Ouster, Inc. (OUST) Earnings Call Transcript & Summary

Hello, and welcome to Ouster's Second Quarter 2026 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 Chen Geng, Senior Vice President and Strategic Finance, Treasurer. Please go ahead.

Thank you, operator, and good afternoon, everyone. Thank you for joining our second quarter 2026 earnings call. Today on the call, we have Chief Executive Officer, Angus Pacala; and Chief Financial Officer, Ken Gianella. As a reminder, after the market closed today, Ouster issued its financial news release, which was also furnished on a Form 8-K and is posted in the Investor Relations section of the Ouster website. Today's conference call will be available for webcast replay in the Investor Relations section of our website. I want to remind everyone that on this call, we will make certain forward-looking statements. These include all statements about our competitive position, product advantages and growth opportunities, anticipated industry trends, our business and strategic priorities, our operating expense targets, the impact of our recent acquisitions, the development and expansion of our products, our products' capabilities and performance, and our revenue guidance for the third quarter of 2026 and long-term financial targets. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause actual results and trends to differ materially from those contained in or implied by these forward-looking statements are set forth in the second quarter 2026 financial results release and in the quarterly and annual reports we file with the Securities and Exchange Commission. 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, Ouster assumes no obligation to update any forward-looking statements, which speak only as of their respective dates. In today's conference call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures discussed today is included in the financial results 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 and an update on our strategic priorities before Ken covers our financial results in more detail. We delivered exceptional results for the second quarter, generating $55 million in revenue and shipping over 17,000 sensors. This marks our 14th straight quarter of product revenue growth and is a testament to the strength of our unified sensing and perception platform. We had strong contributions from our industrial and smart infrastructure verticals for use cases in warehouse automation, yard logistics, port automation, mining and ITS. Across the world, customers have continued to scale their investment in physical AI. Our smart infrastructure business continues to scale with major deployments in New Jersey and Georgia to support the 2026 FIFA World Cup. The New Jersey DOT deployed Ouster BlueCity to create a digital traffic twin across 42 highway locations around MetLife Stadium. In Georgia, we deployed BlueCity at an additional 30 intersections across the Atlanta area, including around Mercedes-Benz Stadium. Upon the conclusion of the World Cup, BlueCity will continue to provide high-fidelity traffic monitoring, automated data analytics and real-time safety alerts, designed to optimize traffic and enhance the safety of everyday residents in these locations. Ouster sensors are helping industrial customers like AIM Intelligent Machines improve safety and productivity for autonomous operations in complex unstructured environments. AIM's autonomy kits retrofit heavy machinery into AI-powered fleets that maximize safety and productivity. We expanded our footprint in the defense industry with a strategic agreement with ARGUS Interception and announced a collaboration with FieldAI to leverage Rev8 to power the next generation of robotic autonomy in markets like construction, mining and security. The second quarter was also a period of strategic execution and expansion for Ouster. We brought the world's first native color lidar sensors to customers with Rev8 and set a new standard for wrist-mount stereo vision with the ZED X Nano. We also deepened our partnership with NVIDIA, bringing Rev8 to the NVIDIA DRIVE and Jetson platforms. With dedicated NVIDIA toolkits supporting direct data ingestion and drivers designed to leverage Jetson Orin and Thor, Ouster is providing customers with a production-ready ecosystem that is critical to solve the most complex challenges in physical AI. We are actively scaling our Rev8 production lines and anticipate reaching production volumes by the end of the quarter. As previously announced, we expanded our partnership with Benchmark to support Rev8, establishing manufacturing capacity that ultimately exceeds 100,000 units per year. We also achieved Build America Buy America compliance for Rev8, which makes Rev8 and BlueCity eligible for deployment in U.S. government-funded infrastructure upgrades. Finally, we continue to bolster our strong operational execution with disciplined financial management. Building upon an already resilient balance sheet, the additional capital we raised provides us with the ability to fully fund our current business plan, while providing immense strategic flexibility. This strength gives our customers ultimate confidence in our ability to serve their needs and serve as their foundational physical AI partner. Turning to our 2026 strategic priorities. We progressed across all 3 key focus areas: revolutionizing our lidar camera and AI compute products, extending our leadership in physical AI solutions and executing towards profitability. The launch of Rev8 was the most important product release in Ouster's history and a pivotal moment for physical AI. Featuring the world's first native color lidar, Rev8 has set a new industry benchmark and delivers the Holy Grail for 3D spatial perception. Feedback from customers has been electric, calling Rev8 a massive leap in sensing capability that provides unprecedented situational awareness to scale next-generation physical AI solutions where it matters most. Engineered for functional safety and built for scale, Rev8 is driving commercial momentum across all of our verticals. From the harsh demanding environments of mining and construction sites to the dynamic complex world of robotaxi fleets and statewide traffic networks across the country, Rev8 is cementing Ouster as a core perception partner for market leaders scaling real-world autonomy. Customer response has been immediate, highlighted by multiple million-dollar-plus orders, including the world's largest manufacturer of heavy machinery, a leading developer of autonomous agriculture equipment and a top autonomous vehicle provider. During the quarter, we secured a significant order to provide the Utah Department of Transportation with its largest lidar deployment to date, covering several hundred intersections across the state. With native color and industry-leading performance, Rev8 is solidifying our market leadership and deepening relationships across these and other key accounts. Our acquisition of Stereolabs is already proving strategic and financial value. The ZED X Nano was the most successful launch in Stereolabs' history and expanded our reach into industrial and robotics markets, winning new sockets requiring smaller form factors. By delivering high-resolution and ultra-low latency capture pipeline and millimeter accuracy, we're giving roboticists a major upgrade to their vision systems, enabling machines to sense, think, act and learn with unprecedented precision. With a unified lidar camera and AI compute stack, Ouster is providing customers with the world's most capable perception platform. We also upgraded our Gemini and BlueCity software solutions with Rev8, opening up a new level of spatial intelligence. This breakthrough introduces the industry's first native color lidar detection system, simultaneously capturing both color and 3D depth information without the need for complex calibration. Powered by the Rev8 OS1 Max, we released advanced detection for BlueCity, delivering double the range and resolution of previous generations and achieving multimodal detection and classification up to 500 feet. By providing unmatched situational awareness and delivering precise high-fidelity digital traffic twins, Rev8 opens up higher speed markets and allows transportation departments to further optimize signal timing based on real-time data to improve traffic flow, while reducing their total cost of ownership. Privacy is paramount for this market, and we designed BlueCity with system-level privacy features at the edge to reduce the collection of identifying features. Ouster BlueCity has quickly become a premier traffic management solution, including the 3 largest lidar-based deployments in the United States, and our goal is to be the #1 provider of smart infrastructure solutions. Since its launch in 2023, we have established Gemini as a standard for sensing and perception, providing the real-time digital twin necessary for our smart infrastructure customers to increase their efficiency and safety. We see an enormous opportunity in our other verticals to provide software solutions for everything that moves in the physical world. Similar to smart infrastructure, these customers need a less technical turnkey solution that is easy to deploy, and we will continue to invest in products and solutions that broaden our market opportunity and help accelerate our customers' development. Finally, our strong results are aligned with our long-term financial framework. We are making strategic investments to expand our addressable market, while maintaining our path to profitability. With that, let me now turn the call over to Ken, who will provide more context on our second quarter financial results.

