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

So to close down our LiDAR track for today, we are very happy to welcome Ouster, and thanks to everyone for still sticking around. Ouster is a little bit unique to some of the other lidar players that we've had in that their efforts to date have primarily been focused on nonautomotive end markets, but they're actually now making significant progress in terms of auto. And some of the end markets that they've been participating in, industrial, automation, smart infrastructure and robotics. And the company's high-performance digital lidar and custom design semiconductors were first brought to market back in 2018. The company was founded in 2015 and then taken public back last year. From Ouster, we are very happy to welcome Angus Pacala, the company's Co-Founder and Chief Executive Officer. Prior to Ouster, he was a Director of Engineering at another lidar company, Quanergy. And before that, he was a Battery Engineer at Amprius. We also have Anna Brunelle, Ouster's Chief Financial Officer. One reminder for everybody in the room, the corporates in attendance today did us a real favor in participating despite some tough quiet period. So we are going to refrain from asking any detailed near-term financial results, but for companies like Ouster, it's much less important than the longer-term vision and strategy and competitive dynamics that we want to get into. So since Ouster is relatively new to be seen as a public company, we're going to let Angus kick it off with a brief presentation and overview before we get into our fireside chat questions. And with that, Angus and Anna, thank you so much for joining us.

Great.

Thank you.

