Ouster, Inc. Oppenheimer 29th Annual Technology, Internet & Communications Conference

Hi, everyone. This is Colin Rusch. I lead the Industrial Innovation Research practice here at Oppenheimer. We're thrilled to have the Ouster team with us today, Ken Gianella, the CFO, and Chen Geng, the SVP of Strategic Finance and Treasurer at Ouster, and longtime veteran of the company. We may have Angus be able to join us here as well, the CEO. To get started, guys, can we talk about the fact that you've got 14 consecutive quarters of revenue growth and you're sitting at a $55 million plus or minus run rate. As you bring Rev8 into the mix, how are you thinking about the impact to revenue and that product transition from REV7 to Rev8, and how that's going to start translating through the P&L?

Thank you, Colin, and thanks again for hosting us at the event today. It's been a great day. Q2 was really our first full quarter as a unified platform with the launch of Rev8, and we also announced the launch of Stereolabs ZED X Nano. It's a camera specifically for the robotics industry. Really pleased with how the quarter performed. When you look ex royalties product-wise, we outperformed in Q2 than we initially anticipated, and our product revenue quarter-over-quarter for Q3 will be sequentially higher in Q3. Rev8, been very electric, the reception that it's gotten, multimillion-dollar orders already booked. Some from new, some from existing customers. A lot of brand new use cases that it opens up. The bookings, we've been really pleased with that. Rev8 is still in the early stages of its volume production ramps.

We said on the call that we're looking for that to ramp, really getting to scale in the September timeframe as we go through Q3, and then carrying that on to Q4 into the out years. We expect Rev8 to become the core of our sensing platform for the business over the next several years. As product transitions go, this one's probably the longest tail that the company's had in its history. REV7 was a real workhorse for us. It's built into a lot of existing company production platforms already. So we expect that one to have a long tail and be part of our product suite for a while to come. The key for us looking ahead, though, it's really about continuing to grow the full product suite, continuing to grow the platform, Rev8 being a piece, big part of that.

What you're going to start seeing as that growth and potential inflection is that platform play of bringing in compute in the software for the individual applications over the next few years.

It raises a good point around the early stages of growth that you guys are in and the individual verticals that are seeing real adoption. The industrial vertical was the biggest contributor this last quarter, was smart infrastructure. How should we think about the durability, repeatability, and kind of mix shift from vertical to vertical as we go forward, and thinking about repeat orders and the consistency of margins as you see slightly different dynamics in each of those verticals?

Right. Well, I think the one thing we've always talked about is the adoption and cadence is very similar across almost every vertical. You start with a prototype, you move to pilot, you lock into design win, then you scale to production. Once you land and you win that production, you're really expanding and building new use cases at a customer. We have several customers that we've been able to demonstrate that with, even within the early days. I think the largest thing for us, and just focusing on smart infrastructure for a second, is having that end-to-end play. Being able to be no code turnkey solution, think easy button, for these customers is what we're seeing start to emerge, especially within the DOT areas.

For the industrial side, though, it's really about how can you get product to market that's durable and repeatable for the customer in a high quality. The ruggedness that you need within these environments, especially in the outdoor environments, that's what really sets Ouster apart from the competitors. I'm not going to make you pick which one we love the best, but if you think about these deployment schedules, you really got to love the industrial side, because once they get into that logistical production mode, it really takes off and it smooths out a lot of the lumpiness.

You cited multiple multimillion-dollar orders, right? I think I would love to understand the significance of that. Certainly, we've seen a lot of demonstration of the technology integrated into large capital equipment, top AV providers, as well as some of the DOT applications. But the history of LIDAR, in some cases, has been around sampling and smaller order sizes and prototypes. Moving into these larger awards signals something different. I just want to understand that from your perspective and what that means for maturity of the physical AI space and where you sit in that ecosystem.

Well, where we sit in the ecosystem has significantly changed with the acquisition of Stereolabs and bringing the compute piece to it. So we've moved from a single point provider to expanding to a platform player within physical AI for sensing and perception. So being able to come to these companies and provide them not only just a point LIDAR solution, but be able to offer the compute, the software, and a camera. We're already seeing early indications of that really driving us, Colin. As you start looking forward with this, the LIDAR business is really going to be a big driver of their technology needs because the Rev8 brings such a unique component to it that people are starting to build into their platforms.

And where before you had a LIDAR that was great and had the right resolution, bringing revolutionary, speaking of perfect timing for you, Angus, speaking of the revolutionary Rev8 and the RGB that brings to the table. We're seeing these industrial customers call in, want to sign on now because they want to build that as part of their core platform to get that fusion right on the chip. Anything you want to add about the Rev8 launch, Angus, and how that does for industrial Angus, before you get started, let me refine the question a little bit.

We were just talking about the significance of the larger orders that you guys are receiving. As you get into answering, kind of the significance of that for the physical AI ecosystem, the ecosystem here, just want to understand a little bit more about why that's so important for folks, right, from a product differentiation, and what that enables from a system level. If you could address both those.

Yeah, absolutely. So it's important context to remember that we've been shipping a highly competitive REV7 product line for the last three years. We are largely regarded as having some of the best lidar sensors, if not in many cases for different use cases, the best lidar sensors on the market with REV7 for the past three years. That's why we've built such a suite of high-end customers for our history. Rev8 is taking something that's already really a leadership position and making it, I would say, obvious that there's no other choice by bringing even more performance capability and now RGB into the mix. If you've ever done sales, and I do a lot of sales and talking to customers, there's a big difference between a competitive sale and an obvious sale.

When customers are just asking, they are not even debating or comparing against a competitor. REV7, you compare against a competitor, you think about it, you choose the REV7 because it has superior specs. Rev8, it has native color, it is functionally safe. We have long-range, hyper-capable OS1 Max versions. It is an obvious choice that does not have a comparison at all in the market, and that makes the sale even that much more faster, that much easier for us, and that much more confident on the customer to actually just place that order up front. We have seen a series of long-term REV7 customers immediately turn around. They have confidence in Ouster, they see Rev8, and they have signed on board with major multimillion-dollar orders. Just this morning, the Utah DOT is such a great example of this, turned around 160 intersections with OS1 Max Rev8 sensors on them.

This is a brand-new product, brand-new hardware, brand-new software. It is not normal for traffic engineers to deploy this kind of technology at scale when it is this new. They have the confidence because it is built on the Ouster brand, the REV7 reputation, and it has got such obvious benefits with this native color and long-range capability. That is just one example of a use case with what I would call a conservative kind of customer, not a customer that wants to take any chances on quality and capability, reliability, and yet they have the confidence in Ouster. That is playing out across all of our industrial customers, all our smart infrastructure customers. They are seeing Rev8. They know it has got the capability and the quality that Ouster has become known for, and then they see native color performance, and it just becomes an obvious decision to adopt.