Thank you, Angus, and hello, everyone. In the second quarter, we delivered a record quarter of revenue and number of sensors sold and introduced multiple new products to the market. These are important proof points in our continued execution against both our financial and operational goals. These results reinforce our confidence in the long-term financial model, supported by continued operating leverage and strong customer demand across our served markets. Turning to the second quarter financial performance. Operating results were again strong with revenue of $55 million. This represents an increase of approximately 56% compared with the second quarter last year. The industrial vertical was the largest contributor to the second quarter revenue, followed by smart infrastructure. We shipped over 17,000 sensors, a new quarterly record, which included over 9,000 lidar and over 8,000 camera sensors. Royalty revenue in Q2 was approximately $1.9 million. And for the first half of the year, royalty revenue was approximately $2.2 million. We continue to estimate total royalty revenue in 2026 to be around $5 million for the full year. GAAP gross margin was 49%, up from 45% in the same quarter last year. A onetime refund was included in our cost of goods sold, which positively impacted gross margin by approximately 1,000 basis points. As a reminder, in the second quarter of 2025, we had a onetime refund, which positively impacted us by approximately 500 basis points. We do not expect these onetime benefits to reoccur in our ongoing normal operations. GAAP operating expenses were $47 million, an increase of approximately 10% from the second quarter last year. The increase was primarily due to the addition and integration of Stereolabs for a full quarter, new product introductions with the Rev8 and ZED X Nano, and recent investments in expanding our physical AI solution portfolio. We are closely monitoring our operating expenses and anticipate the third quarter expenses to be 5% to 8% higher year-over-year. Our adjusted EBITDA in Q2 was a negative $4 million, which was an improvement of approximately $1 million from the second quarter last year. Turning to our balance sheet. We ended the quarter with cash, cash equivalents, restricted cash and short-term investments of $263 million and no debt. This figure includes approximately $98 million raised in the second quarter through our previously discussed ATM program. At the beginning of the third quarter, we further strengthened our cash position through a successful offering of common stock, which closed on July 6. Given the favorable market conditions at the time and corresponding strong investor demand, we closed a common stock offering that generated approximately $191 million in net proceeds. Upon completion, we had approximately 72 million shares outstanding. This strategic financing decision gives us additional capital to support our growth objectives, invest in opportunities we see across our markets and further strengthen what is already one of the industry's strongest balance sheets. Furthermore, after this most recent financing, we do not expect to need additional capital to fund our current operating plan on our path to profitability. Now turning to our guidance. Total revenue for the third quarter of 2026 is expected to be in the range of $54.5 million to $57.5 million, with the ramp of Rev8 to production volumes expected to occur throughout and into the latter part of the third quarter. Our full year revenue expectations remain unchanged. The acquisition of Stereolabs, introduction of Rev8 and ZED X Nano and our expanding software and AI solutions are great proof points towards our continued investment to be a leader in sensing and perception for physical AI. Our execution continues to build confidence in our long-term financial model. I'll now turn the call back to Angus for his closing remarks.

