Ouster, Inc.

Good afternoon and welcome to Ouster's third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After today's presentation and remarks, there will be an opportunity to ask questions. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. The call today is being recorded and a replay of the call will be available. on the Oster Investor Relations website an hour after the completion of this call. I now would like to turn the conference over to Sarah Ewing, Director of Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Thank you for joining us for our 2022 Third Quarter Earnings Call. I'm joined today by Oster's Chief Executive Officer, Angus Bacala, and Chief Financial Officer, Ana Brunel. Before we begin the prepared remarks, we would like to remind you that earlier today, Alistair issued a press release announcing its third quarter results and its proposed merger with Belladine. The company also published an investor presentation, which is available on the investor relations section of Alistair.com. I'd also like to remind everyone that during the course of this conference call, Alistair's management will discuss certain forward-looking information regarding the company, including forecasts, targets, statements from its press release, potential future customer orders and shipments, near and long-term revenue opportunities, strategic customer agreements, market share trends, the company's proposed merger of equals with Belladine, ability to recognize the benefits of cost-saving initiatives, future products, anticipated benefits and applications of new product releases, technological advancements and commercial paths, potential future market opportunities, customer traction, and the company's business outlook and 2022 financial guidance and trajectory that are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements and should not be regarded a representation that such plans, estimates, and expectations will be achieved. Thus, while these statements represent management's expected future results and performance, OUTSER's actual results are subject to subtle risks and uncertainties that may cause actual results to differ materially from current expectations that we may share with you today. In addition to any risks highlighted during this call, you should carefully consider other important risk factors and disclosures that may affect OUTSER's future results as described in its most recent annual report on Form 10-K, quarterly report on Form 10-Q, and other reports the company files with or furnishes to the FCC. Except it's 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 call. Lastly, information discussed on this call concerning the company's industry, competitive position, and the markets in which it operates is based on information from independent industry and research organizations, other third-party sources, and management estimates which are derived from publicly available information released by independent industry analysis and other third-party sources, as well as data from the company's internal research and are based on reasonable assumptions and computations made upon reviewing such data and its experience in and knowledge of such industry and markets. By definition, assumptions are subject to uncertainty and risk, which would cause results to differ materially from those expressed in the estimates. During this call, we may discuss certain non-GAAP financial measures which exclude the effects of events and transactions we consider to be outside of our core operations as outlined in our press release. These non-GAAP measures should be considered as a supplement to, and not a substitute for, measures prepared in accordance with GAAP. For reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures, please refer to today's press release. I'd now like to turn the call over to Angus.

Thanks, Sarah. Good afternoon, everyone, and thank you for joining us today. Ouster had a terrific third quarter. We delivered over $11.2 million in revenue, our second highest quarter ever, representing a 44% increase over the third quarter last year. We shipped 2,136 sensors worldwide for an average selling price of $5,246 and did so while also recording the highest gross margins in Ouster's history at 33%. We continued to grow our business with approximately 80 new customers, bringing our total 12-month customer count to approximately 700 across over 50 countries. We signed four new strategic customer agreements, or SCAs, during the third quarter, bringing our total current SCA count to 84. While we delivered strong quarterly growth supported by our world-class commercial and operations teams, We also executed on our product roadmap and doubled our serviceable, obtainable market through the launch of our breakthrough L3 chip, our upgraded OS sensor suite, Rev7, and with it, our all-new OS Dome sensor. This is our largest expansion in SOM since first entering the market and a game changer in our ability to win an expanded set of deals. Our focus on digital semiconductor design continues to set us apart in the LiDAR industry. Digital products align with the exponential performance path of Moore's Law to eventually displace legacy technologies. Engineered with state-of-the-art 3D backside illumination, the L3 chip packs an incredible amount of processing capability within a compact eye area. With 125 million transistors on chip and a maximum computational power of 21.47 gigamax, the L3 is capable of counting and processing approximately 10 trillion photons per second. This allows the sensor to output up to 5.2 million points per second while consuming less power than previous generations. A 10x increase in photon sensitivity enables our REV7 sensors to deliver 2x increase in range, a 50% improvement in precision, and a 7x improvement in object detection. And the new features that we can now offer are approximately 700 customers and many more prospective customers across our fast-growing markets. With the extended range of REV7, we're unlocking an all-new category of long-range and higher-speed use cases, essential for many robotaxis, shuttle, bus, and truck operators. The REV7 OS2 opens up the unique ability to track vehicles and objects beyond a quarter mile in all directions. The 10X signal improvement of the L3 also improves nearer range detection. Automotive and industrial customers alike can expect incredible detection performance on challenging objects such as tires, black cars, cables, fencing, or the forks on a forklift. This also makes REV7 an excellent fit for mapping applications, where the combination of longer range, high point density, and upgraded precision are based on direct feedback from this customer set. We are seeing incredible demand for REV7 from our customers. Ouster's first REV7 customer signed a multi-year SEA for several hundred OS1 and OS0 REV7 sensors through 2023. After working with us for some time, the performance and reliability increases of REV7 made it the clear sensor of choice for scaling production of their commercial applications, including transit buses, Class 8 trucks, and