Thank you for having us. So I'll keep this pretty short and just go over the high-level for Ouster. Briefly, my background, I was the Director of Engineering at Quanergy and also its Co-Founder back in 2012. So I worked in lidar for the better part of a decade. I've seen basically every lidar company start, and here we are today, I've co-founded now 2 lidar companies that are both now public. So bringing a lot of context to the table when in 2015, me and my co-founder, Mark, decided to start Ouster. And there are a couple of major tenets of Ouster. The first is digital lidar. We have consolidated the lidar down onto a custom piece of silicon in the way that so many lidar -- Silicon Valley companies have done across many different markets for the last 70 years, bring about better performance and better economics at the same time, and we paired that with a diversified strategy across markets. So we actually, from the start, have had a major focus on automotive. It's impossible not to focus on automotive in this market. We've been -- automotive for us spans robo taxis, robo trucking, shuttles and buses and consumer ADAS applications. And looking back all the way to their founding documents, we talk about the 4 verticals: automotive, industrials, robotics and smart infrastructure, which you can see here. And the idea is simply that there is a much larger TAM for lidar and for sensing technologies that are related to automation than just in automotive. And so we are going after a bigger opportunity that is more diversified, that we have more control over, and you'll see that our financial results to date kind of back up the fact that we can grow a bigger business more quickly. We have a great leadership team. I'm going to skip over that. And so I talked about differentiated technologies, the digital technology. The second is the diversified business and then the third is the proven ability to execute. We really like focusing on this. When Anna and I took the company public with the rest of the team at the beginning of last year, we had a focus on hitting our numbers. So we stuck to the numbers that we put into our SPAC deck for our first year guidance. We hit that guidance with $34 million in revenue, 27% gross margins, almost 6,500 units shipped and signed 68 strategic customer agreements. So really focusing on credibility. I've been in this industry a long time, and I think that saying what you do and doing what you say is going to go a long way since it's going to be a battle for a long time in the lidar industry. And we have guided -- as of the Q4 earnings, we put out guidance of $65 million to $85 million in revenue for 2022 and 25% to 30% gross margin. So of all the kind of publicly reported companies with guidance this year, we look like we're going to be on top and -- both in terms of margins and in terms of revenue. So we're growing very quickly, 2x-ing year-over-year last year and guiding previously to 2x-ing this year. Just briefly on the digital architecture. This is really important. The digital products condense complexity onto a single silicon chip and advance economics and performance simultaneously. And so this is a paradigm shift for lidar in general that we've made once and that applies to all of our products. So we've taken about 100 -- between 100 and 1,000 discrete analog and digital off-the-shelf components and put this on to a highly complex silicon chip that does everything that lidar needs to do. It runs compute. It triggers the laser. It captures photons. So it's got over [ 100 billion ] transistors dedicated to this, and it's in the square centimeter of silicon. And that turns our product roadmap from one about lidar sensors into one about chipsets, and chipset-based road maps are unique in that they're driven by this exponential law called Moore's Law. And so when you look at our roadmap, we actually show a graph that looks very familiar to other semiconductor companies like NVIDIA, like Apple with their A-Series processors, like Intel before all of them. And it's an exponential roadmap where we tape out new silicon using advancements in semiconductor technology over time to drive exponential improvements into all the products that we produce. And we reduced -- we produced the L2X chip last year, and we're on track with an L3 chip, which is a huge jump in performance for our entire product portfolio. It's been really powerful, and it's one of the ways that we've kind of snuck up on, I guess, our competitors and the incumbents is that the L1 chip, it was okay in market in 2018. It wasn't the most competitive product that you've ever seen, but we've exponentially improved that product 2x the capability of all of the products we have in the field every 2 years or so, and that's now made us really dominant across a wide variety of metrics. So I'll just put this thought in your head. We are automating the global supply chain. You can look at our markets as automotive, industrial, smart infrastructure and robotics, but we are really pushing automation technology through our lidar technology into the global supply chain, which -- whether it's the mine in the agricultural side or the manufacturing facility or warehousing and fulfillment to last-mile delivery, that's all being automated and lidar sensors are really important for that. Lastly, we have a special section on this because we have a special group of 100 people that is dedicated to our automotive ambitions, and we don't want this to be an afterthought for our business. I think we have -- because we are telling a bigger story across multiple markets, it gets lost that we have a huge effort initiative to win the automotive space as well, really high-volume applications. This has always been true of Ouster. And so what we're offering is the only -- the industry's only truly solid state digital lidar systems for the auto market. They're at unbeatable price points, $1,000 for a 5 sensor package on a vehicle. We offer short, medium and long-range sensors because there's a market beyond just long-range forward-looking lidar in this industry. You really want to have advanced feature sets in automotive. You need to have surround your lidar all around the car. So it can look right, look left, move through a 4-way stop and change and merge lanes on the highway. So we have a really unique offering here. We have the only truly solid state products in the market. And again, they're at very low price points that are super aggressive. We have the standard spec table here, but the proof is in the pudding. You can come to our -- if you're interested in investing in Ouster, you can come to our facility and see the line of prototypes driving around the streets. They're very impressive performance. We also have a commercial team that's dedicated to automotive opportunities. We have a strategic development agreement with a major automaker and 5 series production programs under negotiation right now. So I think with that, I will end -- differentiated technology with the digital technology is diversified across markets that expands the TAM significantly, and we've executed quite well. We're doubling the company's revenue year-over-year. We have over 600 customers to date and highest positive gross margins in the industry. We shipped over 10,000 sensors worldwide since we founded the company.

All right. Fantastic. Okay. And I think we can kick it off into Q&A. A good place to start. I'd love to kind of start technology and then move into kind of commercialization and industrialization. And on the technology front, obviously, we've heard from a slew of latter companies today, and the key question which you kind of cited in terms of the closing remarks is, the real differentiation point of the lidar technology. Every lidar supplier is going to say that they've somewhat crack the code. Now digital lidar, to me -- and I'm an automotive lay person, so feel free to correct me if this is more rudimentary. But it really seems like your innovation is more so on the silicon side, perhaps on the semiconductor side than it is on the "true lidar" technology side. Some lidar companies will say that they've made innovations around the receivers or the transmitters or whatever type of technology. Is that a fair characterization with digital lidar? Or are we kind of missing the point?

