Ouster, Inc. (OUST) Earnings Call Transcript & Summary

Great. Well, good afternoon, everybody, and thank you for joining us for our next session. Excited to have Ouster with us at the Citi Tech Conference to talk lidar and a lot of other interesting topics. From the company, we're very, very pleased to have Angus Pacala, Co-Founder and CEO of Ouster. And we're going to perfectly keep it fairly informal into a mostly a fireside chat session. Most importantly, we want to make sure your questions are answered during the course of the section. And so if you do have questions, please feel free to e-mail me directly, I'll be checking my e-mail throughout the course of the session, and we'll read your questions in. And if you [indiscernible] a legal disclosures, we have those available for you as well. So with that, I think, I'm going to turn it over to Angus for some overview remarks on the company for those who might be newer to lidar or newer to Ouster. And then we'll get into Q&A. Angus, quite to see you, thanks again for joining us. Now I'll turn it over to you.

Thanks, Itay. So briefly my background, I'm the CEO and Co-Founder of Ouster. I'm an engineer by training, and I have been working in lidar for almost 9 years now. So I was a Co-founder of Quanergy Systems back in 2012, a Director of Engineering there for 2.5 years. And Quanergy Systems is also now merging with a SPAC and going public through that route. But in 2015, I co-founded Ouster on the premise of building digital lidar sensors and really transitioning this entire industry from an analog technology set, where there's a real diversity of approaches to a digital technology set, which is a vastly simpler architecture, because we're absorbing all of the traditional complexity of an analog product or suite of products across different competitors into a single silicon chip. And this really is -- so Ouster is based in San Francisco in Silicon Valley, we're about 200 people. And this is really the story and the playbook of Silicon Valley going back to the days of Intel in the '60s. So -- and the idea is take complex custom build analog technology. Condense that -- all of that capability onto a single small semiconductor and then improve that semiconductor ex or the product through the improvement in new chips exponentially with Moore's Law. And there's really no other technology like silicon CMOs to advance a product set exponentially through time, decade after decade after decade. And so it's an approach that's trying true and it's worked across industries, whether it's CPUs, GPUs or telecom infrastructure or GPS receivers and cell modems or digital cameras, has a really great kind of optical sensor that has a lot of similarities to lidar. And so digital lidar is, kind of, standing on the shoulders and giants in that sense. And so again, our goal is condense the latter system into a silicon chip and have best-in-class affordability and performance today. Through that and then an exponential road map based on semiconductor tape-outs, new chipsets going into the future for the, kind of, the foreseeable future righting the way of Moore's law. Now that's really the first pillar of Ouster's digital technology and digital lidar. But there are 2 others, and the second is the diversification in our strategy, our go-to-market strategy across 4 key industries. So you're probably familiar that there's a great opportunity in automotive for lidar sensors. But we're targeting the automotive, industrial, smart infrastructure and robotics markets. And there are, kind of, hundreds of sub-verticals within those 4 key verticals. And we're able to do that, because digital products are more flexible, more affordable and more performing than their analog counterparts. So whereas our competitors have to build a specific analog device and a specific architecture to target a specific narrowly defined use case, digital products can play across verticals. And that's why you see major semiconductor companies that have products that really span many different use cases, consumer, non-consumer, defense, you name it. And it's why you can have a digital camera with the same architecture that works on a drone on Mars and then your cell phone in your pocket and in your car. And so we're doing that with digital lidar, and we're tackling these 4 key verticals and it opens up a much broader TAM. And a TAM that's -- it's diverse in use case and customer, kind of, behavior in margin. And also in the dynamics of some of it is Greenfield opportunities and some of it is Brownfield, kind of, -- there's an existing $1 billion industrial ladder market that we can go out and convert instead of [indiscernible] ground up. So there's some great, kind of, dynamics there playing across the verticals. And then the final pillar of Ouster really is our ability to execute, where we were started around the same time as all of our peers have gone public. And yet we are at -- we have reached a commercial scale that I think others have not. We have over 600 customers today. We shipped almost 1,500 units last quarter. We're guiding to $33 million to $35 million of revenue this year with positive gross margins of 25% to 27%. And so we really and we've outsourced our manufacturing to a great volume partner already, and that facility has been operating for years now. So we're in a position with great product-market fit, a very differentiated digital product. And we have the performance on the commercial side to back that a lot.

