Ouster Inc (OUST) 2021 Q3 法說會逐字稿

Good afternoon, and welcome, everyone, to Ouster's Third Quarter Earnings Conference Call.

(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.

I'd now like to turn the conference over to Sarah Ewing, Director of Investor Relations.

Please go ahead.

Thank you.

Good afternoon.

I'm joined today by Ouster's Chief Executive Officer, Angus Pacala; and Chief Financial Officer, Anna Brunelle.

Before we begin with prepared remarks, we would like to remind you that Ouster issued a press release announcing its third quarter 2021 financial results shortly after market closed today.

The company also published an investor presentation, which is available on the Investor Relations section of ouster.com.

The company's current report on Form 8-K, including the press release, were filed with the SEC today.

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, future customer orders and the company's business outlook 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 the management's current expectations and projections about future results and performance as of today, Ouster's actual results are subject to many risks and uncertainties that could cause actual results to differ materially from those expectations.

In addition to any risks highlighted during this call, important factors that may affect Ouster's future results are described in the most recent filings with the SEC, including today's earnings press release.

Except as required by applicable law, 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.

Management estimates are derived from publicly available information released by the independent industry analysts and other third-party sources as well as data in the company's internal research and are based on assumptions made upon reviewing such data and its experience in and knowledge of such industry and markets, which it believes to be reasonable.

These assumptions are subject to uncertainty and risk, which could cause results to differ materially from those expressed in the estimates.

During the call, we will discuss certain non-GAAP financial measures, which exclude the effects of events and transactions we consider to be outside our core operations.

These non-GAAP measures should be considered a supplement to and not a substitute for measures prepared in accordance with GAAP.

For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures, please refer to today's press release.

I would now like to turn the call over to our Chief Executive Officer, Angus Pacala.

Hi, everyone.

We've accomplished a lot in the recent months, highlighted by the strategic acquisition of Sense Photonics, which bolsters our position in the automotive market, and our continued technology advancements and commercial traction in the nonautomotive market.

In the third quarter, Ouster continued to gain market share across each of our 4 verticals: automotive, industrial, smart infrastructure and robotics.

We generated $7.8 million in revenue and gross margins of 24%.

We continued to ramp production, shipping over 1,630 sensors.

We added over 80 new customers and increased our total number of strategic customer agreements or SCAs from 53 to 62.

Collectively, these SCAs represent roughly $470 million in contracted revenue opportunity through 2025, which give us confidence that we are well positioned to meaningfully grow our revenue over the coming years.

Turning to leadership and governance.

Ouster recently announced the appointment of global automotive leader Karin Rådström to our Board of Directors.

Karin is an invaluable addition that further solidifies Ouster's automotive expertise.

She brings over 15 years of automotive experience through her current role as CEO of Mercedes-Benz Trucks and Board Member at Daimler Trucks and past roles leading sales and marketing at Scania.

Earlier today, Ouster announced the formation of an Advisory Board made up of industry luminaries with deep knowledge and expertise across our addressable markets and decades of combined experience building and leading global enterprises.

Our founding Advisory Board members are current and former executive leaders from companies spanning the industrial, automotive and smart infrastructure sectors, including Siemens, AM General, FLIR, Honda and Acura, ABB, GE, Porsche, Cummins, Vitesco, Marelli, ZF Group and Ford.

We're moving quickly to enable automation in multiple industries.

And our Advisory Board and Board of Directors have decades of combined experience at some of the most innovative companies in the industries we serve.

This experience will be invaluable, shaping our strategy and technology offering as we aim to capture our multibillion-dollar TAM.

Since its inception, Ouster is committed to building a safer and more efficient future through the mass adoption of digital lidar across our 4 industry verticals.

To do so, we focused on developing a wide array of lidar products, spanning scanning and solid-state product families, all based on our performant and affordable digital lidar technology to meet a wide range of customer applications, from port and yard logistics to consumer vehicles.

