Ouster, Inc. (NYSE:OUST) Q4 2022 Earnings Call Transcript

There are some start-up costs associated with that. There is some capital that we have put in place. But we are really excited about what this opportunity means in terms of being able to give us a higher gross margin business over the next few quarters, especially as we get through these early parts of the merger. I know I am not answering your question exactly, but unfortunately, we are still 40 days, and I look forward to giving you more updates especially as we go through and we start getting more and more information under our belt.

Richard Shannon: Okay. I figured it might be a little early for that, but I appreciate your attempt at that one. I am sure I will ask again in the future. Maybe just a follow-up on the gross margin topic, your kind of two thoughts here, you talked about some REV7 transitional things as well as the Velodyne merger impact in the first quarter. I would assume that the €“ at least the Velodyne merger part would affect the second quarter. So, kind of when do we get rid of some of those effects and kind of get to a normal course of business? And then following up on that, as you talk about affecting the Velodyne manufacturing approach with what you have done at Ouster, where the gross margin is so good. Is there any way or expectation that Velodyne products are still remaining can get to an Ouster-like gross margin structure that you reported in the last few quarters?

Mark Weinswig: Yes. So, looking at the gross margins and kind of what we are doing, first of all, on the €“ from some of the historical Velodyne products. And we will just call them the VLP-16, 32 and VLS-128 because we are really thinking about ourselves as one company. And it’s €“ obviously, we are only 40 days into it, but it’s something that what we are focused on from just that communication perspective. We started the transition before the merger. But after the merger, there has been a huge amount of increased efforts in terms of the €“ both the Velodyne and Ouster operations groups to continue to basically move that process forward. It will take a couple of quarters, additional quarters before we get through most of that transition.

Right now, we are expecting to be done sometime in the second half of this year. And that will allow those products to have a higher margin base. There are some intricate differences between the two different product lines, which Angus is €“ I am sure looking forward to discussing about some of the margin base. But that’s something where €“ obviously, we do think that there is a better margin opportunity with some of the newer digital lidar products than what we have seen with some of the other existing historical products.

Angus Pacala: Yes. Just to add on to that, I mean we quickly took a look at the time of the merger, what we could do on the Velodyne product base to increase margins quickly, efficiently and for the purpose of really supporting the existing customer base, and giving them a smooth transition that could be measured in years, not quarters, from analog lidar products to digital lidar products. We are investing €“ when we look €“ when I just step back and continue to think about where this industry is going, digital lidar products have a fundamental cost structure advantage. And we are going to continue to invest in the R&D roadmap that’s behind those digital lidar products. But we are in the fortunate position where we can provide really a supply guarantee to the Velodyne customers that they are going to be able to purchase these products for the VLP-16 and 32 and 128 products for the foreseeable future and give them a really smooth transition to digital products over a matter of years.