Yes. I think that's kind of missing the point because the silicon incorporates everything that a lidar does into the silicon. So all the same algorithms, the pixels, the receivers, that's in the silicon. And so we had to advance that in a way that worked with standard CMOS silicon, which is on this Moore's Law trajectory. So everything related to a lidar had to be reimagined to go onto a silicon chip. So we are a -- the engineering team at Ouster is a set of lidar experts that span optics, algorithms, silicon design, laser design. We also do our own laser, custom lasers with VCSEL technology as well. So definitely, there's broad-based IP at Ouster, and we've been granted over 50 patents now. So I think that's proof of that.

Okay. And on that broad-based technology, obviously, you have among the broadest addressable market set. I think that speaks to the applicability of the technology across automotive, industrial, et cetera. When you think about the maybe form factor of what those sensors look like, i.e., what needs to go into a vehicle versus what goes into smart infrastructure versus what goes into automation. Can you talk about like the product set overall in terms of what you're able to offer your various customers?

But in terms of form factor?

Yes.

Yes. So there's a need in the market for sensors that span wide fields of view and short ranges to long ranges and narrow fields of view and kind of everything in between. So we offer flavors. We use the same chips and the same guts, put different optics in front, just like you put a different lens in front of your camera and get vastly different performance to address the short-range wide field of view warehousing scenario versus the long-range highway driving robo trucking scenario. Same chips work, same technology works for both. And in some cases, you can't even tell the products at part that we supply from an outward appearance. Now on form factor. Form factor is like the slimness of a smartphone. There's a point you need to push to get the thing quite small, but then you don't need to push any further. No one is asking for a slimmer phone than like what was achieved in 2015. And so we have the smallest lidar sensors on the market of any company and that has allowed us to address with the same products, drones and Big Mack Trucks. They're using the same sensors actually in a lot of cases because we've got the form factor small enough. So I think that's one thing that's discounted. A lot of companies have gone after maybe like one high-performing lidar for automotive applications and have designed a form factor just for that. It can fit on a car. It can be bigger than normal, but it's never going to go on a drone. And we said, no, let's build to the hardest spec possible in terms of size, weight and power. And digital technology allows us to do that because it's just a more power-efficient and smaller-form-factor technology.

Yes, that's really -- it's a really interesting point around form factor, but I'll kind of segue it into the other key aspect of differentiation across various end markets is, I would argue on the cost side. So your automotive -- automaker customers are very sensitive to cost in a way other end markets perhaps may not be. So can you maybe talk about the different sensors that you're offering and the products that you're offering across the end markets, and maybe how they differ on the price side?

Yes. I think we -- maybe starting with our expectation of margins in automotive. So automotive as a consumer-oriented industry means there's immense price pressure. There's consolidation in the OEMs. So they have a lot of purchasing power and negotiating power. And then there's huge scrutiny in getting down to price points where these driver assistance systems will actually be adopted. And so our margin expectation is around a 25% margin -- gross margin in the auto -- consumer ADAS automotive sector. Whereas, if you look at some other companies, they're saying 60%, 80% margins in auto. And we're just trying to be more realistic, one, because of the history if you look at other automotive companies, and that's what they're achieving; but two, because we want to be aggressive and win the industry. So we will undercut our competitors where needed to win on price. And I think we have a real advantage there. We have lower costs, but we have both lower costs and can hit lower price points given realistic expectations about our margins. And we're offsetting that all because we have really high margin industrial and smart infrastructure and robotics divisions to who we are overall gross margin of the company is like 50%, 60% long term.

So it's almost like the nonautomotive end markets, which are big markets as you've cited kind of serve as the funding point to get the automotive business. Off the ground is not the correct word because it is off the ground already, but to get that automotive business really up and running in a significant way.