With the acquisition of Sense Photonics, we formed Ouster Automotive, a new functional division of the company focused on driving mass market adoption of digital lidar in consumer and commercial vehicles, led by former Sense CEO, Shauna McIntyre.

As a result, we've accelerated our automotive product road map and commercial engagements by over a year.

Furthermore, we increased our IP portfolio to over 50 granted and 200 pending patents and 250 exclusively licensed patents.

It has been and is our belief that the lidar industry will be dominated by digital technology, and it has been critical for Ouster to expand its IP in this space.

We also grew our team to over 300 full-time and contracted employees.

We're building a digital lidar powerhouse to win across verticals and maintain our competitive lead for years to come.

Ouster Automotive is building the short-, medium- and long-range sensor suite that automakers are asking for and offering it at the performance and price points that automakers need.

And we believe that CMOS digital lidar is the only technology that can deliver on all of this together.

Last week, we introduced our digital flash, DF, series of short-, medium- and long-range solid-state lidar sensors.

With absolutely no moving parts, the DF series is built for best-in-class performance, reliability and affordability and is designed to meet automaker requirements for advanced ADAS while seamlessly integrating into the vehicle architecture and design.

Combining the best of Ouster's previous solid-state road map with the core technology of our recently acquired solid-state platform, Ouster Automotive is developing the DF series for high-volume automotive programs with an anticipated start of production in 2025.

Automakers are looking for multi-sensor lidar suites for a combined price of roughly $1,000, and we believe digital lidar is the only technology that can realistically meet that requirement.

But this is just the beginning.

Over time, we believe that the cost of automotive lidar has the potential to follow a similar trajectory to that of modern radar and automotive camera systems, reaching below hundreds of dollars.

Like radar and digital cameras, digital lidar technology is moving down the cost curve to meet automotive requirements to one day become a standard offering in on-road vehicles.

Ouster Automotive is a one-stop shop that is uniquely positioned to deliver on OEM requirements with a single supplier offering, reducing overall costs and making us an ideal partner for automotive OEMs and Tier 1s alike.

Based on the exceptional performance of our functional prototype DF sensors, Ouster anticipates that it will achieve automotive readiness for the entire platform, including automotive quality and ASIL-B functional safety certification in time for series production programs with the start of production in 2025.

While we'll continue to ship functional prototypes to automotive OEMs today, we expect to have A-samples available by Q2 2022 and B-samples by Q4 2023.

We're excited about Ouster's ability to deliver on our flagship development deal with a global automotive OEM awarded to Sense earlier this year.

In October, we shipped functional solid-state sensors and progressed to on-site testing of the lidar in collaboration with our OEM partner, achieving another major milestone in the strategic development agreement.

Ouster Automotive has also continued to advance negotiations for 5 different series production programs collectively worth over $1 billion in potential revenue with an aggregate demand of up to 1.5 million vehicles.

These potential customers are sourcing a multi-sensor lidar suite for L3 systems for start of production in the 2025 to 2026 time frame.

This is further proof of the market need for multi-sensor lidar suites and the value that Ouster brings as a single company positioned to meet that need.

We expect these programs to be determined within the next 24 months, and we feel well positioned to win one or more in the next year.

I look forward to updating the market on our progress over subsequent quarters.

Ouster has also continued to drive progress across the rest of the business, delivering on our product road map for our OS scanning sensors and signing new customers across all of our industry verticals.

A couple of weeks ago, we introduced our most powerful CMOS chip yet, the L2X, which will power Ouster's newest OS sensors.

The L2X is capable of delivering double the data rate of the prior chip while maintaining the same small size and low power draw and providing even richer point cloud data to improve all-weather performance of our sensors.

Last quarter, we completed our L3 chip tape-out, which will deliver another massive boost in performance, and we're looking forward to our foundry partner completing the chip fabrication.

Both the L2X and forthcoming L3 chip demonstrate our ability to rapidly improve performance through the digital road map.

