Q3 2025 Ouster Inc Earnings Call
Speaker #1: Hello and welcome to Ouster, Inc. Third Quarter 2020 Earnings Conference Call . All lines have been placed on mute to prevent any background noise after today's presentation and remarks .
Speaker #1: There will be an opportunity to ask questions if you'd like to ask a question during this time , simply press star , followed by the number one on your telephone keypad .
Speaker #1: And if you'd like to withdraw your question , press star one again . The call today is being recorded and a replay of the call will be available on the ouster investor Relations website and hour after the completion of this call .
Speaker #1: And with that , I'd now like to turn the conference over to Chen Geng Senior Vice president of strategic finance and treasurer Jen .
Speaker #1: Please go ahead .
Speaker #2: Thank you . Operator . And good afternoon , everyone . Thank you for joining our third quarter 2020 financial results call . Today .
Speaker #2: On the call , we have Chief Executive Officer Angus Pacala and Chief Financial Officer Ken . As a reminder , after the market closed today , ouster issued its financial news release , which was also furnished on form 8-K and is posted in the Investor Relations section of the Ouster website .
Speaker #2: Today's conference call will be available for webcast replay in the Investor Relations section of our website . I want to remind everyone that on this call , we will make certain forward looking statements .
Speaker #2: These include all statements about our competitive position, anticipated industry trends, our business and strategic priorities, the development and expansion of our products, and our revenue guidance for the fourth quarter of 2025.
Speaker #2: Actual results may differ materially from those contemplated by these forward looking statements . Factors that could cause actual results and trends to differ materially from those contained in or implied by these forward looking statements are set forth in the third quarter 2020 financial results release and in the quarterly and annual reports we file with the Securities and Exchange Commission .
Speaker #2: Any forward looking statements that we make on this call are based on assumptions . As of today and other than as may be required by law , Oster assumes no obligation to update any forward looking statements which speak only as of the respective dates .
Speaker #2: In today's conference call , we will discuss both GAAP and non-GAAP financial measures . A reconciliation of GAAP to non-GAAP measures discussed today is included in the financial results release that was issued today .
Speaker #2: I would now like to turn the call over to Angus . Hello , everyone , and thank you for joining us today . I'll start with .
Speaker #3: A brief recap of the quarter and review our strategic priorities . Ken will cover our financial results in more detail before I close with some final thoughts .
Speaker #3: Our third quarter results reflect the continued growth we are seeing across our business , with revenue of 39.5 million . Representing our 11th straight quarter of revenue growth .
Speaker #3: We set a new quarterly record with over 7200 sensors shipped , bringing physical AI to life across multiple applications , including yard logistics and traffic intersections .
Speaker #3: Gross margin remained strong at 42% , and we ended the third quarter with $247 million of cash and equivalents and no debt . This performance further demonstrates our ability to convert pilot programs into large volume orders as we deepen our relationships across our diverse customer base in our smart infrastructure , vertical , we expanded deployments of Aster , Gemini , and Rev7 at logistics yards around the country , helping our customers improve throughput , efficiency , and safety .
Speaker #3: We continued to progress with testing new Gemini AI algorithms at key customer sites during the quarter . With the potential to expand use cases and more than quadruple the number of sensors per logistics yard .
Speaker #3: We also won new deals to bring Oster Blue City to additional intersections across Utah to enhance traffic flow , safety and operational efficiency .
Speaker #3: In our industrial vertical . We shipped a significant number of Rev seven sensors to a leading global technology company as it continued to expand the use of autonomous mobile robots across its warehouse floors .
Speaker #3: Oster sensors are mounted on a variety of warehouse equipment , including Amrs , forklifts and tuggers , enabling our customers to detect and avoid nearby objects and helping heavy machinery to work safely and unstructured environments .
Speaker #3: We also secured a substantial order to supply Rev7 to a large European industrial equipment manufacturer, which is upgrading the sensor stack on its next-generation electric mining trucks.
Speaker #3: These trucks are part of an autonomous haulage solution that increases safety , productivity and efficiency while producing zero greenhouse gas emissions during operation .
Speaker #3: During the quarter , we delivered Rev seven sensors to support the continued expansion of Serve Robotics . Last mile delivery fleet across the United States .