We can drive significant volume off of our other 3 verticals and meet the automotive market at a very kind of robust mature stage. We've already shipped over 10,000 sensors to date, and we already outsourced the manufacturing of all of our sensors to Benchmark, in Thailand, our partner. And so we are in a position to scale and then use that scale to benefit our other verticals. So once we move into automotive, where there's millions of units per customer, it gives us a chance to just continue to scale and scale. And with any digital technology, scale is what drives cost very low, much like the digital camera industry. And so in our minds, our technology platform just gives us a winning edge on cost regardless of the vertical, but that's going to be most important in automotive. And then because we're accepting lower margins in automotive, it benefits the margins blended across our whole business.

Yes. And I want to go back to some of the addressable market targets that I believe you gave for 2025, which kind of automotive is a $2 billion market. Several of the others also $2 billion. It's a little bit different than the estimations that have come out from some of the players and every provider, supplier is going to have a different addressable market analysis. But really, the question that I want to ask is, as you look at the addressable market in 2025 and automotive is one piece of the puzzle and the nonautomotive end markets are very important, does that change as you look out into 2030 where the applicability of Level 2+ or Level 3 autonomous capability becomes much bigger and that automotive market in terms of units as it becomes much more mature for you guys really takes off?

It -- actually, it doesn't. It may shift even further in the direction of nonauto. And I use the evidence of other sensor technologies or other sensor markets to point that direction. So if you look at the camera image sensor market, it's dominated by consumer. Obviously, like handsets, like smartphones, but then industrials is 13% of global image sensor sales. The security market is something like 15%, 15% to 20%. And automotive is 8% of all camera image sensor sales. So -- and that's a really mature industry and actually camera technology is pretty mature in auto as well. So it's less than 10% of the overall unit demand for imaging technology. And so it just shows what an immense opportunity there is outside of auto, and I think that we are -- we're showing that we can scale the business now across all these other verticals. And I think that, that volume is going to run away from the automotive volume faster than the automotive opportunity can scale. So -- yes, what we're projecting is roughly $2 billion in each vertical by 2025, and I think that the other verticals may outstrip that automotive $2 billion vertical in the next 5 years. I mean there's $32 billion worth of security cameras that are sold every year. That's a lot. That's an immense opportunity in just one vertical alone, and the unit demand there is like Dorf's, what anything that's in autos.

Yes. So a really interesting perspective relative to some of the other lidar companies. You don't hear that type of commentary. As you think about the addressable markets and the -- you mentioned a lot of times the applicability of your technology across a variety of them. As you think about capital allocation towards technology iterations, product development, is there any one of those end markets in particular? I mean you cited security, that's a big one that really kind of takes the cake or the top priority in terms of where you guys decided to allocate dollars investment towards.

Well, I mean I can start and you can jump in, perhaps. But I mean, I think over the last year, we used the proceeds from our public offering to more than 3x the size of our commercial teams and to make additional investments in our hardware and software engineering groups. And so I think when you think about that 3x investment on the commercial team side, it's investments in sales, support, training, customer service, all of these metrics across all 3 of our regions. So the Americas, the U.S. and -- I'm sorry, the Americas, EMEA and Asia Pacific regions. And so we benefited by seeing growth in all of our verticals and across all of our regions as a result of that. And I think the total addressable market, if you look at our 4 main verticals, and the primary kind of 20 submarkets underneath that, there are probably 100,000 customers there that can be served by lidar. And so the market potential is very significant. And so to your point, it then comes down to like how do you address those markets? What do you go after first, et cetera? And I think we started more recently, Angus mentioned earlier that 34% of our sensors sold were in the automotive market in 2021, about 50% split evenly between robotics and industrial and about 15% in smart infrastructure. And smart infrastructure is an area that we started to invest more in towards the back half of last year, and we announced, I think, about a quarter ago that we signed 110 new contracts, new customers in that area. And so I think there are other areas still that we can invest in and continue to grow and push forward in, but all of the markets are quite large. And so it really is a case of looking at what our resources are in applying them as best we can. But I think over time, as we continue to grow, we're putting up 30% margins already. Soon, we'll be to a point where we're throwing off cash and continue to invest even more structurally in the business over time. So...

