Q1 2024 Summary
Published Jan 21, 2025, 4:19 PM UTC- Strong Revenue Growth and Margin Expansion: Ouster reported record revenues of $26 million in Q1 2024, representing a 51% year-over-year growth. They are tracking towards their long-term framework of 30%-50% annual revenue growth and 35%-40% gross margin. Additionally, they achieved a 36% non-GAAP gross margin in Q1 2024, the highest level to date.
- Record Performance in the Automotive Vertical: Ouster had a record quarter in their automotive vertical in Q1 2024. With the development of their next-generation DF sensors, designed to be low-cost, solid-state, high-performance products suitable for automotive applications over multiple decades , Ouster is well-positioned to capitalize on opportunities in the automotive and robotaxi industries despite timelines pushing out.
- Expansion into High-Margin Software Solutions: Ouster is focusing on expanding their software offerings like Gemini and Blue City, which are expected to contribute to higher margins in the long term. The software business is becoming a central strategic pillar, providing new revenue streams with higher margins and increased customer stickiness.
- Automotive production timelines are being pushed out, potentially to 2028, indicating delays in revenue opportunities from this sector. Ouster acknowledges that customer adoption of lidar technology is a significant challenge and that timelines in the automotive industry "rarely pull in."
- The company's software solutions, such as Gemini and Blue City, are still in their infancy and require significant investments, which may impact margins and delay the realization of expected benefits. Ouster is "a long way from being a dominant player" in smart infrastructure verticals.
- Improvements in gross margin and cash flow may not be sustainable, as they were partially due to one-time benefits. Additionally, the company anticipates a $4 million cash outflow in the second quarter related to a litigation settlement, which could impact cash reserves.
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Revenue Growth Outlook
Q: Is there bias towards high or low end of 30%-50% growth?
A: We are committed to the 30%-50% revenue growth range. While lidar is a predominant sensing modality providing tailwinds, we face headwinds with customer adoption pace. We feel comfortable and expect to track towards this range. -
Gross Margin Sustainability
Q: Is incremental gross margin of 57% sustainable going forward?
A: Our non-GAAP gross margin this quarter was 36%, up 11 percentage points from a year ago. While we've not disclosed incremental margins, they are higher than our 35%-40% target. Continued revenue growth will help us achieve our 35%-40% GAAP gross margin goals. -
Cash Usage Expectations
Q: Is this quarter's cash use indicative for next quarters?
A: We improved working capital, reducing cash usage to about $7 million, aided by lower inventory and better receivables. Some improvements are one-time, but we expect to continue reducing inventory. Next quarter will include a $4 million settlement payment. Overall, we've significantly improved cash flow from operations over the last year. -
Software Business Impact on Margins
Q: How will the software ecosystem impact long-term margins?
A: Our software is now a central strategic pillar. Products like Gemini and Blue City expand our market and create a new, higher-margin revenue model. While our 35%-40% margin framework relies on hardware revenue, we expect software margins to be higher in the long term and look forward to discussing this more thoroughly early next year. -
Automotive Timelines and DF Sensors
Q: Are automotive production timelines being pushed out?
A: Yes, timelines are pushing out, often to 2028. We're building DF sensors to meet market requirements: low-cost, solid-state, high-performance products for decades of use. We prefer to take time to build the right product rather than rush, as it's better to be correct than first. -
OpEx Variability
Q: Are changes in R&D and SG&A levels seasonal?
A: OpEx in Q1 is typically higher due to resets in taxes and fees. We expect OpEx to be flat or down from our Q3 2023 levels, per our financial framework. R&D expenses can be lumpy due to timing of chip development costs, causing quarter-to-quarter inconsistencies. -
10% Customers
Q: Did you have 10% customers in Q1, and will this increase?
A: This quarter, we had one 10% customer. We see such customers come and go as they ramp up commercially. As more customers move into production, we expect the number of 10% customers to increase over time. -
Expansion of Software Solutions
Q: Will you offer new software solutions, and can you convert sensor-only customers?
A: We expect to provide rapid software updates. Every customer needs complex software for our hardware, and we're building credibility as a combined hardware and software provider. We see opportunities to expand into industrial, automotive, and robotics with software solutions but will stay focused on smart infrastructure for now. -
Impact of Tesla's AI Advancements
Q: Could Tesla's FSD expansion be an opportunity for Ouster?
A: While we can't comment specifically on Tesla, AI advancements by companies like Tesla benefit all sensor modalities, including lidar, which is buoying our business. Automotive remains a major vertical for us, and we had a record quarter in automotive this quarter.