Speaker #3: Last month , serve announced its 1,000th robot deployment compared to an average of 57 active daily robots in the fourth quarter of last year .
Speaker #3: And industrial sites . Tarmac's data centers , and defense facilities across the world . In September , we announced a strategic partnership with Constellis , which now offers a unified security solution enabled by Auster , Gemini and Auster digital LiDAR .
Speaker #3: expects to reach 2000 robots in service by the end of this year . Serve as a prime example of Ouster, Inc. engagement with companies that are rapidly accelerating from initial testing to commercial deployment .
Speaker #3: Turning to our 2025 Strategic priorities , we progressed across all three key focus areas one . Scaling the software attached business two transforming the product portfolio , and three executing towards profitability .
Speaker #3: Our software attached business gained traction during the quarter . Yard logistics was a key driver of demand , and we also won a deal to deploy Gemini for crowd management solutions at major tourist sites and large events in South Korea .
Speaker #3: By investing in AI perception , Auster has built a core platform to enable our customers to develop targeted , market specific applications . With Gemini .
Speaker #3: Constellis can provide real time analytics threat classification , and automated response protocols to bring physical AI to advanced security operations . Constellis operational expertise and global network positions us to rapidly advance Gemini for critical and large scale security operations in the it's market .
Speaker #3: I'm excited by the continued growth of our Auster Blue City Solution , where we won large deals in the US and Canada . We continued to expand our distribution network and signed seven new exclusive partnerships to bring Blue City to additional states , including Illinois and Missouri .
Speaker #3: We are proving the value of AI powered lidar to state and local governments across the nation , and our blue city Partnership network now covers the majority of a nationwide market of over 300,000 signalized intersections .
Speaker #3: We also brought on a transportation integrator in Europe following a successful pilot deployment in Brussels . These partnerships in conjunction with expanding our Blue City bundles to provide customers with more set up options , our key actions to support the continued growth of our software solutions .
Speaker #3: Moving to the product portfolio , we continue to make major investments in retraining our AI algorithms on an ever expanding corpus of field data .
Speaker #3: In the third quarter , these efforts delivered better detection accuracy at longer ranges and higher vehicle speeds to support use cases like tolling and highway monitoring .
Speaker #3: We also released real time localization , or TLS , in our SDK . TLS empowers our customers to understand the position of their assets with centimeter level accuracy , enabling features like geofencing , automatic speed limit enforcement , and custom go no go zones .
Speaker #3: In addition , lidar powered TLS significantly reduces the investment and infrastructure required by legacy sensors . Our team continued to progress with testing and validation of our next generation L4 and Kronos Custom silicon .
Speaker #3: These investments will unlock major performance , security and reliability improvements for our OS sensors and become the backbone of our solid state digital flash line .
Speaker #3: The innovations from this next phase of our product roadmap are expected to more than double our current addressable market , and are the most profound investment in our product roadmap to date .
Speaker #3: Finally , I am proud of our team's consistent execution towards profitability as we deliver record results in the third quarter . As we remain on track to meet our long term financial framework .
Speaker #3: I'll now turn it over to Ken to cover our financial results in more detail.
Speaker #4: Thank you . Angus , and good afternoon , everyone . I want to open my comments by noting that since joining the company in May , I have witnessed firsthand the incredible dedication and laser focus on execution towards our 2025 company goals that Angus discussed .
Speaker #4: And I'm excited about the opportunities in front of us . Now , turning to third quarter financial performance . As Angus noted , our results reflect the underlying strength in our business revenue of 39.5 million was a record representing growth of 41% year over year , and 13% sequentially .
Speaker #4: We delivered more than 7200 sensors , which also represented an all time high . As a reminder , we do expect a level of fluctuation of volumes on a quarterly basis , as is largely dependent on meeting our customer delivery and timing needs .
Speaker #4: Smart infrastructure was the largest contributor to the third quarter revenue , followed by roughly equal contributions from our robotics and industrial verticals . GAAP gross margin of 42% increased by four points compared with the third quarter last year , and reflects the benefits of steadily increasing revenues and product mix , offset by continuing tariff headwinds .
Speaker #4: While our gross margin performance has been strong , this year . We maintain that 35 to 40% is an appropriate long term annual gross margin target for the business .