And also when we talk about investing and a market opportunity, we're not talking about a specific investment in the hardware roadmap. The hardware roadmap is unified and will stay unified. So -- and that investment is being made, and it's really efficient use of capital to be investing in this flexible set of products that work across all industries. So it's really do we invest in go-to-market teams and software solutions that address specific subverticals and sub use cases. So that's the decision we're making now. We're never sacrificing on the speed of our hardware roadmap, which applies to everything.

Yes, that's a really important distinction. On the go-to-market strategy, obviously, the automotive market is different from the nonautomotive market. Automotive market, you have serious production contracts that run for 5 to 7 years. There's 3 years of development time prior to that. It's very lengthy. On the nonautomotive markets, depending on which market it is, you can have more spot buys. You can have more shorter-term contracts, longer-term duration contracts. Can you talk a bit about the scalability of the go-to-market team? Do you have teams that can work on one market versus another market, switch across markets depending on where the priority is and where the customer set is or interest is really coming from?

Yes. We -- so we have our specialized set of folks for automotive, but right now, our sales teams are regionally focused, and they have playbooks by the use cases and like the common kind of customer types that they can apply. And so it's -- we're trying to keep the sales force as flexible as possible that way. We have specialists that understand certain verticals that are almost like business development specialists that step in and try to help across all regions. Yes, to better navigate the sub domains. So that's the way we're playing it right now. At the point where one of our verticals is generating enough revenue basically to justify a very dedicated team, I think we'll go back to a vertical-based sales team model -- regional plus vertical kind of matrix thing.

Got it. I have a lot of questions around the commercialization side, but before we kind of move off of the addressable market, one of your -- or I guess one of the major lidar players in the space more recently has -- I would argue, made a public kind of pivot away from the automotive space towards the nonautomotive markets, their exact languages. There's Phase 1 of commercialization for lidar, which is nonautomotive. And then there's Phase 2 for automotive, which will happen probably later in the decade. And that refocus in terms of nonauto first and then auto, has that changed the competitive landscape for you in any way over the course of the past year as they've kind of made that pivot? Or rather is it just a function of the technology, you're still winning with the customers and you're not really seeing any impact?

Yes. And I'm not quite sure. There have been a couple -- I think a lot of the companies a year ago have changed their language in the last year around the diversified opportunity. And what's notable is that their auto minded lidar startups that are now admitting that there's something that needs to be done near term. And so pivoting is a cool word, but it's not a fun thing to do if you're a company. You want to try to avoid it, if possible. So we haven't seen -- and it also takes time. So if you want to build a fully new product from the ground up, which they need to do, then that takes a long time. So announcing something is different than actually being in market. We haven't seen anything change in the last year as a result of that change in language.

And I think, too, you have to consider the credibility of that because our architecture is a simplified digital architecture that's lightweight, highly performance, low-cost, you can't put a very large lidar sensor on a drone. You can't put it on a last-mile delivery vehicle. So this idea of kind of having a purpose-built lidar sensor that's very large, very power hungry, and then suddenly just being able to pivot into these other verticals, it just seems unlikely to me. And I think that's what's so distinct and unique about Ouster is that we're able to come in with a very reliable, much smaller form factor product that uses less power and can be used the same CMOS chip is used across all of our product platforms. All of our products look very similar, have the majority of part commonality. What we're talking about with a peer trying to pivot and do something for a drone or a last-mile delivery bot, you're talking about them rearchitecting the entire product from the ground up. And so I just don't know how realistic that is. I think that they're just -- maybe our peers are starting to worry that they aren't gaining customers and revenue quickly enough.

Yes. And just to add on. Product engineering is one aspect of this, but we are signing our customers up to long-term agreements now. It's a major focus for the company, and we've been successful with that. So -- and actually, the long duration and long production cycles in automotive do apply to a large number of industrial and smart infrastructure customers. So a lot of those customers operate on 5- to 10-year production cycles and homologate their systems and then don't want to change them and really want to be locked in. Maybe they don't want to be locked in, but they have to be locked in based on their industry. So that is all a moat that we're building right now.

