Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ouster Inc (OUST, Financial) achieved a GAAP gross margin of 34%, setting a new operating record.
- The company reported revenues of $27 million, marking the sixth consecutive quarter of meeting or exceeding guidance.
- Ouster Inc (OUST) reduced inventory levels by over 30% and improved annualized inventory turns to over 3.5 times.
- The company repaid all outstanding balance on its revolving credit line with cash on hand, strengthening its financial position.
- Ouster Inc (OUST) saw significant growth in its robotics vertical, securing and expanding relationships with key customers like Serve Robotics.
Negative Points
- Some customer schedules have been pushed to the right, potentially softening near-term growth.
- GAAP operating expenses increased sequentially by 3%, driven by higher stock-based compensation and increased litigation expenses.
- The company expects operating expenses to fluctuate on a quarterly basis due to the timing of R&D project spending and litigation activities.
- Despite strong performance, there is a slight normalization expected in gross margins, which may remain relatively flat sequentially.
- The company faces challenges in integrating complex technology, which can delay customer deployments and impact revenue timing.
Q & A Highlights
Q: Moving up to 40% gross margin is quite an accomplishment. Can you explain the factors contributing to this improvement?
A: Angus Pacala, CEO: Over the past 18 months, we took significant actions such as moving more product to our contract manufacturer, reducing costs, and shutting down facilities. These actions, along with revenue growth and product mix shift, have significantly increased our gross margins. We are now close to our long-term target of 35% to 40%.
Q: Can you elaborate on your software strategy and its impact on gross margins?
A: Angus Pacala, CEO: Our software strategy, particularly through our solutions business, is paying off. We had a record quarter for software-attached sales, which involves customers buying a combination of hardware and software from Ouster. This strategy is driving significant revenue and expanding gross margins, especially in the smart infrastructure vertical.
Q: Do you have agreements with customers that are non-cancellable, and what end markets are seeing pushouts?
A: Angus Pacala, CEO: Yes, we have non-cancellable contracts with customers. The pushouts are broad-based across our industries and are generally due to technical development delays. However, we see growth across all our verticals and are committed to our long-term growth model.
Q: Can you provide more details on the potential for software-attached sales in the smart infrastructure vertical?
A: Angus Pacala, CEO: We had a strong quarter in smart infrastructure, with about a third of our revenue coming from this vertical. We see potential for the majority of our sales in this vertical to be software-attached, driven by our products like Blue City and Gemini, which address major markets such as traffic management and security.
Q: With 40% non-GAAP gross margin this quarter, do you see potential upside to your long-term margin range?
A: Mark Weinswig, CFO: We are very happy with our performance this quarter. While we have a long-term framework of 35% to 40%, we may update this in the future as we see more business move to higher-margin verticals. We are also considering investing some of that margin back into volume with certain customers.
Q: Can you explain the decision to pay down the revolver in Q3?
A: Mark Weinswig, CFO: We focused on improving our balance sheet and working capital management. With a strong ending cash amount of $186 million as of June 30, we decided to pay down the $45 million debt to further strengthen our financial position.
Q: What impact do you expect from the L4 chip on your product offerings?
A: Angus Pacala, CEO: The L4 chip will continue to deliver exponential improvements in our products, similar to the REV7. It will not only produce higher-end products but also reduce costs by absorbing more system complexity onto the silicon chips. This will benefit customers with improved performance, features, and affordability.
Q: Are the delays you're seeing related to macroeconomic factors or technical development?
A: Angus Pacala, CEO: While there may be some macroeconomic impact, the delays are primarily due to technical development challenges. This presents an opportunity for Ouster to build more comprehensive solutions that address these challenges, thereby speeding up time to market for our customers.
Q: Can you provide more color on the growth outlook for Ouster?
A: Angus Pacala, CEO: We see nothing but growth in our future. We are guiding up for the next quarter and are committed to our long-term model of 30% to 50% annual growth. Our diversified business and strong book of business give us confidence in our growth trajectory.
Q: How do you plan to leverage your strong balance sheet for future growth?
A: Mark Weinswig, CFO: Our strong balance sheet allows us to move aggressively in strategic directions if it makes sense for the long-term profitability of the business. We are focused on maintaining a resilient financial position while exploring opportunities for growth and investment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