We also partnered with NVIDIA to develop a dedicated NVIDIA DriveWorks plug-in to further simplify integration of our complete OS sensor suite on to autonomous vehicle platforms.

With now over 30 perception software partners and system integrators across our major markets, we intend to further accelerate the adoption of digital lidar across industrial, smart infrastructure and robotics applications.

We're also seeing fantastic engagement with Ouster's software development kit or SDK.

And in the last month alone, we saw hundreds of external downloads.

A few weeks ago, we released a new version of our SDK to support our new L2X chip, and I'm incredibly happy with the response from the development community so far.

With that, I'd like to turn the call over to Anna Brunelle to provide an update on our quarterly financial results, customer traction and business outlook.

Thank you, Angus.

Before moving on to the quarterly results, I want to reiterate the importance of our acquisition as it is both revenue and technology accretive for Ouster.

Under the terms of the agreement, Ouster acquired 100% of Sense Photonics and all of its property for approximately 10 million shares of Ouster common stock.

This acquisition is expected to help Ouster accelerate the capture of our multibillion-dollar TAM by executing on our hiring goals and product road map on a faster time line without significant impact to our cost structure.

Even with the head count increase resulting from this all-stock deal, Ouster management expects that the additional OpEx spend in 2022, excluding stock-based compensation, will be offset by R&D savings related to our solid-state product road map, chip tape-outs and design fees that same year.

Ouster's ability to compete for design wins with the digital flash solid-state series also puts us in an excellent position to ramp automotive revenues sooner than expected.

Through our acquisition, we are working with a major automotive OEM on our flagship development deal, shipping solid-state sensors in the third and fourth quarters of 2021 and progressing to on-site testing in October 2021.

We are excited about our momentum, and we believe we are well positioned to continue to deliver on key milestones and progress towards series production.

We also continue to advance negotiations for the 5 automotive series production programs collectively worth over $1 billion in potential revenue with an aggregate demand of up to 1.5 million vehicles.

Each of these potential programs is focused on securing a multi-sensor lidar suite that is performant, reliable and highly manufacturable at a price point that will enable vehicle adoption.

As Angus mentioned, we expect these potential programs to be determined within the next 24 months and look forward to providing more details.

Turning to our third quarter performance.

Ouster generated a record $7.8 million in revenue, up 31% over the third quarter of 2020.

We shipped over 1,630 sensors, a 127% increase over the third quarter of 2020.

With approximately 4,100 sensors sold this year through the third quarter, we have nearly tripled the number of sensors sold over the same period in the prior year.

We also delivered gross margins of 24%, up from 18% in the third quarter of 2020.

We believe we are the only public lidar company with positive hardware gross margins.

And this is largely because we have chosen the right technology, CMOS digital lidar, which makes our sensors one of the most affordable and most performant on the market.

Over time, 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.

We expect this will allow us to meet our revenue and gross margin targets in spite of headwinds from continued supply chain challenges.

We continue to monitor potential downside risk associated with the worldwide semiconductor chip shortage and our ability to control purchase price variance and customer time lines.

As of the third quarter earnings, these shortages have not materially impacted our ability to ship sensors to our customers.

However, we continue to experience temporary purchase price variance related to bulk purchases and expedited shipment fees in order to keep up with product demand.

Over the last quarter, we grew our customer pipeline by 80 new customers with nearly half of new customers coming from the robotics vertical.

Our largest revenue growth from new and existing customers has been in the automotive sector, making up 41% of sales in the third quarter and 34% of sales year-to-date.

As our pipeline grows, we believe Ouster's revenue will continue to ramp for the remainder of the year.

While we are excited about large deals that we anticipate will close in the fourth quarter, deal time lines and uncertainties exist, but our commercial and manufacturing teams have continued to deliver, giving us confidence that we'll meet our fourth quarter forecast.

As such, we are reaffirming our full year 2021 guidance of $33 million to $35 million in revenue and 25% to 27% gross margins.

Further, as anticipated, we will provide full year guidance for 2022 during our fourth quarter 2021 earnings release.