Yes. And you alluded to it, but it's the next set of questions that I have, which is around your strategic customer agreements, which I think you were referencing. And the last disclosure was something like 70 or 68 at the end of 2021. Can you help the audience or just kind of frame up for us, what is a strategic customer agreement? I mean we in the automotive space are very used to serious production contracts. And is that the strategic customer agreement? It's not the entirety of the projects that you're working on, it's just those that have reached a certain contract phase, correct?

Yes. Yes, that's right. So strategic customer agreements are Ouster's framework for basically going into production with a customer. And so it's -- and there's just no standardization outside of auto, but it's basically the same thing. And so we've put a set of definitions around that. It's useful internally because SCAs include a 3- to 5-year forecast. They include negotiated pricing over the duration of the contract. They include named products. So this can't be some hypothetical situation, but it's named products that the end customer is putting it on with our name products, with the pricing, terms and conditions to sale and then the customers have to have bought product under the contract. So you can't sign something and never have had them pay you and delivery. So those are our criteria to build credibility around the whole concept of SCAs and make them look more like an automotive contract. But then they're used internally for us because we can predict 3 to 5 years out across now 68 customers, what they're going to buy. And they're useful for communicating what the opportunity is looking forward for Ouster to investors and analysts.

And to be clear, it's 68 customers and each of those strategic customer agreements can have, whether it's a certain project in a city or a certain production line for industrial -- okay. So 68 customers in...

Yes. Exactly. 68 customers that are going to be buying on an annual cadence at minimum on an annual cadence. It's growing, obviously. So it's customers really moving into production that aren't spot buys, they're not R&D or something like that. And so we've named a number of these customers like plus AI, a major robotrucking company signed about binding SCA with us for 2,000 sensors, and they have a 3- to 5-year forecast that obviously scaled significantly. We've signed them with Balyo, C-grid, Third Wave Robotics. Those are all industrial customers, making different types of automated pallet moving and warehousing robotics. And we've signed, again, 68. So yes, the idea is, they're moving into production, and they need visibility on availability, terms and pricing as a result of their intentions.

And I think to add to what Angus is saying, what's so exciting for me about the SCA is, our customers are giving us those 3- or 5-year forecast. So we're able to start building predictability into our business. We're starting to understand the ramp in our customers' growth cycles, and that's really important to me because our cost of goods sold per unit is primarily based on volume. And so then it allows me to understand volumes 3 to 5 years out, which allows us to negotiate pricing while preserving the margins that we want, but driving ASPs down as we drive volumes down. And so it allows for a very predictable business with our partner Benchmark it as our manufacturing as well as giving our customers insight, clear insight into how much they'll pay per unit, not only now, but 3 and 5 years from now.

Yes, I can very much see the appeal from your side and that it gives you visibility of what the volume roadmap and the cost roadmap and price roadmap looks like, but there's also a value that's being provided to the customer as well. They know what they are purchasing over the next 3 to 5 years, and it's not lost on anyone in this room, supply chain constraints broadly across a lot of different industries are pretty pervasive. So in some ways, do these strategic customer agreements set the standard for how lidar players or maybe other industry providers participate in some of these nonautomotive end markets going forward?

I think we're definitely showing that it's possible. I mean it's so desirable to sign customers up in this way, and it can be win-win if it's structured right that I definitely think more players will adopt it. I think it's a little challenging as more lidar -- we have pretty good stringent requirements for what an SCA is, and we're very open in what the definition is and repeat it exhaustively. But every earnings call -- but every lidar company is going to have their own definition and maybe some are less stringent. And so that will probably introduce some confusion again, but we'll see.