Terrific, now that's a great overview. Maybe on -- the question that always comes up with lidar, a company's is the architecture. You did a great job of, kind of, articulating your approach. Why are there so many approaches out there? You have a lot of companies coming in and say, no, here's the right way to do it. Why do that exist and how many architectures do you think will, kind of, survive in the next 5 years, which is also to say how many lidar companies do you think will ultimately be around to kind of capture the opportunity? Kind of how do you see this whole thing evolving 5, 10 years now?

Yes. I think that the diversity of approaches, first, you have to understand the diversity of approaches is because of -- they're all different forms of analog lidar systems. And that's one of the problems with analog technologies it has to be purpose-built for a very specific application. But it's also the sign of an immature industry. Any time there are 5, 10, 20 different unique approaches to solving the same problem. That means that the right solution hasn't. The industry hasn't matured to the point that they're being the clear winning solution. And most industries do mature to there being one clear winning architecture. And my thesis is that, that's always digital. Whenever digital enters the market, it becomes the mature architecture, because it's the simplest, it's the most affordable, and it's the most performance. And that's what you're seeing with digital cameras is -- it's really every digital camera on earth is a piece of silicon and a lens, and that wasn't true looking back 30-years ago for many different ways to build a camera. And I think it's -- maybe another example is EV platforms, there's been diversity in EV platforms and now companies are -- there was this in-between period where -- where did you put the battery pack? And what was the configuration of battery pack? How many motors? Where did you put the electric motors? And now it's skateboard. Everything is going to a skateboard thing, flat-pack battery, low in the car and motors at the wheels. And everybody is going that route and the EVs are maturing. And so there is this process of maturation and architectures. And so there will not be -- I'm very confident there will not be 20 different architectures long-term. And certainly, digital would be one of them. I expect it to be the only one, but I'm biased.

No, absolutely. And so when you think about like the next-generation chip that you are working on or even your capabilities today relative to your competitors. Maybe give investors a sense at a high level of the performance metric, again do you expect you'll have like you could think out 2 or 3 years even from what you know about what you're doing, of course, from what you're prepared to doing as well, around resolution, frame rate, range, actually cost as well, kind of, how big of advantage do you think you'll have based on the road map over the next couple of years?

Yes. And you can think about it very similar to digital cameras and how much they've improved over the last 20-years. So if you look back at like a feature phone in 2006, it had a grainy sub-megapixel color camera on it that could maybe take one frame in a second it couldn't even do video. So sub-1 megapixel of data coming out and the pictures didn't look very good. And now today, there are cameras that have -- there are some cameras that have literally 100-megapixel imagers that can take 30 frames per second video at incredibly high resolutions with incredible photo quality. And so that's over -- that's almost -- that's probably 3 orders of magnitude, improvement in data throughput, resolution and frame rate. And you can actually measure the -- it's several orders of magnitude in image quality improvement in kind of the signal-noise ratio of those systems. And that's through the semiconductor is getting better, that's through Moore's Law, improving the CMOs with the silicon. And so we're following that same route. And today, we're in the low megapixel count, you know, lidar space and our image quality or things like range and other attributes, accuracy and repeatability are very good today, but they can expand significantly in the future. So I expect a 2 order of magnitude or more 2 to 3 order of magnitude improvement, so we're going to have 100s of mega pixels per second of data coming out of these systems. You can think about it as a HD 3D camera stream. So 3D cameras that have the resolution of an HD camera, that's what we're building, and it's going to be. Yes, it's really going to advance the technology from where it is today.

That's very helpful. And then when we think about -- there's an impression that lidar right, is sort of in its infancy and certainly in automotive, it is. But you mentioned a pretty sizable market today in non-auto, I think maybe about $1 billion. Maybe you could talk to us about a little bit of those opportunities in non-auto, the competitive landscape in non-auto and, kind of, what -- at a high level, I know there's a lot of verticals, but kind of what's driving the sort of inflection point that you've talked about in the past for lidar adoption in these various verticals?