The second quarter continued the momentum of the most transformative year in Ouster's history. With the landmark launch of Rev8 and the ZED X Nano, the integration of Stereolabs, a strengthened partnership with NVIDIA and significant strategic flexibility provided by our capital raises, Ouster is further extending its leadership as the foundational end-to-end sensing and perception platform for physical AI. Our focus remains on providing the industry's most performant products and solutions, dramatically simplifying system integration and accelerating time-to-market for the world's most innovative companies. The resounding customer feedback we received enforces our strategic path. With that, I'd like to open the call up for Q&A.

[Operator Instructions] Our first question comes from the line of Colin Rusch of Oppenheimer.

Can you give us a sense -- you mentioned some of these orders that you're talking about, the bookings and kind of backlog that you guys are looking at -- some order of magnitude or quantification of what you're looking at that's already been kind of put into your expectations for revenue ramp over the next couple of years?

Colin, yes, good question. So we gave a bit of color as it pertains to this year, Q3, Q4, and our revenue expectation remains on track, just given the really strong reception to Rev8. So we -- it's been 1 quarter with Rev8 out being sold, and we've already racked up very significant wins with Fortune 500 companies, millions of dollars worth of orders. And now, we're ramping the production to ship the product at volume scale this quarter. But Rev8 will fuel the core of our business for my expectation in the next 5 years. So -- and we have very strong signal on that being the case, just given the reaction that we've already had and how much better the Rev8 platform is and how expanded the Rev8 platform is with the long-range Max sensors and RGB sensing versus Rev7, which has been the core of our business for so long. Adding on top of that, Stereolabs, which is having an exceptional year. And we're sitting on 50-plus-percent year-over-year product revenue growth as a company and feeling very, very bullish about both this year and the future of Ouster. So yes, not giving exact bookings numbers on the full year quite yet, but feeling really great about the business for sure.

And can you just talk about the competitive landscape a little bit? Now that you've got a couple of very differentiated capabilities in the sensors, coupled with the software capability, can you talk about how competitive some of these bidding efforts are and how you're thinking about pricing on a relative basis?

Yes. Well, I view -- the lidar is not an easy business. Physical AI is not an easy business. These are new technologies that require significant investment. And I visualize this as almost as a flywheel of investment that gains momentum slowly, but considerably year in and year out for any company that's able to be consistent and focused in their strategy and investment over that long time period. I think NVIDIA is such a great example of this, sticking to their guns and investing in edge compute, and we see the results. But that was a strategy compounded over decades. And I view Ouster the same way. We are sticking to our -- to what we do best, cutting-edge technology in sensing, perception, whether it's a camera, a lidar, the compute and the algorithms that run on them. This is a virtuous cycle that has an immense amount of institutional inertia in it that gives us an edge today, but accelerates and keeps that momentum for the next 5 years. So in terms of competitors coming and just catching up, given that there's this amount of investment needed, I don't see anyone just kind of jumping into the mix and being able to build what Ouster has built in a year or a couple of years for that matter, given that I've been at this for 11 years straight. So, yes -- and I think that Ouster is yet to have any major misstep on strategy, technology, product mix or M&A. And that can't be said for a lot of our competitors. So I'm feeling very good about how we positioned Ouster across all of our markets for the foreseeable future.

And just the only thing I'll add on to that, Angus, is the software piece of it that you -- that he discussed was, taking all that infrastructure that Angus just put together and then having products like BlueCity that go end-to-end into the marketplace and expanding that software component with the investments that we're doing in our software, it's very hard for any company to match the investment that Ouster has done in that area. So it's -- we are one of the few companies, if not the [ only company ], out there that have that end-to-end game in play.