Yes. I mean for some of the lidar suppliers, I would argue that their pipelines may be pretty expansive in terms of the number of projects that they're working on or number of customers that they're talking to. So I would agree with you a strategic customer agreement as a kind of signed endorsement, but that business is there. Can you remind us where the number of SCA stands versus maybe a year ago and just give the audience a frame of reference on velocity?

Yes, we signed -- we started 2021 with 10, ended with 68. We ended -- so the aggregate opportunity of the 3- to 5-year forecast multiplied by the pricing was about $500 million in revenue opportunity, it's kind of qualified pipeline, it's not binding, but -- and so that's the scale of what we have. So we're trying to make it diversified. That means that no customer is doing more than 5 -- on average, more than -- between $5 million and $20 million in the course of the next couple of years. And we like it that way because we think we can build to just increasing numbers of SCAs and show this really robust diversified customer set.

All right. And then focusing in a bit back on the automotive segment because it's most important for us. Your last disclosure in terms of commercial milestones, I think you showed that slide earlier today, was you got one strategic development agreement awarded by a global automaker and then 5 series production programs that are under negotiation, which I think SOP will be 2025-2026. Are those 2 tied together, meaning 1 global automaker, 5 potential programs? Or should they be viewed separately?

Yes, they're separate.

Okay. Got it. And then that strategic development agreement, as I understand, it was the result of an acquisition of Sense Photonics. Can you talk a little bit about that acquisition? What they were bringing to the table? Was it really the automotive exposure? Or is there something very complementary to Ouster's technology?

Yes. So Sense Photonics was really the only lidar company that we were aware of that's developing digital technology -- digital lidar technology that was very closely aligned with Ouster. And so -- and they had a product strategy that fit with Ouster in terms of short medium and long-range sensors, digital lidar technology, a commercial team dedicated to automotive and about 80 people in the organization with a great engineering team. And so it will -- by acquiring them, we actually accelerated everything related to our solid-state DF sensor line by about a year and accelerated commercial discussions with automakers by about a year. So it was a no-brainer to go after that opportunity because it just fit in so well with what we're trying to do. It was a shared vision.

Absolutely. And then maybe from an M&A perspective, obviously, the lidar market is very volatile. A lot of new, young companies, a lot of new technology, the technology itself is in very early days with respect to commercialization. Sense Photonics, you mentioned, made sense for a lot of different reasons. Is there anything else from an M&A perspective that you would look to, to complement the product portfolio, complement the customer landscape? Just give us a sense around that.

Well, we're not looking -- we feel really good about the hardware roadmap that we have in place and the team that's going to execute on that. OS and DF sensors and this chipset-based roadmap is what's going to work for the next decade. So there -- so no interest in kind of acquiring more hardware technology. There could be opportunities to acquire kind of the software solutions, they're right on top of our hardware. That's the major initiative or new initiative for Ouster going forward on the product side. But we're not looking to make major acquisitions at this point like for a number of reasons, market-based, focus-based -- and we also have a great internal team already of software engineers. So we don't really need to -- everything we've laid out in our vision is possible given our current growth without acquisition.

Great. I'm going to open up to the audience and see if we have any questions. If not, I've got several more that we can keep going right up here.

I just wanted to ask [indiscernible] industrial customers, but also for the auto customers. There's been a lot of lidar presentations, and if you look at camera, et cetera, dual sourcing is the norm now, particularly with the supply chain as it is. Do you think that your technology being so different from everybody else is a disadvantage for dual sourcing? And how do you think about that?

What's interesting is, there isn't dual sourcing in -- there's -- in industrials, for instance, there is major established players for certified industrial lidar systems, a laser safety scanners. It's about a $1 billion market today. And because of certifications, there aren't dual -- there isn't dual sourcing available for a lot of those products, and again, it's a $1 billion industry. So certainly, some customer -- I mean every customer would ideally have perfect dual sourcing, but I don't think that's a barrier so long as you're a credible partner. And I think that's one of the things -- going back to credibility, it's not just about credibility with investors in the market, but it's about customers. First and foremost, we sell safety critical technology. And if you have a good enough reputation, customers will go on the ride with you. So -- but also none of our financials require us to be an 80% market share company.