Speaker #4: Next , GAAP operating expenses were 41 million in the third quarter , up 7% over the prior year . The increase was primarily driven by investments in R&D to support the new product development cycle .
Speaker #4: As I mentioned last quarter , we remain focused on managing our operating expenses , but anticipate there will be variability on a quarterly basis , largely due to the timing of investments in our innovation and go to market expansion .
Speaker #4: Adjusted EBITDA was a loss of approximately $10 million, flat year over year, and a decline of $4 million sequentially. The sequential decline is primarily due to a favorable employment tax refund.
Speaker #4: We received in the prior quarter . We are pleased with our ability to drive growth and have the operational capacity to meet our customers needs , creating strategic and operational flexibility for the company to innovate and grow as we continue to execute towards profitability , remains a top priority .
Speaker #4: Our balance sheet is one of the strongest in the industry , which is important for our customers as they depend only on the long term support of our products , but also our long term financial security as a key supplier .
Speaker #4: We ended the quarter in a stronger position with cash . Cash equivalents and restricted cash and short term investments of $247 million . This includes approximately $35 million of net proceeds from our ATM at September 30th , we had approximately 4 million of authorization remaining on our ATM .
Speaker #4: We ended the quarter in a stronger position with cash . Cash equivalents and restricted cash and short term investments of $247 million . This includes approximately $35 million of net proceeds from our ATM at September 30th , we had approximately 4 million of authorization remaining on our ATM not expect to achieve revenue between 39.5 million and 42.5 million .
Speaker #4: Thank you for your continued interest in Ulster . I'll now turn the call back to Angus for his closing remarks .
Speaker #3: Thanks , Ken . Ulster is a strong financial foundation , a robust distribution and partner network and a diverse customer base of emerging and world class companies .
Speaker #3: Ulcer is at the forefront of technology that is reshaping how the world engages with the physical environment . Our physical AI solutions are helping deliver improvements in safety and efficiency across a wide range of industries .
Speaker #3: All of this , coupled with our cutting edge product roadmap , positions us well to further accelerate the adoption of physical AI . With that , I'd like to now open up the call for Q&A .
Speaker #1: Thanks , Angus . And at this time , I would like to remind everyone , in order to ask a question , press star and the number one on your telephone keypad .
Speaker #1: Once again , star one . In the interest of time , we ask that you please limit your questions to one primary and one follow up .
Speaker #1: Then , if you have additional questions , you can rejoin the queue . Thanks in advance and we will pause just a moment to compile the Q&A roster .
Speaker #1: All right . Our first question today comes from the line of Colin Rusch with Oppenheimer . Colin , please go ahead .
Speaker #5: Thank so much , guys . Can you talk about where you're at in the testing process with the Rev and the Cronos ? Other offerings ?
Speaker #5: We'd love to get a sense of how that testing is going . Any sort of concerns or kind of accelerations that you're thinking about with the platform , given the potential growth in addressable market here .
Speaker #3: Colin , thanks for the question . So we really try not to talk ahead of the release of our next generation products other than to make sure that it's clear that we remain incredibly committed to the investments we're making and the digital leader portfolio .
Speaker #3: So our L4 chip , the Cronos , going into the DF platform , these are things we talk about each and every every earnings call .
Speaker #3: Because there's still the biggest source of investment that we have at Ouster, Inc. . And because of all the promise , the importance of of these products to the future expansion of Ouster, Inc. business .
Speaker #3: So , you know , the , the , the points that we've made in the past and we continue to make on this earnings call , a doubling of the overall Tam , the most significant set of products , hardware , products and Ouster, Inc. roadmap in Ulster's history , all remain incredibly true .
Speaker #3: committed and We're focused to getting these products out as soon as humanly possible . But beyond that , going to just leave it at that .
Speaker #5: Okay . Fair enough . And then as you work through the design cycle with your customers , and we know that there's an awful lot of customers that you guys are working with .
Speaker #5: There's a lot of innovation happening . In industrial hardware design . Can you talk a little bit about the cadence of those those programs moving forward ?
Speaker #5: We know that you have a number of wins and moving from kind of smaller volumes into more serious production , particularly with some of the off road vehicles .