Over the last quarter, we converted an additional 9 preproduction and production-level customers to a strategic customer agreement or SCA.

This means to date, Ouster has signed 62 SCAs, representing approximately $470 million in contracted revenue opportunity through 2025, up from 53 SCAs and $422 million at the end of the second quarter.

Most notably, we increased the value of our binding agreements by 39% this quarter versus Q2 2021.

New SCA customers that we have announced publicly include Local Motors, Perrone Robotics and Juzhen for which we plan to supply over 1,000 scanning sensors for autonomous vehicle applications through 2023, with a forecasted opportunity for tens of thousands of additional sensors through 2025.

These customers use 3 to 6 sensors per vehicle and plan to deploy their next-generation systems as early as the fourth quarter of this year.

As we stated in previous quarters, we believe SCAs are an important benchmark for us.

They established a multiyear purchase and supply framework for Ouster and the customer and include details about the customer programs and applications where Ouster products will be used.

They also include multiyear nonbinding customer forecasts, giving Ouster visibility to the customer's long-term purchasing requirements, mutually agreed upon pricing for specific Ouster products over the duration of the agreement and, in some cases, include multiyear binding purchase commitments.

Contracted revenue opportunity represents the sum of both binding and nonbinding purchase commitments, and no additional revenue opportunity has been included beyond the customer's actual forecast.

When we became a public company last March, we committed to using the cash proceeds to build out our sales and marketing teams, accelerate our hardware road map and strengthen investments in software development to take advantage of our growing multibillion-dollar TAM.

We have progressed on these commitments, efficiently using capital while executing on our business strategy and driving additional value.

Through our all-stock acquisition of Sense Photonics, we significantly accelerated our automotive product road map while simultaneously building out automotive-focused sales and marketing and engineering teams with minimal impact to our planned cost structure.

We did not stop there.

We scaled sensor production with our contract manufacturer at our IATF-16949-certified Thailand facility, continued to improve sensor performance, most recently with the introduction of our L2X chip, which we expect to increase demand for our scanning sensors, and expanded our commercial footprint with new distribution, perception software and integration partners, furthering the adoption of our digital lidar across our end markets.

These are the important achievements across our capital allocation plan, and we were able to do so while maintaining a cash balance of $224 million at the end of the third quarter.

This leaves us room to continue to grow our business within our 4 industry verticals, execute on our path to significant automotive growth, further improve sensor performance across the Board with our L3 chip and DF solid-state series and make key investments in software that will drive faster customer adoption and stickiness.

Through Ouster's differentiated CMOS digital lidar technology and diversified multi-market approach, we are able to take advantage of near-term opportunities across each of our 4 verticals, allowing us to build towards a stable commercial run rate while also taking additional steps with the formation of Ouster Automotive to position ourselves to further grow our market share in the automotive vertical, one of the largest addressable market opportunities, with design wins for high-volume series production programs.

In short, Ouster continues to execute on its business strategy, and I am incredibly excited about the road ahead.

With that, I would like to turn it back over to Angus for some closing remarks.

Thanks, Anna.

Ouster is here to build a safer, more efficient world by delivering best-in-class lidar hardware and solutions that will transform industries and improve quality of life.

Three takeaways continue to separate Ouster from the rest of the industry: our differentiated technology, our diversified business and our proven ability to execute.

I'm incredibly proud of what we have accomplished to date and beyond excited about what's to come.

And I look forward to answering your questions.

(Operator Instructions) Our first question today comes from Tristan Gerra with Baird.

First question is regarding the top line.

So by reiterating the full year revenue guidance, you're implying some inflection point in your quarterly revenue for the December quarter.

If you could provide some color on what creates that inflection point.

And also, how should we look at the mix of revenue today?

Is there a substantial amount of NREs in your current revenue?

Trying to perhaps get a little bit more color on your gross margin profile relative to the competition?

Sure.

I can get...

Yes, this is Anna.

I can jump in...

Oh.

Oh, go ahead, Angus.