Yes. We almost -- I've somewhat on our team had said that Ouster is an index fund for autonomy technology. What we're doing is we're betting on the global adoption of autonomy technology that has been developed mostly within the automotive industry or within Robotaxis automotive and consumer ADAS. And that's now being brought to this diversity of industries, whether it's smart infrastructure or industrials or robotics, a generation of engineers have been trained to really automate and improve the efficiency and safety at all of these systems that drive and fly and crawl and [ drawl ] around factory floors and ports and depots and mines. And so yes, I think that, that is -- that there's a convergence of a generation of engineers that have been trained of algorithms, machine learning algorithms that now can be deployed on affordable compute platforms that have matured as well. Digital cameras have gotten to the point where you can place enough around the vehicle, that full coverage there. And digital lidar now, we are hitting the price points, the loud for incredibly high-resolution, long-range, all-weather deployment of these sensors. That kind of provide this final enabling sensor modality that has not existed before. And so that's true in industrials, there have been 2D, kind of, low-performing lidar systems for a very long time, almost 30-years, and it's a big industry almost $1 billion. But it is very much constrained those platforms to being somewhat unintelligent, simple kind of if there's an object stop, kind of, systems, they are very simple. And now they -- our customers are building much more intelligence and flexibility into the platforms, whether it's a forklift or a mining vehicle or an automated ground vehicle and a factory floor. A digital lidar can allow a computer to interpret. This is a mobile object that I can navigate around. This is a human that I need to stop for and wait until they pass. And that kind of intelligence breeds more efficiency and more safety into the systems. So it's a really exciting time across all of our industries as like literally, like every player in these spaces is -- has an automation strategy or an autonomous strategy that they're embarking on. And we're really well poised to capture that opportunity.

Absolutely. And maybe just from a revenue perspective, you also announced a fair amount of incremental wins this year. Would you say that the growth that you're expecting in the next couple of years, is that kind of roughly $1 billion growing? Is it -- are you taking more market share from the existing? Is it both kind of what's a split around market share gains versus maybe the incumbents relative to that, the overall TAM just accelerating?

Yes. We haven't really broken it out, but what I like about our business is that we can do both. I really -- the diversity breeds conservatism and it's a hedging of the potential -- it allows us to go out and find the -- and run downhill, find the path of least resistance to build to that $1 billion revenue number. And so like I said, industrial is $1 billion established market there. And that's -- it's great that that customer says educated about the value of lidar. It's the predominant sensor -- safety sensor in these applications, not camera, not [indiscernible]. So it's really about providing a comparable or compatible sensor to this ecosystem of vital products there. So there's immense opportunity for that to contribute to our bottom line. There's also -- but there are these greenfield applications, and they're so abundant across smart infrastructure and robotics and there are other reasons they may be more greenfield opportunities, but there are tailwinds that are driving from smart infrastructure with this company's investment and really worldwide investment in infrastructure updates, but also pedestrian safety and road safety. There's not just a movement to make cars safer for the passengers in them, but to make roadway safer vision zero for instance. And lidar sensor is mounted on traffic, traffic intersections, like in signaling more intelligent is a way to achieve those vision zero goals as well. So lots of tailwinds driving the greenfield applications. But balanced by some of these brownfields to establish industries.

Terrific. We did get a 2-part question in, so I'll just read on the e-mail. Ouster seems to have its eyes on a number of verticals, how do they balance the need to focus and create momentum in a vertical versus being diffused across too many opportunities and not owning a particular market or solution? And then the second part, kind of, related is when sitting around the conference table with the leadership team, what questions does the Ouster team debate the most when it comes to kind of commercialization?

