining and agriculture to be the major growth drivers in 2022 within the industrial and robotics vertical.
We continue to gain market share in the existing $1 billion market for legacy industrial sensors as we further display high comp to the laser safety scanners and other legacy sensor, making this one of the largest near term and fastest growing opportunities for digital lidar.
The warehouse automation market is just in its infancy and already generating millions in revenue for our business.
The market opportunity is estimated at over $15 billion today.
Less than 20% of warehouses currently have any form of automation.
According to a recent report the market for mobile robot is estimated to grow 10 times by 2030, driven by the sale of automated mobile robot, which tripled from 2018 to 2020.
I'll start with already working with customers, including large industrial Oems looking to automate their own fleet and.
A large global company looking to invest millions into automating its warehousing operation.
As well as a number of leading warehouse automation company, including best net robotics third wave automation ATI motors and Valeant.
These customers as well as our pipeline of future opportunities position us well to scale in line with market demand turning to smart infrastructure.
Last year, we won 110 projects, which represented nearly 3000 sensors for initial deployments that have the potential to expand to one hundreds of thousands of sensors.
We continued to gain traction in the first quarter of 2022 through new deployment and project expansion in airports highways Street and more across Europe , the Middle East Asia and North American these.
These include critical infrastructure security traffic monitoring connected vehicles as well as speed enforcement application.
We expect the continued expansion of intelligent transportation projects. In addition to crowd analytic application to be the primary growth drivers in the smart infrastructure vertical in 2022.
We also see a massive opportunity to disrupt the multibillion dollar security market with our new joint security solution ouster accurate vision.
Where incumbent technology benefit from the relatively high AFP and faster sales cycle.
We expect the lighter industry to evolve in similar ways as the digital camera industry.
According to a recent report by Youll the market for digital cameras for security is the largest non consumer digital camera market in the world estimated at 32 billion in 2021.
Our growth over the first quarter across each of our critical especially a handful of fast developing submarkets, such as robo trucking warehouse automation and intelligent transportation system reinforces our ability to capture market share within the $8 6 billion total addressable market expected by 2000.
25.
Our differentiated technology backed by a leading cost structure and our multimarket approach positions <unk> to take advantage of both near and long term revenue opportunity and continue to gain market share.
The fundamentals of our business remain unchanged our bottom up analysis based on sales pipeline bookings and commercial expansion plan, coupled with major product announcements planned for later in the year.
The commercial path to deliver on our full year 2022 guidance of 65% to $85 million in revenue and 25% to 30% gross margin.
Which we expect will follow a similar trajectory to 2021 with larger customer orders and shipments hitting in the second half of the year.
I would now like to turn the call back over to Angus.
Thanks Anna.
A central theme driving digital lidar adoption each of our verticals is a desire to improve safety and quality of life, while increasing efficiency sustainability and equity.
Applications powered by digital Lidar has the potential to do just that our technology is already creating safer conditions for minors and inner Mongolia engineers at nuclear facilities in Europe and on road sales in the United States and abroad.
Lidar can help reduce traffic congestion to minimize greenhouse gas emissions or monitor critical infrastructure like railways and power lines.
These are just a few of many examples at scale. The positive impact we can have on society is enormous and it starts at home with the actions you can take the company.
Earlier this year also announced the sustainability program predicated on the founding principle of our company to innovate and deliver technologies that lead to safer and more efficient vehicles transportation networks workplaces and infrastructure for more sustainable and prosperous communities.
We have formed an internal advisory committee to guide our sustainability program and look forward to reporting out our efforts and impact for 2022.
In closing our increased customer traction across each of our four verticals and critical product developments combined with further capital flexibility position now start to drive near and long term revenue growth. We believe <unk> is uniquely positioned to power cycle transformations and become an indispensable part of our day to day lives.
With that I'd like to open it up for Q&A.
Thank you we will now begin the question and answer session to ask a question press Star one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the key to it.
Jay Your question Press Star one again when called upon and please limit yourself to two questions. Our first question will come from the line of interest in Gara with Baird. Please go ahead.
Hi, This is Tyler on for Chris and thanks for taking the questions.
First and what the supply chain constraints, how are you seeing car Oems protective timelines for the ramp of our Lidar industry are you seeing any push outs or is <unk>.
Everything on track with you.
Our timing expectations.
And I'm, sorry, Tyler I had a little bit of trouble hearing you.
Our OEM.