Yes.

Sorry about that.

I was just going to jump in and say that in terms of the fourth quarter as we've worked through the year and continued to release new products and develop deeper relationships with customers, our pipeline has continued to grow, our SCA deals have continued to grow, and that visibility is what has allowed us to reiterate guidance for the fourth quarter.

And I'll just pause there because I think Angus wanted to answer also.

Yes.

I mean I think the entire year, we've been building towards a mature team, mature business systems and mature customers by the -- by Q4.

We've been investing a huge amount to get to this point from the start of the year or from really March when we went public.

And so on top of the fact that Q4 has always been kind of historically our biggest quarter, and there are a lot of kind of year-end tailwinds for our business, we just have been investing all year, and now we have this ramped team and a lot of great visibility into our customer base and maturing customers.

And so for all those reasons, we're able to reaffirm the guidance for the year.

And then in terms of -- you had a question about NRE.

And historically, we've had no NRE in the business.

So I think -- excuse me, for the 2021 revenue numbers, we haven't really been splitting that out, but -- the NRE versus hardware sales.

But I think the vast majority, if not all revenue has been product revenue, though that may change in the future.

Great.

That's very useful.

And then for my follow-up question, if you could provide a little bit more details on the NVIDIA engagement that you mentioned on the call as well as your efforts in terms of software for specifically highway autonomy and what are your goals there in terms of having a platform that goes beyond just object recognition.

Yes.

And so NVIDIA is one part of -- one kind of aspect of our software strategy at Ouster.

And I can walk you through kind of the overall strategy to help put that in context.

But we're taking a multipronged approach because we have this diversified business around how we provide value in the software stack to our customers.

And you can think of it as almost a pyramid of building the foundation up.

And the first and most important thing is to have core hardware that is winning business and winning sockets at customers.

Without that, we don't get in the door and we don't have the opportunity to sell software.

So this really all relies on highly sticky, long-term engagements with our customers through hardware.

Riding on top of that, though, is the opportunity to enable a customer set through software development tools, some of which are developed in-house, specifically with our SDK, which we've been talking about and released earlier this year and have now updated, but some of that through software integrations with partners across our diversified end markets.

And so that's where NVIDIA sits right now.

That NVIDIA DriveWorks plug-in is a way for our sensors to seamlessly work in the NVIDIA ecosystem and for the customers that have selected that ecosystem as kind of their go-forward plan on the software side.

But if you go to our website, we actually have 30-odd customer -- excuse me, 30-odd integrators and partners listed on our website that span different verticals.

NVIDIA specifically is one focused on more highway autonomy, as you pointed out, but we have integrators that are in the industrial space or the agricultural space or the robotics space, and so -- or in automotive.

And then there is -- and then we are able to provide, in certain cases, full solutions and complete solutions where it makes sense, building upon our hardware, our SDK and then the solutions space and investing in that.

And we mentioned in Q2 that we had opened the solutions office out of Ottawa, Canada, and we've continued to hire into that solution software arm of the business.

And we'll be providing updates as they come in the next couple of quarters.

Your next question comes from Itay Michaeli with Citi.

Just 2 questions for me.

I want to first start on the quarter and the outlook on the gross margin side, maybe for Anna.

Was there any like material supply chain or other costs that affected gross margin this quarter and maybe could affect gross margin in the fourth quarter as well?

Yes.

I mean we talked a bit in our prepared remarks about how we're still seeing some headwinds from the worldwide global kind of problem around semiconductor shortages and parts shortages.

And so we'll continue to monitor that downside risk.

And we continue to work to control the purchase price variance and meet our customer time lines.

And I think the answer is yes, we have seen some impact.

We still maintain 24% gross margins this quarter.

We were still able to ensure that all of our customers got the product that they needed.

And so other than some additional pressure on our margins right now, we don't see it as having an impact on the business.

Great.

That's very helpful.

And then just secondly, a longer-term question on automotive gross margin.