Yes. So the challenge is diversity breeds complexity. And it's definitely more challenging to build a company that is trying to address multiple verticals. And so what we've done is make sure that our products, our architecture and our product suite is shared across verticals. But that doesn't mean we can sell the same way to all of our customer sets, and it doesn't mean that we have to have integration partners for all of the major sub-verticals. And so it does -- it creates challenges across the company that aren't the challenges that technology, kind of, move typically solve and being one of them. So I've made sure to have great support and cast of really partners on the executive team that have been through this that understand what's building a company that's addressing multiple very unique customer sets looks like and what really, really relying on the experience of a much broader set of people. And -- but ultimately, you do have to pick and choose what to invest in. And our customer set is unique enough, maybe carve them out and have a dedicated team that's going to focus exclusively on them. If they're unique, and it's a big opportunity versus maybe some other verticals can be shared across kind of account -- your sales team and your marketing team. So the hybrid model, you don't want to have -- you don't have to do the same thing everywhere for every customer site. In terms of what we debate all the time, I think that we -- we're really focused on company processes right now. Because one of the ways we actually do scale. And we're in a real scaling stage. Our unit shipments are up 7 points, almost 3x, I think, year-over-year. And we're pulling on huge numbers of new customers. We announced going on that over 100 new customers in the last quarter alone, 500 to 600 customers in Q2. And so all of that requires great business crosses and like great interaction between teams, and that's the hard stuff because there's no kind of -- there are many different playbooks for it, but you have to kind of navigate your own route and with the unique aspects of the company. So at a personal inter-team stuff, company processes. That's where we debate the most, I would say. The product strategy is quite clear. Build better silicon, put it in our products and continue to dominate and build more affordable and more performance. There's a lot of product strategy as we branch out into more solutions, I guess, around our different verticals. I would say that's a big point. We don't want to make a wrong bet. I have a lot of respect for companies that first place the right bet on their starting product. But now we want to be a company that can show that we can place to write that multiple times and expand our product suite and what we're offering to companies.

Absolutely. And maybe related to that, you've grown your customer count significantly. How much of it is customers coming to you versus you going to them? I know you've been investing in your sales force this year as well? Maybe we could start with that first.

Yes. Historically, we've really been an inbound commercial organization. We just haven't had the resources. And we built to around 500 customers, mostly with an inbound model. And I still get, clearly, every inbound comes to my e-mail to our portals on our website, so I keep track of this. But what we've been able to do is really invest in a commercial, kind of, machine that is -- that has the significant outbound sales component since going public that was one of our key, kind of, investment areas. We pull on, I think, almost 30 people into the sales organization. And we've invested in business automation tooling and all the stuff, and it's really paying off. It's crazy that we've got so far without really aggressively reaching out to customers. And so we think that there are 10s of 1,000s of companies worldwide that can use lidar. And so it's a very different business that we're building than, say, just going after 15 automakers. No, we're doing that too, but we actually are building a company that can go out and reach out to literally 10s of 1,000s of companies and build this incredibly rich and diversified business over the next couple of years.

Awesome. And then maybe tying that back into the product road map. Maybe give us an update there from what you can share? And what are the key milestones to dates for you to kind of -- to make in terms of the next chipset? And when -- how should we think about the product road map, particularly given the significant improvements in performance of the resolution costs that you outlined relative to customer demand, you know, your customers already have a sense of what the next-generation will do? Is that reflected, kind of, in your win rates? Or just sort of concurrent when you, kind of, come out with the next generation, we could end up seeing a significant impact to kind of the order trends and backlog. How is that kind of timing work? And maybe just an update on the road map there?

Yes. We're -- I think we're trying to be conservative, holding things like in our expectations where this is going. We're trying to hold win rates, kind of, constant and have conservatism around how many customers that we can gain each year even though I think that we're outstripping that significantly from where our expectation was. And so one of the reasons I think we're, kind of, at this tipping point is because we already have very good product-market fit with the performance we have from the sensors today. And yet, yes, we have great visibility on our sensors getting 10x better, not 2x better, 10x better. And that's inevitable at this point. And so will that cause a linear change to our business? Or will that be some sort of other change in growth services? I don't know, we're trying to stick with something that's conservative and more conservative. But we give -- in terms of what our customers know about our product road map. We spend a lot of time communicating the benefits of our technology and the advancement of our road map [Technical Difficulty] and there -- and how they're going to be able to leverage this. And we have proof points to this effect because we've shipped now multiple generations of lidar. We've exponentially improved the capabilities, with the range and resolution of our devices over the last 3 years. So it's not like we're just saying something actually have proof points here. And we give customers some view into our future, but it's a very fine line to ride because we have an established business that we cannot interrupt. And you see this from most companies that actually do operate commercially with real customer sets like they don't preannounce their rebounds. It's usually not the right call.

Yes, absolutely. Let me ask you to an overall question on the space and then I only have to get into auto and trucking. But a lot of lidar companies have gone public. You've had some time to engage with analysts and investors. As we -- what do you think are the misconceptions, if any, out there? What do you -- from your seat, think about the perception of the lidar space in general? Or, of force Ouster as well within that? What surprises you in those perceptions? What's the market you think getting right, getting wrong in terms of the overall lidar space?

