00:04 Good afternoon, and welcome everyone to Ouster’s First 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. [Operator Instructions] The call today is being recorded. And a replay of the call will be available on the Ouster Investor Relations website an hour after the completion of this call. 00:37 I'd now like to turn the conference over to Sarah Ewing, Director of Investor Relations. Please go ahead.

00:46 Thank you. I'm joined today by Ouster ‘s Chief Executive Officer Angus Pacala and Chief Financial Officer, Anna Brunelle. 00:54 Before we begin the prepared remarks, we would like to remind you that Ouster issued a press release announcing its first quarter financial results shortly after market close today. The company also published an investor presentation which is available on the Investor Relations section of ouster.com. I'd also like to remind everyone that during the course of this conference call Ouster's management will discuss forecasts, targets and other forward-looking statements regarding the company, including statements from its press release, future customer orders and shipments, near and long-term revenue opportunity, market share trends, future products and commercial path, potential future opportunities customer traction, winning an OEM program and the company's business outlook and 2022 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. While these statements represent management's expected future results and performance Ouster's actual results are subject to many risks and uncertainties that could cause actual results to differ materially from current expectations that we may share with you today. 02:01 In addition to any risks highlighted during this call, you should consider the important risk factors and other disclosures that may affect Ouster's future results as described in its most recent annual report on Form 10-K and its other filings with the SEC. Except as 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. 02:25 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. Management estimates are derived from publicly available information released by independent industry analysts and other third-party sources, as well as data from the company’s internal research, and are based on assumptions and computations made upon reviewing such data and its experience in and knowledge of such industry and market. By definition assumptions are subject to uncertainty and risk which could causes results to differ materially from those expressed in the estimates. 03:09 During this call, we may discuss certain non-GAAP financial measures, which exclude the effects and events and transactions we consider to be outside of our core operations. These non-GAAP measures should be considered as supplement to and not a substitute for measures prepared in accordance with GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures, please refer to today’s press release. 03:34 I would now like to turn the call over to our Chief Executive Officer, Angus Pacala.

03:38 Hi, everyone. Following the breakout year in 2021 Ouster continue to bolster its strong position in the market in the first quarter. We maintained positive gross margins, introduced new solutions, delivered on major automotive milestones along our product roadmap and with our strategic OEM partner. We believe these developments will act as catalyst for growth in each of our target industries and to further improve our position in the marketplace. 04:04 At Ouster Automotive we are pursuing a hardware first strategy, focused on winning the multi-billion dollar opportunity to supply lighter hardware into consumer vehicles through the superior price and performance of digital lidar. 04:18 Ouster Automotive announced the Digital Flash or DF series for automotive last fall. The industry's first multi sensor suite of short, medium and long-range solid-state lidars for comprehensive coverage around the vehicle. Just like Ouster’s OS scanning centers and market today, the Digital Flash Series is powered by a single silicon CMOS chip, enabling us to scale performance in line with Moore's Law unlike any other lidar company, while simultaneously dropping cost and complexity. We continue to track towards automotive readiness for our DS Series to support automotive programs starting production in 2025. 04:58 In the first quarter, we announced the Chronos chip, a automotive grade fully custom digital lidar system-on-chip that will power our DS solid-state sensor suite. The Chronos chip is the foundation of the DF architecture and will enable us to deliver more performance, power-efficient and compact sensors to automotive series production programs. We also shipped the first DF A-Sample sensors, delivering on a major milestone in our strategic development agreement with our global automotive OEM partner. 05:28 The plan to present the upgraded A-Sample to over 30 additional auto OEMs, Tier 1s and EV companies in order to unlock new…