yard trucks. We are also seeing traction with early adopters of the OS dome, including some of the world's largest companies, one of which has already ordered several hundred sensors for initial rollout of crowd analytics technology in their retail stores. Our partner, SkyFi, a global software technology company, is also an early adopter of the OS Dome and plans to offer the sensor as part of its crowd analytics solution to help businesses enhance the guest experience, boost revenue, and optimize operational efficiency. SkyFi and Ouster have double active crowd analytics deployments across the globe, including at international airports, major event venues, and retail stores. With the unique capabilities of the OS Dome, we are better positioned to sell into more use cases and scale deployments with existing customers. We're thrilled with the product performance of our new REV7 suite and fantastic early response from customers. We're excited to get the products into more hands this quarter as we ramp production and shipments. The benefits of REV7's performance upgrades will also support Alster's recently released 3D industrial sensor suite, configured to meet the unique requirements of forklift, port equipment, and autonomous mobile robot manufacturers, with high volume pricing to enable adoption on production fleets. Complemented by the all-new OS Dome with a hemispherical field of view for floor-to-ceiling and wide area coverage, our industrial sensors are an excellent fit for material handling applications. We expect these new offerings to accelerate expansion into the estimated $15 billion warehouse automation market. With the incredible range and precision improvements of the L3-powered REV7, we now offer the highest-performing family of sensors on the market. It also provides a glimpse of what will be possible by applying the same advancements to our upcoming digital flash or DS sensors for automotive applications. The advancements in the L3 architecture paved the way for Ouster's upcoming Chronos chip. the automotive-grade, fully custom digital LiDAR silicon receiver that will power our DF sensors, which is slated to be integrated into the first DF units in 2023. Automakers and Tier 1s alike have responded with consistent amazement after seeing the incredible performance of our first DFA samples and are eager to begin testing with B samples next year. While product features and performance upgrades will represent major growth drivers for our business for the foreseeable future, We also have a significant access on which to catalyze new business, vertical specific product and safety certifications, as well as software solutions. We're on track to achieve ASIL-B and IATF 16949 functional safety certifications for automotive, SIL-2 safety certifications for industrial, and NEMA TS-2 certifications for smart infrastructure applications within the next 12 to 24 months. The mechanical and electrical upgrades we made to our OS sensors with REV7 put us even closer towards achieving these market-expanding certifications. These included reducing their power draw and doubling their resistance to shock and vibration while maintaining the same small, lightweight, and power-efficient form factor design of previous generations. All REV7 sensors include approximately 95% automotive-grade components. feature an upgraded FPGA that is qualified for functionally safe automotive and industrial applications, and offer an option for a 1,000 base T1 automotive ethernet. We also see an immense opportunity to speed our customers' time to market, build stickiness, and drive higher margin revenues through verticalized software solutions. We continue to build a robust software ecosystem built on three foundational pillars, a best-in-class software development experience that provides resources and tools to reduce our customers' time to test, validate, and integrate our sensors, an expanded partner platform to bring targeted solutions to our customers, and verticalized software solutions that drive new customers and higher margin revenues. In the third quarter, we released an updated version of the Ouster SDK and new firmware. We continued to expand our partner platform and started working with Applied Intuition, a provider of software solutions for autonomous systems development, including sensor simulation, to create, test, and release synthetic models of our LiDAR data to empower customers to generate synthetic data that accelerates the deployment of perception systems. This is just the beginning of what's in store for our software ecosystem, and we're excited to share more about it early next year. I'm as confident as I have ever been in our ability to make Alster's digital LiDAR the sensors of choice across autonomy and intelligent infrastructure applications. I believe we have a clear and winning strategy to make our technology more affordable more performant, and more ubiquitous. That said, execution on our strategy requires thoughtful capital management. With this in mind, we took proactive steps to optimize our cost structure and reduce our gross cash spend in the third quarter. While these steps bolstered our cash runway and path to profitability, we are taking advantage of another exciting opportunity to accelerate the adoption of LIDAR across fast-growing markets and further strengthen our financial position, merging with Belladine. This morning, we announced our plan to merge with Belladine in an all-stock merger of equals transaction that is expected to drive significant value creation for our customers, our company, and our shareholders. As one combined company led by me as CEO and Ted Tewksbury as executive chairman of the board, we will be a leading LiDAR company with a deep history, strong balance sheet, industry-leading technology, and world-class commercial organization. Together, we can offer robust product offerings, including verticalized software to serve a broader set of customers. We expect the proposed merger to unlock significant synergies, creating a company with the scale and resources to deliver stronger solutions for customers and society, while accelerating time to profitability and enhancing value for shareholders. Overall, this proposed merger accelerates our ability to reduce product costs through volume purchasing and scaled manufacturing, develop a combined product roadmap of low-cost performance sensors that aligns with the future needs of the market, cast a wider net to reach a broader set of customers, and strengthen our competitiveness against other established sensing modalities like cameras and radar. We're excited to build on both of our strengths and look forward to providing the market with more information around the combined company strategy upon closing, which is expected in the first half of 2023. For more information on the proposed merger, please refer to our joint release and webcast published on both company websites earlier today. I'll now turn it over to our CFO, Ana Brunel, who will provide an update on our third quarter performance and our expectations for the remainder of the year.