Ouster, Inc. Q1 FY2024 earnings call

• Recorded record revenues of $26 million, 51% YoY growth, and exceeded annualized run rate of $100 million.
• Non-GAAP gross margin reached 36%, the highest in Ouster's history.
• Closed numerous large deals in smart infrastructure and industrial verticals, e.g., collaboration with a leading global logistics company in smart infrastructure and million-dollar deals in agriculture and port applications in industrial.
• Focused on strategic priorities: expanding software and growing installed base, with new deep learning perception model trained; executing on product roadmap, e.g., new firmware for REV7 sensors, next-generation L4 custom silicon chip taped out, and progress on automotive-grade custom silicon.
• Progressed on long-term financial framework with revenue growth and margin expansion aligning with parameters, and GAAP operating expenses fluctuating due to noncash items but aiming to optimize cost structure and reduce cash burn.

In the first quarter, Ouster reported record revenues of $26 million, a 51% year-over-year growth. Revenues exceeded an annualized run rate of $100 million. Strong revenue contributions came from 4 verticals: automotive, industrial, robotics, and smart infrastructure. The robotics vertical was the largest contributor, and automotive generated the highest quarterly revenue in history. Non-GAAP gross margin expanded to 36%, the highest level to date.

• Expect second quarter 2024 revenue to be between $26 million and $28 million, midpoint representing ~40% YoY growth.
• Long-term financial framework targets 30%-50% year-over-year revenue growth, 35%-40% gross margin, and OpEx flat or below Q3 2023 levels.

• Customer adoption pace of lidar technology is a headwind.
• Quarterly GAAP operating expenses may fluctuate due to changes in noncash stock-based compensation and other items.
• Working capital improvements seen in Q1 may not be sustainable on a continual basis, and a $4 million fee or settlement related to previous litigation will impact cash usage in Q2.

Q: Did you have any 10% customers in Q1 and expect more over time?

A: This quarter had 1 10% customer, and as customers move into production, expect 10% customers to increase over time.

Q: Clarification on 40%-50% revenue growth range for 2024 and OpEx levels?

A: Committed to 30%-50% revenue growth, 35%-40% gross margin, and OpEx flat/below Q3 2023; OpEx in Q1 unusual due to tax reset, audit fees, etc., but expect to continue driving down cost structure.

Q: Sustainability of incremental gross margin and revenue growth impact?

A: Non-GAAP gross margin 36% this quarter, higher than a year ago; incremental margin higher than 35%-40% target, and increasing revenue will help reach 35%-40% GAAP gross margin.

Q: Automotive market opportunity with Tesla and software ecosystem?

A: Automotive is a major vertical, AI advancements help all sensor modalities; software is a strategic pillar, with developer tools for sensors and revenue-generating Gemini and Blue City solutions in smart infrastructure, expecting software margins to be higher long-term.

Q: Pace of new software solutions and customer conversations on sensor-only purchases?

A: Expect more nimble software updates; every customer needs software to use sensors, building credibility to expand software footprint into verticals, aiming to be an autonomy systems provider rather than isolated hardware/software provider.