10:55 Thank you, Angus. We made substantial gains over the course of 2021, nearly doubling our revenue over the previous year. We continued our momentum in the first quarter of 2022, recording our second highest quarterly revenue of $8.6 million, up 29% over the first quarter of 2021 and aim to double our revenue again in 2022. We shipped 1,550 sensor, a 58% increase over the first quarter of 2021 and produced a record 4,368 sensor, demonstrating our ability to scale to meet market demand. 11:35 As discussed during our earnings call for the fourth quarter of 2021, we expected some revenue variability in the first quarter and remain confident in our commercial pipeline for the year and our ability to continue to win deals and head to head competition across each of our four vertical. 11:55 We delivered gross margins of 30%, up from the 26% gross margins recorded in the first quarter of 2021 and in line with the 30% gross margin recorded in the fourth quarter of 2021. Our proven manufacturing and operations team continue to secure our source material and scale production of our OS sensor despite headwinds from continued supply chain challenges. 12:22 Over the course of the first quarter, our average cost per unit sold was up slightly from the fourth quarter of 2021, primarily due to lower absorption of overhead cost per unit. However, similar to the trend shown throughout 2021, we expect our average cost per unit sold will continue to decline faster than our average selling price as our sales volumes continue to increase. 12:49 We believe Ouster has the highest hardware gross margin profile of our public lidar peer group, validating our leading cost structure associated with our CMOS digital lidar architecture, which enables high scalability and both performance and…

23:21 Thanks Anna. Essential to driving digital lidar adoption in each of our verticals is a desire to improve safety and quality of life, while increasing efficiency, sustainability and equity. Applications powered by digital lidar have the potential to do just that. Our technology is already creating safer conditions for miners and among OEM, engineers at nuclear facilities in Europe and on roadways in the United States and abroad. 23:49 Lidar can help reduce traffic congestion to minimize greenhouse gas emissions or monitor critical infrastructure like railways and power lines. These are just a few of many examples. At scale, the positive impact we can have on society is enormous and starts at home with the actions we take as a company. 24:08 Earlier this year Ouster announced a sustainability program predicated on the founding principle of our company, to innovate and deliver technologies that lead to safer and more efficient vehicles, transportation networks, workplaces and infrastructure for more sustainable and prosperous communities. 24:27 We have formed an internal advisory committee to guide our sustainability program and look forward to reporting our efforts and impact for 2022. In closing, our increased customer traction across each of our four verticals in critical product development, combined with further capital flexibility position Ouster to drive near and long-term revenue growth. We believe digital lidar is uniquely positioned to power societal transformations and become an indispensable part of our day-to-day lives. 24:55 With that I'd like to open it up for Q&A.

25:00 Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] Our first question will come from the line of Tristan Gerra with Baird. Please go ahead.

25:25 Hi, this is Tyler on Tristan. Thanks for taking the questions. First, in light of some supply chain constraints how are you seeing car OEMs projected timelines for the ramp of the lidar industry? Are you seeing any push outs or is everything on track with your prior timing expectations?

25:45 And I'm sorry Taylor. I have a little bit of trouble hearing you, did you say car OEMs?

25:51 Yeah, the car OEM's.

25:55 Yeah, I can take that. Thanks for the question. So I guess if this is a question around the broader industry. Then I think that there is always a subset of companies that are going to fall behind their initial projections, this is not something that is historically true if you look at the at automakers releasing any new technology, but there's also a subset that are still moving forward. And I’d say, the majority of the industry is still moving forward very aggressively into autonomy and lidar. And so, what we see from our conversations is our real effort to stick to their autonomy and electrification strategies and not let any kind of budget restrictions affect that, because it's so core to the business in the future kind of competitiveness of automakers at this point.

26:49 Yeah. Great. For my follow-up, how should we look at your mix by end market this year? I know you talked about some of the growth drivers for each of your end markets, but how should we think of the next, do you expect any material changes from last year?

27:05 I think we are -- we did 34% of our revenue in automotive sector last year and I think that continues to drive a lot of our growth going forward. And we saw the remainder kind of split evenly between the robotics and industrial verticals where we're also still seeing more traction, but I think as I highlighted in my prepared remarks, we're really excited as well about the smart infrastructure vertical this year, which is about 15% last year and that's primarily around, as we said, the 110 contracts that we signed previously that are still continuing to develop and add to our projected revenues this year.

27:48 Okay. Thank --

27:50 Yeah. Just to add a little more color there. Just to add a little more color there. Smart infrastructure, we come back to again and again, because it's -- really it's the true greenfield opportunity for lidar. The other verticals we're operating in, there's a lot of understanding and use of legacy lidar systems. And -- but in smart infrastructure there is kind of unbounded opportunity, because it's a new use case for lidar and there is such a huge market existing there on digital cameras, almost $32 billion of digital cameras sold just in the security, not even talking about smart infrastructure or traffic management or crowd analytics. 28:30 So, absolutely we see things progressing as is, but that's the safe that with roughly equal distribution across verticals, but there is immense potential that we may tap into in smart infrastructure also beyond what we're talking about.