Speaker #5: But what you're seeing in terms of the cadence of design cycles , you know , the adoption rates , you know , any sort of win rate data that you can share would love to get a sense of how that's evolving here .
Speaker #3: Yeah . So we have over 1000 end customers . And one of the points that we've made and one of the kind of bright spots about Ouster, Inc. promise of the future is that the there's a small minority of all of the high quality customers that we have that have actually reached full scale production and commercial release of their products , that that are built with an outer , lighter inside .
Speaker #3: So and so that means there's immense opportunity in our existing latent customer base for tranches of these customers to go from development all the way to commercial release .
Speaker #3: And you know , we mentioned on the call Serve Robotics , great example of a customer that shows how the volumes shift from a kind of development , small scale pilot style production , where they had 57 , 57 robots deployed with our technology .
Speaker #3: If you look back a year or so ago now , they're on track to have 2000 robots deployed with our technology . In the next couple of months .
Speaker #3: So that kind of fundamental order of magnitude shift is a big part of our growth strategy for the foreseeable future . And , and , and a small fraction of our overall customer mix under 10% is actually in that full scale production .
Speaker #3: So and and but but one of Ulster's core kind of muscles that we've built on the commercial side is our ability to support our customers developing these challenging new technologies and close gaps that maybe we have better expertise closing than our customers do , either on the hardware or the software that processes our LiDAR technology , so that we're getting customers to market faster .
Speaker #3: And they're seeing that we're a valued partner in that process versus just a hardware supplier . So I think there's a lot of yeah , there's a there's a lot of kind of goodwill and deep partnerships that we've built along the way .
Speaker #3: And and we're continuing to do that . It's it's something that our customers value at this point .
Speaker #5: Thanks so much , guys .
Speaker #1: Thanks , Colin . And our next question comes from the line of Andre Shepard with Cantor Fitzgerald . Andre , please go ahead .
Speaker #6: Hi . This is Anandan for Andre . Congrats on the quarter and thanks for taking our questions . You know , with the rapid acceleration of self-driving vehicles , you know , both passenger and commercial vehicles .
Speaker #6: Do you guys expect to pursue this vertical a little bit more aggressively going forward ? I know it wasn't as much of a focus this quarter , but are you looking for any major OEM agreements and what would be an ideal candidate ?
Speaker #6: Because it seems like most companies , with the exception of Tesla , are really reliant on LiDAR for this . Thank you .
Speaker #3: Yeah , thanks for the question , Anand . So , I mean , it's first , it's great to see the renewed kind of resurgence and interest around self-driving vehicles .
Speaker #3: A lot of this is because of the advancements that Waymo has made in really providing a commercial service to customers out here on the West Coast and in Texas and Arizona .
Speaker #3: And then also some of the advancements from Tesla . So it's great to see this ouster already has some really strong partners in this area .
Speaker #3: If we're talking about robotaxi specifically motional and mobility , both are strong ouster partners . We've seen a lot of great partnerships that mobility has been inking with , with to build their customer base and actually expand their commercial robotaxi deployments .
Speaker #3: So , you know , ouster already has some of these these great customer relationships when it comes to the OEMs and kind of direct OEM integration of this technology into a car .
Speaker #3: You and I can buy . That's where I've tempered expectations in the past . Just , you know , basically because of the long time horizon for OEMs directly integrating self-driving technology into the cars that you and I can buy .
Speaker #3: That's largely because of technology difficulties on the OEM side versus like the readiness of compute and sensor technologies that that ouster is responsible for .
Speaker #3: So but on that latter point , we're absolutely interested in this space . What I've always said is it's important to have the right products with the right at at the right point in time for that adoption to happen .
Speaker #3: I think a lot of things are converging. We've put a lot of investment into DF and into future products on that. Internally at Ouster.
Speaker #3: So that again , we have the right product at the right time for this massive opportunity in direct OEM integration . So definitely interesting to us in the future , something I've tempered in the past , but , you know , I think the stars are aligning in the next couple of years here .
Speaker #6: Gotcha . Thanks , Angus . That's that's helpful . Just switching gears a little bit , I guess for the past few months , the elephant in the room has been the blue .
