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

Good morning and welcome to Ouster's L3 Chip Release and New Product Launch. [Operator Instructions] [Presentation]

I'd now like to turn the conference over to Sarah Ewing, Director of Investor Relations. Please go ahead.

Thank you. I'm joined today by Ouster's Chief Executive Officer, Angus Pacala and Chief Financial Officer, Anna Brunelle. Before we begin the prepared remarks, I'd first like to remind everyone that during the course of this conference call, Ouster's management will discuss forecasts, targets and other forward-looking statements regarding potential future customer orders and Ouster's business outlook that are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. While these statements represent management's expected future results and performance, Ouster's actual results are subject to many risks and uncertainties that could cause actual results to differ materially from current expectations that we may share with you today. In addition, you should consider the important risk factors and other disclosures that may affect Ouster's future results as described in its most recent annual report on Form 10-K and its other filings with the SEC. Except as required by law, rule or regulation, the company undertakes no obligation to update any of these forward-looking statements for any reason after the date of this webcast. I'd now like to turn the call over to Angus.

Thank you all for joining us today, and I hope you enjoyed the video. I've been waiting all year to reveal our groundbreaking L3 chip and with it, our upgraded REV7 sensors, including our all-new hemispheric sensor, the OSDome. To encourage the adoption of lidar at mass scale, sensors must be both performing and affordable. Digital lidar achieves both and is a critical technology to usher in the era of autonomy from our roads and cities to nearly every part of the global supply chain. Our focus on digital semiconductor design continues to set Ouster apart in the lidar industry. Digital products aligned with the exponential performance path of Moore's Law to steamroll analog technologies. They dominate in both price and performance in the lidar industry is no exception. Ouster's new fully custom and proprietary L3 system-on-chip builds on years of innovation here. The L3 chip brings backside illumination technology to the high-performance lidar industry for the very first time, a technology which has already revolutionized the digital camera industry. With 10x the photon sensitivity of the L2X and 125 million transistors on the chip, our L3 powered REV7 sensors provide a massive performance gains of range, resolution and precision and new features to offer to our over 600 customers. The benefits of REV7 will resonate far beyond our current customer base, increasing our overall competitiveness across markets, opening up new opportunities and cementing our position as an industry leader. REV7 more than doubles our collective serviceable attainable market or SAM, primarily driven by new opportunities for longer range and mapping applications. This is our largest expansion in SAM since first entering the market and a game changer in our ability to win and expanded set of deals. Our REV6 sensors powered by the L2X chip provided the market with an incredible combination of size, weight, performance and reliability and the L3 powered REV7 takes that all to another level. With the REV7, we offer the highest performing family of sensors in the market with incredible range, precision and accuracy across the entire OS lineup. Our OS0 now delivers 1.5x more range and 6x higher resolution than our competitors. Our OS1 delivers 2x more range and 4x higher resolution than our competitors and our OS2 not only achieves greater than 200 meters range on 10% reflective objects, but now has a maximum range of over 400 meters. With the extended range of REV7, we're unlocking an all-new category of long-range and higher-speed use cases, essential for many robotaxi, shuttle bus and truck operators. The REV7 OS2 opens up the unique ability to track vehicles and objects beyond a core mile in all directions. The 10x signal improvement of L3 also improved near range detection. Automotive and industrial customers alike can expect incredible detection performance on challenging objects such as tires, black cars, cables, fencing or forks on a forklift. This also makes REV7 an excellent fit for mapping applications with a combination of longer range, high point density and upgraded precision are based on direct feedback from this customer set. And then there's the OSDome. With the OSDome we have a new competitive edge in deals. In the industrial vertical, the OSDome's hemispherical field-of-view delivers greater vertical visibility to autonomous mobile robot operating in warehouses, ensuring customers are able to detect objects directly above or below their vehicles. We expect this new offering to speed expansion into the estimated $15 billion warehouse automation market. Within the Smart Infrastructure vertical, the OSDome is designed to meet the unique requirements of the security and crowd analytics submarkets currently dominated by digital and thermal cameras. $32 billion are spent each year on security camera hardware alone. The OSDome offers the ability to cover a wider -- a wide area with accurate 3D object classification and tracking, while preserving privacy to augment or replace existing camera systems. We expect to see the OSDome protecting critical infrastructure such as warehouses, data centers, commercial buildings and residential properties as well as analyzing pedestrian movement in high-traffic venues like stadiums, shopping centers, airports, retail stores and quick-service restaurants. With each new product release, each exponential jump in digital performance and each new customer and market we expand to, Ouster is extending an already formidable lead in the lidar industry. We're seeing incredible interest in REV7 from our customer base, and I can't wait to begin shipping broadly this quarter. And with that, I'd like to open it up for Q&A.