28:51 Great, thanks for that additional color.

28:53 Our next question will come from the line of Brian Dobson with Chardan capital markets. Please go ahead.

28:56 Hi, thanks so much for taking my question. So you pointed to gross margin being up 300 basis points on stronger average sales prices, and you alluded to navigating supply chain issues. Could you just give us a little bit more color on what was driving that pricing power in the quarter? And how you expect pricing to evolve through the balance of the year.

29:24 Yeah, I mean I think we talked a bit about that. We has several new customers entering our pipeline in Q1. And as a result of that, that tend to list our ASP's and I think going forward, we've said that we expect ASP's to fall as we are able to lower our COGS. As we ship more volume. So, if you recall, our cost of goods sold are primarily based on volume increases. We expect to see constant margin improvement as we sell more and more volume and that's just based on our digital architecture. And so we are expecting kind of further improvements to the product line to get to the cost structure that we're anticipating, it's mostly coming from these volume improvement. 30:13 And so over time, historically and into the future we expect that will continue to drop ASP's in line as our COGS drop. And so that gives us a lot of kind of predictability into the business.

30:24 Great, thanks very much. And then you mentioned that customers are still learning their ramp rates and that impacts the timing of quarters, you're expecting more sales in the back half of the year, can you just walk us through the quarterly cadence as you expected.

30:43 Yeah, I mean I think we are really excited about the guidance that we've given, we guided to $65 million to $85 million in revenue, which is nearly a doubling of our revenue over prior year, even at the low end of that guidance. And I think when we talk about what we're anticipating over the quarters, we haven't given quarterly guidance historically, but I think that you can see that there have been trends in our business over the last couple of years, so we tend to have really strong fourth quarters. And so, I think looking forward, what's really important here is that, our guidance is based on our bottoms up pipeline projections. 31:23 So our pipeline supports our guidance. We have over 600 customers, we've signed 72 Strategic Customer Agreements now where we're getting three and five year forecast from our customers. And so, it's really important that you understand the bottoms up projections are supported by those customers in that pipeline. And so I think we're just expecting a similar trajectory to last year where we're seeing many of our larger orders hitting in the second half of the year.

31:53 Excellent. Thank you very much for the additional color.

31:58 Our next question will come from the line of Sam Peterman with Craig-Hallum. Please go ahead.

32:04 Hi guys. Thanks for taking my question. I appreciate all the color in the prepared remarks, I did want to ask on the quarter you just reported. Obviously, revenue is below the fourth quarter and below, kind of what you were anticipating. It's still not very clear to me kind of what drove -- I know you mentioned seasonality, if you give any thoughts on kind of where you saw weakness, either in terms of end market or with any supply constraints or anything like that. Just curious what you saw in the first quarter, the lidar revenues being down a bit.

32:43 Yeah. I mean, I don't think that we saw any weakness in any areas and certainly we haven't lost any kind of head to head deal, major deals with customers. I think when we talked about our projections for 2022, when we gave our fourth quarter earnings update we did say that we expected some variability going into Q1. 33:05 And so, I don't think anything fundamentally has changed in the business. We're still seeing kind of -- we're still signing up new customers, we're still seeing them progress through the pipeline and we get three to five year forecast for many of our customers. And so, yeah, I just -- I don't see any fundamental changing in the business. I think we're really excited about the growth we're seeing in the customers we are working with.

33:34 Okay, fair enough. And then I wanted to follow up on the topic of obviously your sales guidance for the year, kind of asking it in a different way. Obviously, the quarter-over-quarter increases and we acquired a pretty substantial dip to that midpoint guidance. And you mentioned a couple different factors, bookings, your sales pipeline, upcoming products, etcetera. So I just wanted to ask if you could give any color around what end markets are going to drive strength? And how much of that outlook that you have is booked versus -- your line of sight versus you expect to be spot buys any kind of color on your level of visibility at this point would be helpful.