Speaker #6: UAS certification . So I was wondering , you know , what are maybe some of the most recent updates related to that ? And if you could potentially give us any granularity on sensor shipments or if not , do you continue to believe that you have a moat in this segment , or are you seeing more competitors pursuing this now ?
Speaker #3: Yeah . Specifically asking so the for for those listening on the call , the blue UAS certification was really a it was a certification for using Ouster, Inc. leaders on defense DoD use cases and payloads specifically for drones .
Speaker #3: So the common use case here is or the traditional use case for lidar on drones is a surveying payload . Surveying and surveillance payload .
Speaker #3: Auster , A robust business as a surveying payload on drones already , and the UAS announcement made us the first DoD blue UAS certified company in the mix , and it's definitely a boost for our business .
Speaker #3: We're not splitting out specific specific sensor volumes , but we do see inbounds from customers that are interested in making sure they're operating certified payloads and whether or not you know , sometimes it's because the end customer is a DoD customer .
Speaker #3: And sometimes that the end customer isn't . But values the fact that we're using a certified American made technology . So definitely a bunch of benefits there .
Speaker #3: I think we do have a moat where the first we're certainly the first mover in this space . And and we have a great set of products that apply really well , you know , small form factor , super high resolution , robust leaders that don't weigh a lot .
Speaker #3: And all those things make sense. If you want to put these on a small form factor drone, like the Blue UAS certification is positioned for.
Speaker #3: So yeah , not spitting out any specific numbers but but definitely a benefit to our business .
Speaker #1: All right . Thanks for the question Anand . And just a reminder folks , if you'd like to ask a question again , star one on your telephone keypad .
Speaker #1: Once again , star one and our next question comes from the line of Madison , Depaulo , with Rosenblatt Securities . Madison . Please go ahead .
Speaker #7: Hi , this is Madison calling on behalf of Kevin Cassidy . I was just wondering , with so many customers moving from prototype to production , what steps are you taking to mitigate potential supply chain constraints that could impact growth ?
Speaker #7: And just as a follow up , what's the long term target for blue cities ? Attach rate ?
Speaker #4: Well , let me start with the latter . First . Thank you . Madison . The bigger thing is , is we're not breaking that out and giving the long term target .
Speaker #4: It is part of our overall robotics and industrial outlook that we have already . So if you just stick with those growth rates that we we talk about , that's majority , what would be covered there .
Speaker #4: You know , turning to your first part about capacity , one of the things we've done very well , and if you look at the growth just these last two quarters , we set two record quarters of shipments .
Speaker #4: You know , pretty much quarter over quarter . Our sensors grew year over year for this quarter alone was 85% . And quarter over quarter from last quarter to this quarter is a 31% growth .
Speaker #4: So having that capacity is very important to us as we continue our growth journey . So part of the capital investments we make aren't just strategic .
Speaker #4: It's also financial flexibility . What's important for us is meeting our customers scheduled demands . Because , you know , while we pride ourselves on the continued growth , our customers are growing just as fast .
Speaker #4: And so we have to have the capacity to deliver their needs so they can meet their customers needs . So we'll always be investing in capacity to ensure that we can meet the customer demands .
Speaker #7: Great . Thank you .
Speaker #1: All right . Thank you , Madison . And our next question comes from the line of Richard Shannon with Craig-hallum Capital Group . Richard , please go ahead .
Speaker #8: Hi , guys . This is Tyler Anderson on for Richard . Thank you for taking my questions . So Amazon has been talking about adding a lot of robots in the future .
Speaker #8: And including the humanoid robots, do you think there's going to be a benefit to you from this? I have seen some pictures of robots that look similar to yours.
Speaker #8: And how would this show up in bookings when that starts moving forward ? Is this something that takes a long time ? That needs to be built out ?
Speaker #8: Just any way to think about that would be helpful . Thank you .
Speaker #3: Yeah , it's a good question , Tyler , because this is a fast evolving space . I'm amazed how many humanoid robotics companies have have been announced in the last year .
Speaker #3: Overall , definitely a great thing for us . Humanoids need sensing technology like any other robot , and LiDAR is the best possible sensor you could put in the mix .
Speaker #3: And we already have some customers that are using our leaders in their humanoid robotics platform , so definitely good news . There you would see the way that's going to impact our business is it would boost our robotics vertical .