I think one of the biggest misconceptions is that there's parity across this peer set. There is not parity, in my view, it's hard. If you look at people's, kind of, I don't know, pipe presentations and things like that, it looks like there's parity. But the reality is that where our competitors might say that they have 50 partners. Which aren't customers. It's kind of like they're in the pipeline to be one. We have 500 customers literally revenue-generating customers that were actively engaged with not 600, where our competitors are talking about their manufacturing road map and how they're outsourcing their manufacturing, this is a work in progress. We're 3 years into being very established and a volume manufacturing strategy, and we manufacture all of our volume at benchmark Electronics [ Thailand ], and where customers are talk or competitors are talking about their margins and their expectation on margin, they all -- literally all have negative, significantly negative margins on their hardware, and we have the only positive margin in the entire industry. So it's -- the number is all the same. But for our peer set, it's forward-looking, whereas for us, it's the reality today. So that's the biggest misconception that I'm trying to get over is just -- and then I think what falls you [indiscernible] that is that we really want to try to build -- when I talk about the future, I try to talk about the future built on the reality that we have today and the numbers using bottoms-up kind of modeling with the numbers that are credible and that are real today. So I want to be a credible voice in the industry as much as possible. So that's the biggest misconception when it comes to [indiscernible], I think, versus the rest of the pack. There are many more and then it's very hard to sort through the technology side of things as well.

No, absolutely not. And one, I guess, consumption that comes up with Ouster, when we have discussions is on the auto market. Auto is a little bit maybe, I guess, easier to model in some respects in terms of the next 10-years. And so it does get a lot of attention. And of course, it's a market that you're going to be participating in, of course, are already in the trucks. But there's a pushback we hear around is Ouster somewhat linked to the auto market? And will your competitors establish, kind of, that early mover advantage in hardware and software before you really enter? And when you do enter what's going to be left at that point? Maybe give us our thoughts on that point? And maybe any updated thoughts on what your developments have been in auto?

Yes. I mean, so this is where I think there's a huge misunderstanding of what the status of the auto market is. And we're specifically talking about consumer ADAS, because we have 4 sub verticals in auto. We have consumer ADAS, robo trucking, robotaxis and shuttles and buses. And generating significant revenue across the 4 verticals today. But consumer ADAS specifically is just absolutely wide open. Where the only SOP production win that I am aware of for any, kind of, high performing lidar. So we're including the [indiscernible], which is -- has had real success in the market as the first kind of real lidar system to be commercialized. So the only one I'm aware of is Innov-is working with BMW that was inked in 2017 and is only just maybe rolling out in the next year or 2. There has been no other series production when announced. All of the Tier 1, kind of, announcements and partnerships. Those aren't wins, those are just partnerships, Tier 1 is our customers, and everyone needs to keep that in mind. Tier 1s are not customers, they're as desperate for wins as anyone else in the industry and do not have the wins in pocket. So and then -- so auto is wide open, and we have a really clear and good auto strategy around being the price leader and the platform, kind of, bring the biggest platform of products to market at the lowest pricing and with incredibly great, kind of, good performance across the 3 key use cases. So what we talk about is providing a 5 lidar suite for $1,000 into the consumer ADAS world versus the competition like really targeting $1,000 forward-looking lidar systems. And that's kind of $1,000 forward-looking lidar systems. The hope there is that it works in an L2+ system. But what is really needed for L3, which is kind of where you can watch a movie in your car, while your car drive yourself and really hand your life over to the vehicle. That requires fully redundant 360-degree coverage by lidar sensors, and that's our strategy is to provide that complete huge of lidar sensors, and it has to be at an affordable price point, so $1,000 price point. And that's possible with digital technology. And you can only look as far as cameras to see that, kind of, affordability point as has been achieved in auto.

Awesome. I do get occasional questions on the 5 lidar suite for $1,000. Can you remind us roughly when you think the timing for that would be to be, kind of, ready for production? And I know there's some next-generation solid-state lidar you're working on. Do you think that as part of how we should think about that $1,000? Do you displace Ultrasonix, maybe even some of the corner radar technology? Is it too early to know perhaps how that would work? Could you get your thoughts and kind of think about the -- maybe if there is a net cost add attached to or not?