Maybe I think now that you've completed the Sense Photonics transaction and you're looking for potentially winning the 5 series production programs, any updated thoughts to the, I think, prior 25% long-term gross margin target within auto?

Is that still kind of the right number?

Or has that changed just with the recent acquisition?

Yes.

I mean I think you're [referring] to the materials put out like a year ago -- oh, go ahead, Angus.

Yes.

Well, I was going to say, we don't see any reason to change that thinking.

That was based on kind of pretty good understanding of the automotive margins a year ago, and nothing has significantly changed there.

I think that the overarching theme, though, was -- from then and continues to now is that we have more realistic expectations on hardware margins in auto than our peer set.

We're expecting 25% margins.

We know this is a price-dominated industry.

And the Sense acquisition has absolutely confirmed that price is one of the most, if not the most important aspect of this technology in winning deals.

And that just goes back to we are extraordinarily well positioned to offer the most competitive pricing in the industry for high-performance products.

And we're being realistic about hardware margins as well and not betting the business on it.

So no real update there but a reconfirmation of the thesis that we went into the year with.

Well, and I think also, I would just add onto that, too, really quickly, but we also have really strong insight into our cost structure.

We are already doing outsourced manufacturing of our products for many years.

And so I think we have more confidence than our peer group in what our costs will actually be, having products in market for a long time now and also working with Benchmark, our auto certified facility for manufacturing in Thailand.

And so in my mind, I think that we feel pretty good about what we've put out.

And should things change, we'll continue to talk about that with you all.

Your next question comes from Blayne Curtis with Barclays.

Angus, I know you only recently acquired it, but I was just curious if you could speak to the auto win pipeline, particularly the lead one.

I mean you said you passed some key milestones.

They have the product.

So maybe you can just walk us through the kind of timing of next kind of milestones before you can get to a more definitive win there.

Sure.

So what we said in the call is that all of these 5 deals will be determined in the next 24 months because any automotive deal that's moving to series production, they have a date selected, and in our case, 2025 to 2026, where the winning party suppliers must be selected a specific amount of time beforehand to actually commercialize the technology and get it into manufacturing and production.

And so every one of these will be decided.

And we -- I'm confident that one or more of them will actually go in our favor in the next year, let alone the next 24 months.

But this isn't the end, and it's not like there are just 5 deals out there in automotive lidar.

There's a rolling set of opportunities.

And as opportunities fall off, new ones come into play.

And so we will always be kind of chasing new opportunities that come in the 2026 and 2027 time frame.

And that will just continue to move out and out and out as time goes on.

So I -- my expectation, and I'm confident that we'll be able to close something in the next 12 months, that's a series production win with 1 of these 5 deals.

I just want to follow up on Tristan's question, Anna.

It seems for -- I know you only got annual, and obviously, you have 1 more quarter to go, so you're effectively guiding December, and it's a large step-up.

So I just had 2 questions.

One, I think Sense Photonics has very little revenue, but I just wanted to make sure -- and I think Angus said no NRE.

So I just want to make sure there's no contribution or any material contribution in the Q4 time frame.

And then maybe just a little bit more color speaking to -- you've grown revenue, but it's been very small.

It's early days.

What's driving this big step-up for December?

Yes.

I mean I think just what Angus and I talked about when we took kind of a similar question a minute ago is that we've more than doubled the size of our sales and marketing teams over the course of the year.

We've continued to release new products.

We're just moving forward with the momentum on the business, and we've been signing SCAs with customers, giving us insight into their production plans.

So I think that's where we're moving.

Your point about Sense historically having small numbers of revenue is accurate.

And so obviously, moving forward, we'll be combining the Sense forecast into the Ouster forecast and building one combined forecast, which is what we're doing now for December.

And to the extent of your question around NRE, obviously, we've talked a bit about the 5 production deals -- series production deals that we're discussing right now and moving towards closure hopefully over the next 24 months.

But those deals could very well come with NRE down the road, absolutely.

But this year, historically, we have not seen significant NRE.