Speaker #3: Right . That's that's where this would fall into into the financials or the financial performance of the company . I'd say it's still early days .
Speaker #3: Like there aren't thousands of humanoid robotics or humanoid robots that are deployed at end customer sites . Right now , it's a prototyping environment .
Speaker #3: So I don't expect it to be a big impact . Positive impact on Astra's business . You know , for the next year or so foreseeable future .
Speaker #3: But this is all about laying the groundwork for a future tranche of customers to , you know , to reach commercial deployment . Just like what we've seen with some of our other verticals happening all the time .
Speaker #3: So we love investing in new customer sets . I think the humanoid thing is interesting , but I think it's going to take a couple of years to play out .
Speaker #8: Great . Thank you . And then you mentioned something about a majority of intersections , about 3000 in the US . Is this the total addressable market that you're speaking to , or is this something that you already have plans and that's that's moving forward with business in hand ?
Speaker #8: Just want to get a look at that . And then also , is there any way that you could categorize the attach rate for your traffic business .
Speaker #3: Yeah , absolutely . So so what I said was that we had signed exclusive partnerships , distribution partnerships that covered regions for the majority of signalized intersections in North America .
Speaker #3: There are about 300,000 signalized intersections in North America . That's the total total addressable market . But I think it's a market that we can largely go after aggressively .
Speaker #3: Today , Blue City is a best in class intersection . You know , intelligent intersection product . It can cover a wide swath of the use cases today .
Speaker #3: And we haven't quantified exactly how many of those 300,000 intersections exactly that Blue City can go and capture . But it's a significant , significant fraction and a major impediment to going and addressing that market is just having regional partners that we can sell through , that can support the end customers , not just in installing the technology up front , but also supporting them for the long term .
Speaker #3: It's important that a municipality has support on their traffic infrastructure for , you know , for , for , for many years to come .
Speaker #3: So we have a lot of inertia there . We announced seven new exclusive partnerships . And so overall , we are we have partnerships that cover the majority of the North American market .
Speaker #3: When we're talking about attach rates , you know , it . Blue City is by default a software attached product . You cannot just buy sensors and you cannot just buy software .
Speaker #3: You have to buy the whole complete solution that goes turnkey onto your intersection . So I wouldn't every blue city sale has an attached rate of 100% for leaders .
Speaker #3: It has an attach rate of 100% for a software component . So it's more what we're seeing is that we're growing pretty fast in this market .
Speaker #3: Smart infrastructure was our biggest vertical this quarter , and so my goal is instead of looking at attach rates per se for Blue City , it's looking at the growth rate for Blue City versus the rest of our business .
Speaker #3: I think there's some early signs that there's some really positive, you know, fast growth happening there.
Speaker #8: Awesome . Thank you . I'm going to hop back in the queue . .
Speaker #1: All right . Thank you Tyler . And again ladies and gentlemen , last call for questions . Star one on your telephone keypad .
Speaker #1: If you'd like to ask a question once again, star one. All right. Our next question comes from the line of Casey Ryan with West Park Capital.
Speaker #1: Casey , please go ahead .
Speaker #9: Good evening everybody . Great quarter . We've talked a little bit about defense . I just wanted to get your perspective on that as a vertical , because I think there's a lot of focus on drones .
Speaker #9: But as a company , do you do you guys define it as maybe being service wide , meaning potentially all vehicles could could sort of use automation and as part of that , do you see sort of a retrofit opportunity as being potentially significant in addition to new weapons platforms and vehicle platforms ?
Speaker #3: Thanks , Casey . It's a thoughtful question . The so the defense market is incredibly diverse . I think that's the first thing to acknowledge .
Speaker #3: And there's legacy vehicles already deployed . And the DoD there are traditional defense contractors . And then there's this new tranche of kind of faster moving startups in the space .
Speaker #3: Ouster, Inc. is really focused . I would say , on the non retrofit opportunities , working with traditional defense industry or the new players .
Speaker #3: And yeah , I think that the the retrofit opportunity maybe not not something that we're tracking . But but overall there's a there's a big opportunity here .
Speaker #3: But with I would say a unclear timeline to the scale where this is deployed universally on these vehicle platforms . I do think that that's where it goes .