Any more questions in the audience? All right. I've got a few more, so we can kind of wrap up there. The other key question that I have for you is around the industrialization process. And you -- obviously, you are one of the few lidar companies out there. Velodyne is really the only one, else that is already shipping lidars or sensors. So one, can you just remind us of the key tenets of the industrialization process? You mentioned a couple of times your contract manufacturer, Benchmark. And then how does that help support the customer discussion, because we've heard from Lumina earlier today that cited, it's somewhat a gating factor to their discussions with the automaker partners, which is, you're a young company. We'd love it if you have a Tier 1 or a contract manufacturer that has been validated from an automotive perspective to work with. So how does being in production already, proving the technology works, help in terms of getting your foot in the door with the automaker or any customer for that matter?

Yes. I think it's a huge advantage no matter what customer we talk to at this point. If it's a new customer, we have immediate ship. We have a 2-week shipping lead time right now. So we can just ship product really quickly, and that's highly desirable with the supply chain issues with auto customers. Our facility in Thailand, which is a very large facility, a big, big permanent staff on hand there is IATF 6949 certified for automotive manufacturing standards, and it gets -- we bring auditors in from different automakers, and they got passing marks a couple of times. And so that can be an advantage. Just the general know-how, it builds credibility like the fact that we ship 10,000 units is starting to get into the quantities where automakers pay attention. If you ship 100 units, you ship 1,000 units, they don't really care. But tens of thousands of units, which is where we're going to be at this year, is really a number that is meaningful to an automaker, and it moves the needle for them. It also moves the needle for industrial companies that are looking at putting tens of thousands of these systems out into the world potentially.

Yes. We've got one minute left because we started a little bit late. So I'll ask a question. From a near-term perspective, we spent most of our time talking about the long term, but one of the near-term market dynamics, it's not lost on anyone is the global semiconductor shortage, which never seems to end. It's been going on for the past 18 months. So can you talk about the impact, if any, on your business? It sounds like you have a great manufacturing partner, and more specifically, the impact as you look to scale over the next several years for all of these different growth verticals that you have.

Yes. Well, we don't like -- I think that a lot of companies are using it almost as an excuse for missing certain shipments or whatever. And I know that our VP of Operations, Darien Spencer, would not allow it to be use as an excuse. It's not an excuse, you have to ship. And so there have been headwinds because we have to pay more of the parts, and that's why -- well, yes, because we have to pay more for parts, but our #1 goal is not to ever have a break in our supply, and that's been true so far. And keep in mind, we shipped the second most units of any public lidar company last year and still didn't have a break in supply.

I think we have a very professional manufacturing team who is very serious about ensuring that all customers' needs are met at all times. So we will pay expedite fees, if needed. And we're lucky. We're in -- we have the ability to do that because we have 30% hardware margins in Q4, even on 2,400 units shipped that quarter. So a small number of units because we're an emerging company, but those margins allow us to never disappoint a customer. We can afford to pay more if we have to and to continue to build our business and our trust with customers. It's very important that customers get goods on time, and we do not want to disappoint them ever. So having that really professional team in place, I think, has allowed us to find our way through that without any delays to customers.

It also helps that we -- our BOM count -- part count has been significantly reduced into this one piece of silicon, which we have direct control over. We get the purchase our wafers from a semiconductor fab, and we can purchase the safety stock of 2 years easily and have done so. So that really helps.

But fewer parts is certainly helpful as well. Order of magnitude, fewer parts.

All right. Well, with that, we're out of time, and you guys are closing down the summit. So we very much appreciate your participation, Angus and Anna. Thank you so much for joining, and thank you for everyone for participating.

Thank you.

Thank you.