Our hardware sales are making up our revenue for 2021.

Your next question comes from Richard Shannon with Craig-Hallum Capital Group.

I think I have to follow up on the last one here because I think it's going to be the big question that investors will be asking until your next conference call here.

So I guess maybe the way I will ask it is, are you expecting one or a very small number of deals to help you kind of bridge between the third and fourth quarter?

I mean just [bottoming to] the bottom end here requires 45% sequential growth.

So just want to get a sense of whether this is a lot of smaller deals or a few larger ones at least relative to your current base here.

If you could provide those details, that would be great, please.

Yes.

I mean I think we continue to add quite a few customers every quarter, and we added 80 new customers in Q3.

So obviously, we still continue to sell to a large number of customers.

I think your question around are we seeing more activity from larger customers as the business grows and over time, then yes, that's our expectation.

Okay.

My second question probably for Angus is -- talked about the profile of end markets here with the SCAs and, I think, maybe even the engagement or the pipeline for SCAs here, and you especially called out robotics.

Maybe if you can talk about the dynamics of that space here, that's been a market specifically historically driven by cameras and other sensors.

And obviously, lidar is a bit more expensive right now than some of the other sensor modalities.

So what are you seeing here that these robotics customers need lidar?

What are they looking at?

Maybe any profile for the big pickup in the engagement there.

Sure.

I mean when you think robotics, you think smaller form factor, battery-operated devices, rolling, flying, walking, crawling machines.

And that requires a certain type of product that can hit a form factor, a size, weight, power and price point to enable putting it onto that platform.

And that's really one of digital lidar's sweet spot, is the ability to hit all of the -- it's -- one of the smallest devices is lidar sensors in the market, most power-efficient, lightest weight.

All of that combined makes it really an ideal sensor for putting on these smaller-form factor robotics applications.

Great examples of that are the Amazon -- or excuse me, the Postmates -- excuse me, Serve Robotics, the last-mile delivery robots.

We have a number of different delivery robotics customers at this point, smart drone, 3D surveying applications who need a lightweight device going on a flying vehicle.

So -- and then warehouse robotics is another example where you just have smaller-scale logistics vehicles that are battery-operated in a lot of cases.

So that now -- and then combining just product specifications where the price point enables the whole industry.

So I think that's why we're hitting an inflection point with that customer set and our products today.

And I guess just a follow-up on that last point regarding prices that your price -- forward pricing road map here that's getting a lot of interest here, so you're calling -- you're maybe suggesting that the activity here is based on share of mind because of that?

Say that again?

Your last comment there was about leveraging the digital CMOS lidar technology at a lower cost here.

Is -- this engagement profile in robotics, is that essentially kind of talking about an increase in mindshare for Ouster to [beat the] competition?

Yes.

Oh, sure.

Well, I mean we're able to -- one of our core goals here is to provide pricing that enables vast new applications across our 4 verticals.

That's necessary in automotive obviously, but it's true across our verticals.

And obviously, our goal is to do that while dropping COGS faster than enabling volume pricing.

And we have very high confidence that we're going to continue to do that and clearly have -- we have done that actually historically.

So there's no question that Ouster is -- there's an awareness in the market that Ouster can provide extraordinarily compelling combinations of price, form factor and performance that's uniquely positioned to capture things like this -- the new emerging robotics applications.

Your next question comes from Kevin Cassidy with Rosenblatt Securities.

Congratulations on the great progress you're making.

And with that, you talked about you wanted to build out your sales and marketing effort.

But the new partnerships you have with distribution, can you give a little more details on what the nature of that is?

Which markets are they going to address?

And are they stocking distributors?

Or do they create demand?

Yes.

It's -- most of our partners, if you go to our website, there's a partners page, again, with around 30 partners on it.

They're mostly value-added resellers of some kind, integrators, but -- and not just pure distribution.

And that -- most of our end customers require some value-add engineering of some sort, and there's a rich ecosystem that's cropped up to help supply that to our customer set.