Speaker #3: Automation is good in this no matter what in this industry , but it's going to take a quite a while , I think , to field this technology in a big way .
Speaker #3: But there's some promising . First , you know , places where this is useful even today . So blue UAS surveying platforms , great example .
Speaker #3: It's not automation . It's surveying that use case ready today being widely deployed and used great for business . Automated systems operating in the field in life or death situations .
Speaker #3: There's a very high bar for fielding that , and I think it's going to be a couple of years before that's a major impact on Astra's business .
Speaker #3: But Ouster, Inc. is as well positioned for this industry as anyone in the world.
Speaker #9: Okay , terrific . That's a very thoughtful and helpful answer . Very quickly , there's the potential for DJI to be blocked . I guess for .
Speaker #9: US shipments . Could you see that having an impact to your commercial opportunities ? Because I think DJI obviously dominates market share in the US for people who are using commercial drones for businesses and things like that .
Speaker #9: But I wonder if we should associate a sort of a blocking as being positive somehow . For Alastair , in terms of serving domestic manufacturers .
Speaker #3: Yeah , I think the maybe there could be a positive impact on just the general awareness on , you know , on where customers are sourcing critical technology in their supply chain .
Speaker #3: So , you know , the scrutiny of DJI , it's it's an adjacent market to us . But I think more it would be around the general kind of perspective on strategic supply chains .
Speaker #3: And knowing who you're buying from . And maybe there's some bleed over that benefits our business . So net net a little bit of benefit for Ouster, Inc. .
Speaker #9: Okay . Well good I don't want to overstate that . Thank you . That's very helpful . Jump back in the queue as well .
Speaker #1: All right . Thanks , Casey . And our next question comes from the line of Tim Savageau with Northland Capital Markets . Tim , please go ahead .
Speaker #10: Thanks very much and congrats on the results . I might have dropped off there for a second . So sorry about that . My first question is you called out serve Robotics as a kind of an example of the deployment of technology and volume .
Speaker #10: I wonder , you know , we we've seen some work obviously just did a deal with DoorDash for Los Angeles . There's some estimates that , you know , LA by itself could take 10,000 robots , you know , as you look at the scale of this opportunity is is that something that's significant in terms of potential growth drivers , whether its last mile delivery in general or or serve in particular , that you're focused on ?
Speaker #3: Yeah . You know , I , I serve robotics is I think they're having their Waymo moment . Right . It's been many years of wondering is this market is last mile delivery viable as a business .
Speaker #3: Is it ready technology technologically for the prime time . And and they've stuck to their game plan of making the technology and the commercial strategy work .
Speaker #3: And here we are with them now moving to orders of magnitude greater deployments . So kudos to them . I think that they're you know , that's that's the best evidence that this is a real market with that .
Speaker #3: Well , not just a real market with real demand , but that it's a viable market now . So I it's easy to be to be skeptical and pessimistic .
Speaker #3: And people were of Waymo and then they kind of scaled by orders of magnitude and and now everyone's a true believer . I think that's what's happening with serve .
Speaker #3: And I'm happy for it . Both because they're a customer and because it also is like a harbinger of of good things to come in the rest of the last mile delivery market .
Speaker #4: I think I just want to add on there to Tim . It's a great proof point for our strategy of go to market , right ?
Speaker #4: You know , we across multiple verticals , it's just not a one vertical play . And serve is just one of thousands of customers who were in these early stages who scaled to success with their business plan and prevailed and gave us the opportunity to grow with them .
Speaker #4: So , you know , not just betting on one sector and riding that , but having the foresight to go across multiple sectors and , and really work with these , these companies through their success .
Speaker #4: It's paying off for us now .
Speaker #10: Okay . And that's a good segue to my follow up , which is Angus , I think you mentioned sub 10% of your customer base having scaled into full production .
Speaker #10: How far sub ten . But you know , I guess if we look a little bit forward , I don't know whether it's a year or two in that numbers .
Speaker #10: You know , 25 or 50% . What are the implications there for your overall revenue opportunity . And that's it for me .
Speaker #4: Yeah . I mean , I'm pointing straight to our model of the 30 to 50% growth , right ? When you look at how we're progressing with that and , you know , with that going into production , I mean , we've had some some good tailwinds with margin lately .