[Operator Instructions] Our next question comes from the line of Kevin Cassidy of Rosenblatt Securities.

Congratulations on the ramp of Rev8. And maybe just along those lines with Rev8, were there any orders that you couldn't ship for the quarter because Rev8 wasn't available? Or, let's say, even for this quarter, in the guidance, is there potential that if you could make more, you could guide for a higher revenue, you have more orders than you do product?

Well, we always carry a backlog in our business. We maintain inventory and a healthy backlog for the lidar business and increasingly for the Stereolabs camera business. And so, that's kind of a -- I can answer it technically. There could be more revenue to ship, but it's at the sacrifice of backlog, which we wouldn't want to do, and we also want to uphold our lead time obligations and shipment schedules with our customers. So what we're guiding to is what we think we can ship realistically in revenue each and every quarter, and there's not that much wiggle room within that guide.

Okay. And maybe on BlueCity, it seems Utah is starting to release more orders. And what is the time frame? Or can we expect that in Atlanta or Stamford, Connecticut or even Northern Jersey that your foothold will expand? Is there a time frame expected for that? Or do you just sit and wait?

Yes. I see the expansion happening all the time. So while I don't know exactly what will happen in Atlanta or New Jersey specifically, the trend is, customers get their hands on BlueCity, they deploy POCs, then they deploy citywide scale or statewide scale, and it works, and then they order more and more and more. And so, Utah is one of the earliest adopters, been a really strong customer of ours for -- so they're furthest along perhaps in adopting the BlueCity product. And so, when they saw the advanced detection capability that we came out with 500-foot sensing with full RGB OS1 Max sensors, they were first in line because they knew how well it would work on Utah's big, wide open roadways. So, that is absolutely an indication of where this market is going and the competitiveness we bring to it with the new OS1 Max Rev8 sensors. There's a huge part of the market that we now have broader access to because they're bigger roads, bigger, wider roads with higher-speed traffic, where the longer range is pretty critical. So yes, a lot of momentum in BlueCity. And I would say that the trend is, customers get their hands on it, and they order more and more and more. Very few customers are kind of stagnant in this industry for us, given how good the product is.

And we gave a number at the beginning of the year, just to add to that, Kevin, of about 15% of our sales were based off of BlueCity and Gemini-based products. We expect and would like to see that continue to grow upwards as the years go on, a bigger portion of that type of BlueCity content being a larger portion of our revenue in the years to come.

Our next question comes from the line of Suji Desilva of ROTH.

Congratulations on the progress here. I want to follow up on the questions on ITS, intelligent transport. I'm curious, you have a bunch of customers already. But in the deal pipeline, are you seeing any exogenous factors that are maybe causing an inflection in the inbound interest or activity in terms of layering on deals and kind of growing this functionality out there beyond the initial customers you have?

That's a great question. There's a lot going on. We've actually invested a huge amount into BlueCity this year and the go-to-market, and we're starting to see the payoff of that. Rev8, I can't stress it enough, the [ OS1 Max ] advanced detection, long-range detection opens up about half the market. And the market, as a reminder, in North America, there are 300,000 signalized intersections. In North America, we have hundreds -- rapidly moving to thousands of intersections deployed. But it's still a very small fraction of the total market that we can go and capture. So we're not going to be gated by the market size in the foreseeable future, and we have the best product in the market. I'm convinced of that. So yes, I think that the first 6 months of this year have been a huge inflection point for our BlueCity business, given the investments we've made in the go-to-market strategy and the product development on the software side, and then integrating this new Rev8 RGB OS1 Max capability.

Okay. Great. And then, just on an end market that's emerging here, robotics, I just want to understand how that might play out for you guys, what you're seeing in initial sort of discussions? And are we early in this? Or is there contribution already or coming soon? Just an update there where robotics is as an end market for you guys.

Yes. Robotics has been an incredible business for us. We've -- Q2 was the first quarter -- first full quarter with Stereolabs under the Ouster umbrella. And Stereolabs is stereo cameras that -- and monocular camera products, including their release of the ZED X Nano, which is a special stereo camera for wrist-mounted manipulation on humanoid and robotic arms. They have the most competitive set of products for this like hypergrowth humanoid and robotic manipulation market. And we've seen incredible kind of interest and uptake from that customer set. So I feel like I'm in the thick of this industry that it was kind of lidar-adjacent. But now, with Stereolabs under the umbrella, we are just -- we are pushing every last camera we can through our manufacturing supply chain to get them to customers because of the voracious appetite for physical AI systems in that category set.