Yes. So we're not -- the problem is that you can't displace those other technologies. And you won't -- and there's history, I mean, the safety technologies don't displace each other commonly in automotive, seatbelts or airbags and display seat belts and ABS and that's electronic stability control didn't displace airbags and so on and so forth. It just gets added and it becomes economical, and then it becomes standard. And so camera Radar, Ultrasonix are here to stay. And one of the challenges is lidar either needs to be so affordable or create such a good compelling feature set or really the combination that it can be justified as an add-on option to start. And so L2+ systems that incorporate lidar, I really -- what I see from automakers is -- and what they tell us is they need a $300 forward-looking lidar to even consider putting it on NL2+ system just because the incremental benefit to the consumer is relatively low given the maturity of camera radar systems. L3, though, there's a higher price point that can be achieved if you can provide the full suite of sensors because then all of a sudden, oh my gosh, you can get in your car and it can drive to work for 90% of the time. And that's really valuable to the customer. But the cost still has to be low enough that there's significant take rate. And so $1,000 5 lidar sensors is where we see that. Well, it's what automakers are telling us.

Absolutely. I guess we get a couple of financial questions. I want to get back to non-auto. But one of the things -- and I think when you originally provided your, kind of, 5-year outlook, the 2025 Ouster revenue target was [indiscernible] the highest revenue target in the lidar industry. Yes, I think when we met in the last several months, you've always emphasized that you booked those projections with a degree of conservatism. So just -- and obviously, it's a long-term view, but just level of confidence or kind of just sort of glance those productions today relative to the new business momentum out there. Just your overall thoughts on kind of how the industry and the company are progressing relative to that 5-year plans?

Yes, sure. So first of all, what we've provided guidance on is this year is $33 million to $35 million of revenue and 25% to 27% gross margins. And I think we're the only lidar company that out of the gates didn't change what we were telling the pipe while raising the pipe for 2021 and what we guided to. And I'm proud of that, and that's the kind of behavior that you should expect from Ouster. But so we do -- I think that this year, we're having a fantastic year. And the strategy that we've laid out across verticals allows us to address a much, much larger TAM. And that's why our revenue expectations are much higher than our competitors is because we're literally -- we're not just talking to like 10 times more customers, we're talking to do something like 1,000 times more customers, so that's the expectation. There's 10s of 1,000s of potential accounts to go and target. And so we're not beholding to the time lines of just automakers for the time lines of just industrial, it's really -- we have the opportunity to go out and foster the most -- again, to run downhill with the customers that went around down with us. So I have immense, kind of, optimism about where we're headed and the strategy we've laid out and the fact that, yes, we are going to be putting up numbers that are bigger than our competitors. And so yes, I think that overall, what we laid out is exactly, kind of, accurate to the world view that I see in full one.

Sure. Awesome. And then the other, I think, sort of, I guess, out of consensus, you took in the projections was on the auto gross margin being below non-auto. I'd love to get your updated thoughts on that, because you mentioned before to the scalability of your architecture, I would think would lend itself to that, maybe having a higher gross margin and if all the auto competitors are sort of targeting a higher gross margin? Is that conservatism of some opportunity, do you really still believe that the opportunity in auto is just not going to be as attractive financially?

Yes. I'd rather be proven wrong that the margins are higher in auto than, say, then expect that they rely on them being higher and bet the business on it. So we think we can have a great profitable auto business with 26% or 25%, 26% margins in that vertical or that sub-vertical, because we're really talking about consumer ADAS here. And yes, it's just because our pricing expectation is we're taking the guidance of automakers, which is they want $300 forward-looking lidar and $1,000 lidar's 5 [indiscernible]. And when you look at all the numbers, it comes to something like a 25% margin. So I'm not going to change that until we prove it the other way. But -- and so, that's one of the -- I mean that's one of the big differences between us and our peers. Our peers are thinking that they're going to have 20% -- 50%, 60% margins, maybe even higher in auto, and I just don't expect that. And I don't think there's a lot of instant for.

Definitely. And I want to definitely touch upon -- you mentioned a few times manufacturing strategy you've had relative to your peers, a positive gross margins. It sounds like you think maybe investors or are we kind of maybe underestimate, kind of, how important that transition for you was -- with a third-party. Maybe talk a little bit about that? And then as you're growing volume and realizing this new business momentum, are you able to ultimately achieve lower costs and lower [ BOM ], and than maybe you would have thought. Is that benefiting you going forward? Maybe just talk a little bit about the manufacturing strategy and kind of how important that is in terms of what you're trying to do in the next 12 months?

