Ouster, Inc.

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, press the pound key. The call today is being recorded and a replay of the call will be available on the Alsters Investors Relations website an hour after the completion of this call. I'd now like to turn the conference over to Chen Geng, VP of Strategic Finance and Treasurer

Good afternoon, everyone. Thank you for joining us for our second quarter 2024 earnings call. I am joined today by OUTSER's Chief Executive Officer, Angus Bacala, and Chief Financial Officer, Mark Weinsteig. Before we begin the prepared remarks, we would like to remind you that earlier today, OUTSER issued a press release announcing its second quarter 2024 results. An investor presentation was published and is available on the investor relations section of OUSER's website. Today's earnings call and press release reflect 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 OUTSER's industry, competitive position, and the markets in which it operates is based on information from independent industries 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 OUTSER'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 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 financial results in more detail before I close with some final thoughts. Our second quarter results showcase solid execution as our GAAP gross margin increased to 34%, setting a new operating record for Alster. We reported revenues of $27 million, representing the sixth straight quarter we have met or exceeded our guidance. We are also making our business more efficient. Since the first quarter of 2023, we have reduced our inventory levels by over 30% and improved our annualized inventory turns to over three and a half times from under two and a half. Alongside the continued improvement in our operating results, we have built one of the industry's most resilient balance sheets and diversified business models. Subsequent to the end of the quarter, we repaid all outstanding balance on our revolving credit line with cash on hand. During the second quarter, we saw strength in our robotics vertical, which accounted for many of our largest deals. We secured and expanded our relationship with CERV Robotics, a leading developer of advanced AI-powered delivery robots. Ouster's REV7 sensors are designed to support a Level 4-capable fleet that makes on-demand delivery more affordable and accessible. We look forward to supporting CERV's planned fleet expansion across multiple U.S. markets by the end of 2025. Also within robotics, we won deals with two of the world's leading mapping companies to improve how their billions of users explore the world. These customers are expanding their REV7 deployments to refresh and upgrade their mapping fleets with increased range, accuracy, and precision. REV7 took mapping to a whole new level at the Paris Olympics, where fans engaged in new immersive experiences that brought them closer to the games. Reflecting our focus on software solutions, software-attached sales were a highlight in the quarter as we won deals to power perimeter security, intelligent transportation systems, and crowd analytics. With Ouster Gemini, our customers are able to detect and classify objects, conduct real-time tracking, protect secure zones, and automate alerts for security threats. Compared to traditional security solutions, Gemini can significantly decrease false alarms, reduce labor constraints, and enhance intrusion detection capabilities in a wide range of environmental conditions. I am excited about the additional software opportunities we have in the pipeline for the second half of 2024. Touching on the current demand environment more broadly, we are encouraged to see expanding deployments with existing customers, as well as evaluation projects with new customers. Consistent with broader macroeconomic and industry trends, we have also seen some customer schedules push to the right. Despite these schedule changes, which may soften near-term growth, we expect our strong margin and operating expense performance to keep us on track to deliver on our path to profitability. Turning to our strategic business priorities for 2024. Our first priority is to expand software sales and grow our installed base. In the second quarter, we secured deals to supply Ouster Gemini, our smart infrastructure software solution, to one of the world's largest consumer technology companies, as well as a global telecommunications company. During the quarter, our software team also improved movement detection for security customers, optimized software processing requirements, and enhanced our deep learning perception model to support new use cases, such as identifying unauthorized individuals tailgating into restricted areas. The second quarter also marked one of our best quarters for software-attached sales. We increased our deployments at distribution yards as Gemini and Red7 are helping drive immediate ROI for our customers, in addition to providing safety and operational optimization. We signed Gemini deals for multiple other use cases, such as material handling, crowd analytics, and perimeter security applications. Turning to our digital LiDAR hardware roadmap, we have taped out our automotive grade custom silicon chronos chip and expect to integrate chronos into our solid state digital flash DS sensors in the next year. Concurrently, we advanced the development of our next generation custom silicon for OS sensors, the L4 chip. The L4 silicon is back from fab and validation testing is underway. Both Kronos and L4 are expected to open up new verticals and bring significant improvements in performance, reliability, and manufacturability to the Oster product family. Finally, our second quarter results demonstrate solid execution and progress on our path to profitability. Our gross margins are now approaching the range provided in our long-term financial framework, and we have maintained a low-cost structure while achieving significant year-over-year revenue growth. we remain on track to deliver the financial metrics necessary to reach profitability. In summary, the second quarter showcased our execution 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 second quarter.