Speaker #4: But I think that would keep our margins in that 35 to 40% on a GAAP basis . We looked at . But we fully are looking at that ramp up .
Speaker #4: That's where you can get towards the higher end of that 30 to 50 range .
Speaker #3: Yeah . And I would say this is exactly the sub 10% in production is why we talk about Ouster, Inc. being in the early innings or I think last quarter we , we said we're still in the dugout .
Speaker #3: We're not even we're not even playing the game yet . So there's a long way to go . And a lot of growth for ouster to grow into our Tam numbers .
Speaker #3: We've put out Tam numbers . I think those are real in the long term . And and it but but it just speaks to the confidence we have in hitting our 30 to 50% revenue growth for the foreseeable future .
Speaker #10: A great thanks very much .
Speaker #1: All right . Thanks , Tim . And I believe we have Tyler from Craig-hallum with a follow up question . Tyler , please go ahead .
Speaker #8: Hi , guys . Just a quick one . So thinking about your software business , are you or are customers able to use other sensors with your software ?
Speaker #8: And essentially , could you be just overlaid in different use cases with your software for what people have already purchased ?
Speaker #3: So short answer no , you cannot use a different sensor with our software , and that's why it's a software attached business . We really always focus on the fact that we're selling systems .
Speaker #3: Blue City and Gemini combine our sensors with our software , and in most cases , our compute as well . So software attached business .
Speaker #3: There are cases , though , where you can buy we have some customers , distributors that used to buy used to sell just after leaders .
Speaker #3: And now they're selling Gemini on top of those leaders . Maybe after the fact to a certain set of customers , maybe a customer thinks that they can write their own software for our sensors and realizes that after a trying for a little while , that ouster has something more mature and they can sidestep a bunch of difficult technical issues by purchasing the Gemini software themselves .
Speaker #3: So we do have some cases there . But but again , the the end result is that the customer is running a software attached product solutions product from Ouster, Inc. .
Speaker #4: Yeah . And Tyler , I think the goal here for us is that software attached is buying the full system . And perception and sensing fusion from us .
Speaker #4: The goal is , is that you would use an Ulster product set for your sensor and perception . And then once that software is integrated into your software stack , they can grow with us for generations because our we write this .
Speaker #4: So it's forward and backward compatible on the hardware elements that we sell. So regardless of the generation we're on, it gives us the flexibility.
Speaker #4: The other thing I would just add to that is if you start thinking about into the future , having that software attach rate that makes this extremely sticky to our customer bases .
Speaker #4: So , you know , once you get in there , you want to provide not just quality service and quality products , but if you can provide a whole system and a platform that they can grow generation over generation , that's the ultimate goal of this , of this play .
Speaker #8: Osman , just one more for me . So just thinking about the software and the model training , this is all traditional machine learning , correct .
Speaker #8: And is there any way or are there any customers that are pulling for some kind of LLM or visual model capability that that isn't traditional machine learning ?
Speaker #3: I don't know if we've ever used the term traditional machine learning . I would definitely say that for this type of leader perception , we are using cutting edge models .
Speaker #3: But but they're not text models . So LLM is almost a miss . You know , misnomer for this industry . But we are using cutting edge deep learning models in our products , trained on giant corpuses of , you know , annotated data that we've collected from the field .
Speaker #3: So true , true cutting edge fleet learning true cutting edge deep learning models used best in class in in the perception space for lidar .
Speaker #3: So . Yeah , I think that there are ways we could augment our products with things like Llms , or maybe that the perception space will transition to transformers and llms , but the cutting edge is actually what we're using , and that's deep learning .
Speaker #8: Got it . Thank you . And I meant traditional , as in non trans transformer models coming from a data background , I was just trying to differentiate from that .
Speaker #8: But thank you; I appreciate it.
Speaker #3: Yeah yeah .
Speaker #1: All right . Great . Thank you Tyler . And with that I would now like to say that Q&A is concluded . So I will hand it back to Angus for closing remarks .
Speaker #1: Angus .
Speaker #3: All right . Well , with that little discussion on LMS , thank you all for joining the call and have a great rest of your day .
Speaker #3: Cheers .