34:26 Yeah, I mean I think we highlighted in our prepared remarks some of the growth that we're seeing around -- in automotive, for example, around the robo trucking industry where we're really emerging as a leader and we're working with several large customers there that gives us a lot of predictability in that submarket. 34:44 And then, on the supply chain automation side, if we talk particularly about warehouse automation where we're signing SBA customers and booking some large spot buys, we continue to see traction in our highway vehicles for applications like mining and agriculture, etcetera. And then, I think also on the Smart Infrastructure side, Angus had given some color earlier in response to a question where we're just seeing additional new deployments and project expansions in 2022 in airports, highways, streets, etcetera. And we're seeing that kind of worldwide across all of our geographies. So I think we remain very excited about this year.

35:27 Appreciate the color. And I'll jump back in queue.

35:32 [Operator Instructions] Your next question will come from the line of Andre Shephard with Cantor Fitzgerald. Please go ahead.

35:40 Hey, good afternoon guys and congrats on the quarter. Can you hear me okay?

35:46 Yes.

35:48 Thank you. Most of my questions have been asked, but maybe to follow-up on the last one there in terms of revenue, right? So with $8.6 million revenue for the quarter, to get to the midpoint of the guidance, which was reaffirmed today, let's call it, $75 million, that leaves about $66 million or so in revenue for the year. So I'm just wondering should we account for the seasonality? Do you expect a bit of like a ramp-up period or is most of the revenue expected in the later quarter? Just a little more color there would be helpful.

36:31 Yeah, I can step in and answer it a little bit differently. So, first and foremost, we have bottoms up revenue pipeline that is -- that supports our guidance for the year, but it's absolutely item-by-item, customer by customer, opportunity by opportunity. That's why we're reaffirming guidance, because we have the opportunities to support it and we are winning those opportunities. So nothing fundamentally changed about the business. We see the business growing and we're reaffirming guidance because of that data, if nothing else. Obviously we are growing the business and we've said that there is going to be a ramp that looks like last year in the second half of this year as well. 37:17 It's just part -- it’s part of doubling revenue year-over-year. The back half of every year is going to be back weighted. But then, there's also potentially some seasonality that we're seeing with customers placing very significant orders and receiving shipments at the end of the year. And then in terms of contribution split by vertical, right now we see roughly equal contribution from the four verticals. And I don't seen the -- last year over the 34% of unit shipped into automotive, with about 20%, 25% for industrials and robotics and about 15% of units shipped in the smart infrastructure. And I don't see a significant deviation from that, may be plus or minus 10% of shuffling between the verticals for this year just depending on which orders they went. So I want to make it abundantly clear, there's a reason why we're reaffirming guidance, we understand there is a significant ramp that happens. But we got the data and we clearly are able to ship against that, we're doing great on the manufacturing side.

38:20 Got it, thanks. Angus. Now, that's very through. I appreciate it. Maybe my quick follow-up is, in terms of the margins, which I know has been asked a little but already. With 30% margins for the quarter, you're already at the top end of your guidance. And you've mentioned that you kind of anticipate maybe those margins to improve. So I'm wondering is that 25% to 30% gross margin guidance, is that all of a sudden may be conservative?

38:57 [Multiple Speakers] I think you're right. Go ahead.

39:02 I'm sorry. Yeah, I think we said in our Q4 earnings three months ago that we were giving ourselves some headroom in our guidance on margin in case of further disruptions in the supply chain. At the time we don't want to -- we never want to be in a position where we have to decide between hitting our margin guidance and shipping to customers, right, and maintaining our continuity of supply. 39:28 So there may be some upside there, but what we've said is, we don't really going to built into two models, because we retain the right to hit the guidance which means falling within that range if we need to keep shipping.

39:46 Got it. Thanks again Angus and Anna, congrats again on the quarter. I'll pass it on.

39:52 Thanks.

39:52 And this does conclude our question-and-answer session. I'd like to turn the conference back over to Angus Pacala for any closing remarks.

40:02 No. Thank you all for tuning in. We're really happy about the year started and we're looking forward to the growth that we're seeing in the business. Thank you all.

40:13 Ladies and gentlemen, the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.