[Operator Instructions] Our first question comes from Sam Peterman from Craig-Hallum Capital.

I wanted to ask on the OSDome. It's a really cool design. And I know you talked before about kind of lidar going everywhere a cameras is and this looks like it's designed to do exactly that. And I guess I'm curious kind of about the go-to-market strategy with that? Is that going to be cost competitive or close to it with camera solutions? Or how do you think about where you can start to win with that product and when and why you're going to win there?

Yes, absolutely. That's a great question. So you're absolutely right. The OSDome is positioned to be a drop in replacement for the fisheye cameras that you see mounted ubiquitously around infrastructure that we navigate each and every day. And what's interesting about that $32 billion of spend every year in security hardware alone is there's a lot of stratification in pricing. So there's a high end to midrange and the low-end range to that market. And we are squarely in the mix with our pricing. The cost structure that we have with the OSDome is the same cost structure we've established with digital lidar, which is really much more aligned with digital camera technology than with historically analoged lidar technology. So yes, absolutely, we're going to be very competitive with pricing and the product attributes are going to be this fantastic drop in replacement for many camera systems.

Okay. I wanted to ask just broadly with this new chip. I guess kind of a 2-part question. Can you talk a little bit about what back-side-illumination is and what that lets you do? I guess, where that drives improvements? And then also kind of how power levels compare in this new chip with your old chip, I think that's something that customers had been looking for, I think, was a little bit of a lighter power draw. So I'm curious how the new set of product stacks up on that as well.

Yes. So the latter question first. So we've made a significant improvement in power draw. We haven't released the exact number for the chip. The chip is more power efficient. It's -- what it's allowed is a 10 Celsius temperature improvement to the entire sensor lineup. So that's the end effect for customers, and that's brings us well aligned with any other lidar offering. So it's a really good number, 70c upper operating range. In terms of back-side-illuminated technology, that -- so back-side-illuminated refers to a 3D die stacking technology. It's actually a 2 wafer semiconductor chip, where you bond to micron level wafers together where the top wafer is the photosensitive layer and the bottom wafer is the digital logic layer. And this is the technology that is operating in any modern smartphone it has for about the last 5 years. And it's what's brought around the incredible photosensitivity that's allowed for low-light imaging and camera phones for exact example. And so that same photon sensitivity is what allows a lidar to see even a digital or to see twice as far with better position, with better accuracy and all with lower power draw, while consuming less laser power to do so. So it's a really incredible technology at this micron level, a 3D die stacking technology where you're banging 2 silicon wafers together that's allowing for this higher photosensitivity and thus higher performance in the product.

Got you. Okay. And then last one just real quick, you showed the FPGA that you're using from Xilinx. Is that -- I guess have you thought about as part of your road map doing your own ASIC and designing something like that yourself? Or is that not really part of the road map at this point?

No, that's a great question. There absolutely is a progression to this technology where we'll have products that have a custom ASIC eventually. That is -- this is one of the -- we chose to show a little more detail around that because, a, it's an important part of the system today that customers are interested in. But b, it also shows that there's still significant headroom for additional consolidation. And I'd remind everyone that we are the -- our cost structure is second to none in this industry. We have the only positive gross margins right now in the public lidar industry. And so -- but there's obviously -- there's more BAM consolidation through additional silicon integration still left on our road map.

Our next question comes from McClain Culver from Rosenblatt.

It's Kevin Cassidy from Rosenblatt. And I just had a question -- congratulations on the L3, very impressive. Will it be used for the DF series also?

Thanks for the question. We're focused on REV7 right now. We haven't -- what we've previously said is that the DF sensors are powered by the Chronos chip. So I guess those are 2 different chips, L3 and Chronos. But you can imagine every bit of learning that we've garnered in the last almost decade of digital design is being applied to the Chronos architecture as well.