Yes. I do think that it's easy to overlook how important manufacturing is Elon Musk is well spoken on the subject of manufacturing is really hard, and it's a real differentiator for complex technology or companies that are building new and complex technology. And at a certain point, you can have everything else right in the business, but if you can't produce the stuff at a good cost and a good margin, nothing else matters. So I think by bringing manufacturing in-house, we are not giving that margin to a partner to a Tier 1. So we have a contract [indiscernible] partner, benchmark, and we have a great relationship with them. But it's a much different relationship than if we were to hand over a partially commercialized product to an automotive Tier 1 and have them manufacture it and then take margins. So that is another core part of our strategy to have the best margins at the lowest pricing in the industry, really have that control -- total control of your manufacturing. And so it's not like we're just passing over some plans to benchmark. We actually have full-time employees over in Thailand. We produce and we design and build all of the tooling and get shipped over and run by an benchmark in Thailand. It's a very tight relationship that we have a lot of control over. So absolutely, I think, it's a key strategic element to Ouster's business that we're going continue to invest in.

So -- and one of the topic that I think doesn't get maybe as much attention. I mean, actually, of course, the pleasure was sticking with your customers back in August and what we held together. But like service, right, and kind of making sure you're tailing to customer needs. Can you talk a little bit what you're doing on that because it does come up, I think almost the earlier question we got before around just all the numerous customers you have and obviously, individual needs, how are you managing service and making sure customers are happy across the board from a hardware and even a software perspective there?

Yes. We're investing -- so it's a little different in considerate assets you're interacting with OEM. There's a complete team. A lot of different functional groups are all kind of at the backend call of these big automakers. And so we have to work a little differently with those customers. There's a different expectation there. But for our broader customer base, we really have to -- we built this customer success arm of Ouster, so that we can support a large number of customers efficiently. And I think we do have best-in-class, kind of, customer service at this point. There are a lot of different ways to tackle the problem, and that's where company processes come in. So how do you get customers to the right people internally to answer their questions or solve their problems? Is it pre-sales? Is post-sales? And part of that is also by making our products or our software offerings, easier and easier to use and to get around some of the common, kind of, pickups or something that we see across the customer base. So it's a company-wide effort to streamline our engagement with customers through the point-of-sale and then pass the point-of-sale because we're -- you heard on our call with Outrider, this is a long-term engagement that we have with them. It's not going to be over in a year. We're going to be with them supporting them for years and years to come. So again, that's just like not something that technologists that are used to building in a company. And I'm betting that Ouster can do that kind of thing better than anyone else, and it will be a real strategic differentiator for us long-term.

Absolutely. And maybe I'll sneak one last one here, Angus. Hiring in general, just how is that going? Where are you looking for? Is it the degree of being able to go out and acquire talent, whether it's technology or of course, customer service sales? You made some hires, of course, some significance to this year. Just maybe update us on what you're doing there?

We're over 200 people now. We started the year at about 160 people. So we -- or even less maybe 140. And still we've had a lot of success hiring since news backing. One of the use of proceeds primarily has gone towards either R&D or hiring teams and commercial side or the product side, product engineering. And the visibility of stacking has really been a benefit actually to going out and hiring. So it's interesting, because, I mean, we're having a lot of success. We're also smaller than some of our major competitors, half the size of -- in terms of employee count. And that's -- I don't know, I believe that you can -- if you find the right person, you can do a lot with many fewer employees, and we've been able to do that to-date. And so we're not trying to just balloon the company. We're trying to be selective and getting exactly, who we need and be thoughtful about it. So I still have engaged with almost every hire that I'm still aware of and looking into. But yes, we've had a lot of success so far this year.

Terrific. Awesome. We definitely could keep going, but I think we are over our time. I want to thank you, Angus. So a really great discussion, as always, learned a lot definitely covered a lot of important topics.

Thanks, Itay. That's [ fine ].

Absolutely. Great. Well, thank you, everybody, for joining us. Thank you for the questions that were e-mailed in. Again, I want to thank Angus and team at Ouster for participating in our conference. And with that, we can go ahead and conclude the session. Have a great day, everybody.