Ouster, Inc.

Hello and welcome to Alster's first quarter 2024 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 one on your telephone keypad. If you would like to withdraw your question, press star one again. The call today is being recorded and a replay of the call will be available on the Alster Investor Relations website an hour after the completion of this call. I'd now like to turn the conference over to Chen Gang, VP of Strategic Finance and Treasurer. Please go ahead.

Good afternoon, everyone. Thank you for joining us for our first quarter 2024 earnings call. I am joined today by OUTSER's Chief Executive Officer, Angus Bacala, and Chief Financial Officer, Mark Weinswig. Before we begin the prepared remarks, we would like to remind you that earlier today, Aster issued a press release announcing its first quarter 2024 results. An investor presentation was published and is available on the investor relations section of Aster's website. Today's earnings call and press release reflects management's views as of today only and will include statements related to our business and financial outlook that are forward-looking statements under the federal securities laws. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business. For a discussion of the material risks and other important factors that could impact our actual results, please refer to the company's SEC filings and today's press release, both of which can be found on our investor relations website. Any forward-looking statements that we make on this call are based on assumptions as of today and, other than as may be required by law, we undertake no obligation to update these statements as a result of new information or future events. Information discussed on this call concerning Alster'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 analysts and other third-party sources, as well as data from outsourced 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 could cause results to differ materially from those expressed in the estimates. During this call, we will discuss certain non-GAAP financial measures. These non-GAAP financial measures should be considered as a supplement to, and not a substitute for, measures prepared in accordance with GAAP. For a reconciliation of non-GAAP financial measures discussed during this call to the most directly comparable GAAP measures, please refer to today's press release. I would now like to turn the call over to Angus.

Hello, everyone, and thank you for joining us today. I'll start with a brief recap of the quarter, overview of the market, and update on our strategic priorities. Mark will cover our results in more detail before I close with some final thoughts. In the first quarter, we continued to build upon the positive operational momentum that we generated throughout 2023. We reported record revenues of $26 million, which was at the high end of our guidance range. This represents growth of 51% year over year, and our revenues exceeded an annualized run rate of $100 million for the first time in Ouster's history. Our customers' continued adoption of REV7 sensors, combined with our operational leverage, drove non-gap gross margin expansion to 36%, which represents our highest level to date. During the quarter, we closed on numerous large deals in our smart infrastructure and industrial verticals. Within Smart Infrastructure, we continue to extend our collaboration with a leading global logistics company to install additional REV7 sensors and Ouster Gemini at their distribution yards. We see potential for further expansion as we are currently deploying our solutions on only 5% of their global footprint. Moreover, we estimate that this single customer represents only a fraction of the market opportunities for this use case. Last year alone, 10 of the largest retail and logistics companies collectively invested nearly $50 billion in capital expenditures. Our Gemini solution is designed to offer a myriad of benefits, such as reducing operating costs, boosting operating efficiency, fortifying perimeter security, enhancing workplace safety, and alleviating labor constraints. We believe that these compelling value propositions will help secure an increasing portion of this spend. The industrial vertical is a perfect example of our belief that ultimately everything that moves will become autonomous. During the first quarter, we landed million-dollar deals to bring RES 7 to agriculture and port applications. Within agriculture, we see the potential for agricultural automation to become one of our largest end markets. Based on industry data, there are over 2 million tractors sold each year. Assuming two sensors per vehicle, each 1% penetration rate represents 40,000 sensors, or nearly triple the amount of sensors to be sold during 2023. Our solutions also bring a convincing value proposition to ports around the world. TruePut imports globally surpassed 850 million containers in 2023. Our solutions can enable increased efficiency in tasks such as container positioning, tracking, collision avoidance, and twist lock detection. By saving one second per container, we estimate that ports can move an additional 20 million units per year. At an average terminal handling charge of $500 per container, this represents 10 billion of incremental revenue for the port industry. Governments worldwide are investing in their infrastructure and the U.S. alone has committed to spending over $20 billion on U.S. port infrastructure over the next five years. We feel well-positioned to capitalize on this investment. Turning to our strategic business priorities for 2024, our first priority is to expand software and grow the installed base. During the first quarter, Ouster trained a new deep learning perception model that advances our ambition to become a world leader in LiDAR-powered perception solutions. With enhanced operating performance, our Gemini and BlueCity customers now benefit from improvements to object detection at longer distances and multiple object tracking accuracy. We continue to expand Ouster Gemini and BlueCity deployments and close millions in software-attached sales in the first quarter. Ouster collaborated with a recipient of the U.S. Department of Transportation SMART grant to empower pedestrian safety improvements, near-miss detection, traffic counting, and traffic flow analytics. Compared to competing solutions, Ouster provides superior all-weather performance, privacy protection, and the ability to accurately detect and classify multiple types of road users. With over 300,000 signalized intersections in the U.S. alone, we view the market for intelligent transportation systems as a tremendous future growth opportunity. Our smart infrastructure team also recently attended major industry events, including the United States' largest security trade show. There were a few anecdotes that I'd like to share. First, one of the world's largest retailers noted that Ouster was one of the true gems of the show, while one of the largest security integrators in North America said Ouster was the most interesting technology he had seen in 20 years. This positive feedback reinforces our conviction that LiDAR is poised to become the preeminent technology for the next generation of smart infrastructure applications. Turning to hardware technology, Ouster continued to execute on its product roadmap in the first quarter. We introduced new firmware designed to enhance the performance capabilities of our REV7 sensors and coincides with heightened interest for AI and robotics customers. Delivered over the air, the update supports improved accuracy and zero minimum range and will enable operations in tighter spaces and closer proximity to other objects. Our next generation L4 custom silicon chip is taped out and is expected to bring significant improvements in performance, reliability, and manufacturability, along with safety certifications to the OS sensor family. We continue to develop our automotive-grade custom silicon and plan to integrate the Chronos chip into our final form factor solid-state digital flash, or DF, sensors in the next year. DF represents a first-of-its-kind, truly solid-state, compact, affordable, and performant family of automotive-grade LiDAR sensors. Finally, we progressed on our long-term financial framework during the first quarter. Our first quarter revenue growth at 51% and margin expansion to 29% align well with the parameters we have laid out. While we are pleased that our gap operating expenses of $33 million were 14% lower than the third quarter of 2023, we do expect our gap operating expenses to fluctuate quarter to quarter, primarily due to changes in non-cash stock-based compensation expenses and other items. we continue to look for further opportunities to optimize our cost structure and reduce our cash firm. The first quarter marked strong operating results and progress on all three of our strategic business objectives. I'll now turn the call over to our CFO, Mark Weinswig, to provide more context on our financial results for the first quarter.