Okay.
Yeah.
Yes.
Yes, I can take that.
Thanks for the question so.
I guess this is if this is a question around the broader industry.
Then I think that Theres always a subset of.
Of of companies that are going to fall behind our initial projections were not something that's just historically true. If you look at the automakers releasing any new technology.
But theres also a subset that are still moving forward and I would say the majority of the industry is still moving forward very aggressively into autonomy and lidar and so what we see from our conversations is a real effort to stick.
Two the autonomy and electrification.
Strategies.
And.
And not let any kind of budget restraint restrictions affect that.
So core to the business in the future kind of.
Competitiveness of automakers at this point.
Okay.
Yeah, Great for my follow up how should we look at your mix by end market. This year I know you talked about some of the growth drivers.
For each of your end markets, but how should we think of the mix do you expect any material changes from last year.
I think we are.
We did 34%.
<unk> of our revenue in the automotive sector last year, and I think that continues to drive a lot of our growth going forward and we saw the remainder kind of split evenly between.
The robotics and industrial verticals, where we're also still seeing more traction, but I think as I highlighted in my prepared remarks were really excited as well about the smart infrastructure vertical this year, which was about 15% last year and that's primarily around as we said the 110 contracts that we signed previous.
<unk> that are still continuing to develop and add to our projected revenue this year.
Yes, just little more color there.
Just to add a little more color there.
<unk> infrastructure, we come back to again and again, because it's really it's the the true greenfield opportunity for Lidar, the other verticals, where we're operating in and there's a lot of understanding and use of legacy lidar systems, and but that in smart infrastructure, those kind of unbounded opportunity because it's a new use case.
For Lidar and there's such a huge market existing there in digital.
Okay, Thats almost $32 billion of digital camera sold just in the security.
Not even talking about smart infrastructure traffic.
Traffic management, our crowd analytics so.
Absolutely.
We see things progressing as is that's the safe, but with roughly equal distribution across our verticals, but there is immense potential that we may tap into and smart infrastructure, probably beyond what we're talking about.
Alright, thanks for that additional color.
Our next question will come from the line of Brian Dobson with short on capital markets. Please go ahead.
Alright, thanks, so much for taking my question.
So you pointed to gross margin being up 300 basis points on stronger average sales prices and you needed to navigating the supply chain issues can you just give us a little bit more color.
What was driving that.
Pricing power in the quarter and how you expect pricing to evolve through the balance of the year.
Yes, I mean, I think we talked a bit about that we had several new customers entering our pipeline in Q1 and as a result of that that tended to lift our asps.
And I think going forward, we've said that we expect asps to fall as we are able to lower our Cogs as we ship more volume. So if you recall our cost of goods sold are primarily based on volume increases we expect to see constant margin improvement as.
We sell more and more volume and that's just based on our digital architecture.
And so we arent expecting kind of further improvements to the product line to get to the cost structure that we are anticipating it's mostly coming from these volume improvements and so over time historically and into the future. We expect that will continue to drop in Asp's in line is our Cogs drop and so that gives us a lot of kind of predictable.
And of the business.
Great. Thanks, very much and then you mentioned that customers are still learning the ramp rate and that impacts the timing of orders you're expecting more sales in the back half of the year.
Can you just walk us through the quarterly cadence as you expected.
Yes, I mean, I think we're really excited about the guidance that we've given we guided to 65% to $85 million in revenue, which is nearly a doubling of our revenue over the prior year, even at the low end of that guide about what we are anticipating over the quarters, we havent given quarterly guidance, historically, but I think that <unk>.
You can see that there have been trends in our business over the last couple of years. So we tend to.
Centered customers we've signed.
72 up to strategic customer agreements now.
<unk>, three and five year forecast from our customers and so it's really important that you understand the bottoms that projections are supported by those customers in that pipeline and so.
I think we're just expecting a similar trajectory to last year, where we're seeing many of our larger orders here.
Excellent. Thank you very much additional color.
Our next question will come from the line of Sam Peterman with Craig Hallum. Please go ahead.
Hi, guys. Thanks for taking my question I appreciate all the color in the prepared remarks.
Didn't want to ask on.
The quarter you just reported.
Robert.
Below kind of what.
We were anticipating so no.
That I know you mentioned seasonality.
If you could give any.
Where you saw weakness either in terms of end market.
Or.
With any supply constraints or anything like that just curious.
What you saw in the first quarter that led to revenues being being down a bit.