So we're selecting -- we are selective with who we're working with, and we want to vet companies across each one of our verticals and really subverticals to make sure that they're well positioned to actually sell our products on our behalf and market them and that there's a good relationship there.

So it's not a pure distributor relationship in most cases, which we view as a good thing right now.

Yes.

That's great.

Okay.

And when you look further out, what percentage of your revenue do you think would go through those distributors?

I don't think -- I can give you directionally.

I think that a healthy business, we will have a small minority of our business go through distributors just because if you look at things like our SCAs or any of our -- any of the internal information we have around major customer ramps, whether it's our SCA customers or our automotive customers, there's such volume growth across the key larger accounts that they'll dominate maybe the long tail in -- when we get to 3 or 4 years from now.

Your next question comes from Jonathan Bailey with Argos.

Angus, Anna, congratulations on another stellar quarter of momentum and delivery.

I'm intrigued by the Advisory Board you've put together.

The backgrounds and résumés are kind of compelling.

I'd like to understand how you're going to use them and how they're compensated, please.

Sure.

So thanks for the question.

This is a great initiative that we've taken in the last quarter.

And it's a really, really impressive group of people.

And we're looking at -- well, first of all, they're compensated with a bit of equity in Ouster.

So there's no -- it's just -- they're mostly doing this as a -- it's a really kind of -- Ouster's an interesting place, I think, to advise for just because we have such a diversity of customers that you can learn a lot about the global shift in autonomy that's very relevant to -- if you're an executive leading a global organization.

So I think there's a compelling reason why these people are interested in advising Ouster, and there's some compensation to go with it.

But I'm excited about the opportunity to learn from each one of these people about their requisite industries.

And this goes back to as Ouster learns more about our verticals and we have more and more customers, we start identifying subverticals that are worth going after and having a more targeted go-to-market strategy.

And I think that's really where -- that's one of the places where this Advisory Board is going to be super informative and helpful, is the go-to-market strategy by subvertical that they have deep kind of decades of experience on.

And then I think the other thing is most of these people have had experience running global organizations, and Ouster is fast becoming a global organization, and org building is deeply important for our ongoing success.

And they're going to be able to advise me and the other executives here on that as well.

Just -- obviously, we're sort of certainly awaiting with bated breath for '22 guidance next quarter, and I understand you want to completely [see] that with any specificity.

That said, broadly speaking, in the 9 months since you've been public, would you say that you feel more or less confident and excited about the development over the multiyear period?

Are you learning things and seeing relationships build that make you more or less confident about the longer-term projections we had at the time of the merger?

Well, I can take a quick stab at that and just say just accelerating our automotive program by a single year, as we've talked about, through this acquisition, that has the potential to add really significant revenue in the out years of that early forecast that we put out some months ago.

And so when you look back on all of the activities that we've reported over the last 9 months, we've continued to do everything that we've told The Street that we would do and more.

And so we're very happy with all of the execution that we've seen.

And a lot of that was covered in our prepared remarks, whether it was on the road map or the L2X chipset tape-out or the new SDK activity that we had earlier in the year, et cetera.

I mean we've just been firing on all cylinders and really fulfilling all of the promises, so to speak, that we made when we went public several months ago.

So I think we're really excited about where we're at, and we're really excited about where the future is, and we're really excited about how this acquisition is going to really solidify our position as a leader in automotive.

And I think it heavily derisks the forecast that we've put out and potentially in the out years adds additional growth opportunity from pulling in that time line.

That does conclude our question-and-answer session.

I'd like to turn the conference back over to Angus Pacala for any closing remarks.

Well, great.

Thank you all for tuning in for our earnings call.

I am incredibly excited about what lies ahead for Ouster.

I think we had a fantastic quarter, and the digital lidar strategy, diversified technology -- differentiated technology, diversified markets and our ability to actually make good on that plan have continued to prove themselves.

And so I'm looking forward to the next year ahead.

Thank you all.

Ladies and gentlemen, the conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect your lines.