Yes.
I don't think that we saw any weakness in any area and certainly we haven't lost any kind of head to head deals.
Major deals with customers I think when we talked about our projections for 2022, when we gave our fourth quarter earnings update.
We did say that we expected some variability going into Q1.
And the mentally has changed in the business.
We're still seeing kind of we're still signing up new customers, we're still seeing them progressed through the pipe.
We get three to five year forecast from many of our customers.
I, just I don't see any fundamental change.
And in the business I think we're really excited about it.
Right.
Okay fair enough.
And then I wanted to follow up.
So obviously your sales guidance for the year.
Okay.
Asking in a different way.
Obviously the quarter over quarter increases will be required are pretty substantial we get to that midpoint.
As the guidance.
From a couple of different factors.
So I just wanted to ask if you could give any color around.
While the markets are going to drive strong.
And how much of.
Okay.
That outlook that you have is booked versus.
Your line of sight to versus you expect to be spot buys.
Any kind of color.
The level of visibility at this point would be helpful.
But we're seeing around.
In automotive for example around the globe.
The trucking industry, where we are really emerging as a leader and we're working with.
Our large customers there thank.
That gives us a lot of predictability in that sub market.
So SBA customers in bookings.
Spot buys.
So we continue to see traction and off highway vehicles for our et cetera, and then.
I think also texture side Angus have given some.
Some color earlier in response to it.
Additional new deployments and project expansion.
Airports highways streets et cetera, and we're seeing that kind of worldwide and across all of our geographies.
So I think we're we remain very excited about this year.
Thank you.
Again to ask a question simply press star one.
Please go ahead.
And congrats on the quarter.
Can you hear me okay.
Yes.
Thank you most of my my questions have been asked but maybe to follow up on the line.
Last one there in terms of revenue right so with.
$8 6 million revenue for the quarter.
To get to.
Let's call it 75 that leaves about $66 million or so.
<unk>.
Revenue for the year. So I'm just wondering should we account for the seasonality do you expect a bit of like a ramp up.
Color there would be helpful.
Yes, I can step in.
Answered a little bit.
Definitely.
So.
First and foremost we have Bob comes up revenue pipeline that is.
Supports our guidance item by item customer by customer.
Our opportunity by opportunity.
Because we have.
<unk>.
Opportunities to support it and we are winning those opportunities, but nothing fundamental has changed about the business.
We see the business growing and will reaffirm.
Business, and we've said that there's going to be a ramp that looks like last year.
In the second half of this year as well, it's just part of part of doubling revenue year over year.
That we're seeing with customers placing.
Very significant orders and receiving shipments at the end of the year.
A vertical.
Right now equal contribution from the four vertical.
And I don't see the last year with a 34%.
Of units shipped in the automotive.
Charles and robotics.
Bob.
15% of units shipped in the China infrastructure and I don't see.
A significant deviation from that maybe plus or minus 10% of shuffling between between the verticals for this year.
Just depending on which which order standpoint so.
We want to make it abundantly clear there's a reason we're reaffirming guidance. We understand there is a significant ramp that happens, but we got the data and you clearly are able to ship against that we're doing great on the manufacturing side.
Got it thanks, Angus now that's area very thorough I appreciate it maybe my quick follow up is in terms of.
It's been asked a little bit already.
Just for the quarter Youre already at the top.
Up end of your guidance and you've mentioned that you've got.
We anticipate to improve so I'm wondering is.
The 25% to 30%.
But all of a sudden maybe conservative.
So I think youre right.
Okay.
Go ahead.
Oh, sorry.
Yes, I think we said.
Three months ago that we were given.
And in our guidance.
Margin.
Case of further disruptions.
We never want to be in a position where.
So our margin guidance and shipping costs.
Alright, and maintaining our continuity of supply so.
There there may be some upside there, but what we satisfy don't really want it built into our models because we retained the right to it.
Hit the guidance.
Which means falling within that range.
If we need to keep shipping.
Okay got it thanks, again, Angus and congrats again on the quarter I'll pass it on.
Thanks.
Back over to Angus Mccullough for any closing remarks.
No. Thank you all for today.
And again, we're really happy about the <unk> started.
The growth that we're seeing in the business. Thank you all.
Ladies and gentlemen, the conference.
Presentation, you may now disconnect.
Okay.
Okay.
Okay.
Okay.
Yeah.
[noise].
Okay.