Good evening, and welcome everyone to Ouster Acquisition of Sense Photonics and Formation of Ouster Automotive 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. If you would like to ask a question during this time, simply press star followed by one on your telephone keypad. If you would like to withdraw the question, just press the pound key. 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. Speaking today will be Ouster's Chief Executive Officer, Angus Pacala, Sense Photonics's Chief Executive Officer, Shauna McIntyre, and Ouster's Chief Financial Officer, Anna Brunelle. I would like to turn the conference over to Sarah Ewing, Director of Investor Relations. Please go ahead.
Good morning, everyone. A copy of our press release is available at ouster.com. During the call today, we will also be referring to the slide deck that is posted on our IR website. As a reminder, today's press release, the slide deck, and this call may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. These statements are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. For a detailed description of these risks, please read the Risk Factors section disclosed in our public filings with the SEC and the press release. Ouster undertakes no obligation to release publicly any revisions to any of our forward-looking statements. This call also includes management estimates concerning Ouster's and Sense's industries, competitive positions, and the markets in which they operate.
These estimates are assumptions derived in part from publicly available information, independent industry and research organizations, and other third-party sources. However, they remain subject to uncertainty and risk, which could cause results to differ materially from those estimates. Further, this presentation may include non-GAAP financial measures, which could be considered supplemental to, and not substitutes of, measures prepared in accordance with GAAP. I would now like to turn the call over to Angus.
Good morning, everyone, and thanks for joining us. I'm excited to announce Ouster's plans to acquire Sense Photonics, a privately held digital lidar company, and to establish Ouster Automotive, a new functional division of Ouster focused on driving mass market adoption of digital lidar in consumer and commercial vehicles upon the close of the transaction. Ouster is a first mover in digital lidar and has become one of the fastest-growing lidar companies in the automotive, industrial, robotics, and smart infrastructure verticals. We're now cementing our position as a market leader with the acquisition of Sense Photonics and the formation of Ouster Automotive. Ouster is a top player in automotive today with significant customers, product shipments, and revenue, and a multi-sensor strategy that meets the market need.
The planned acquisition, including the addition of key talent from Sense, will allow us to focus and accelerate these efforts and solidify our position within the automotive industry. Sense Photonics' significant automotive customer traction and functional solid-state digital lidar sensors, paired with Ouster's resources and proven ability to execute, positions us to be a leading lidar partner for the automotive industry. I'm pleased to share that current Sense Photonics CEO, Shauna McIntyre, will be joining Ouster as the President of Ouster Automotive. Together, we plan to bring to market our 200-meter range solid-state digital lidar, accelerating Ouster's previous solid-state roadmap by more than a year. We expect to integrate Sense's breakthrough solid-state lidar into our plan for the industry's first multi-sensor lidar suite to meet the performance and the price requirements of L2, L3, and L4 autonomy.
We also plan to deliver on the flagship development agreement with a major global automotive OEM that Sense was awarded in June of this year and to advance five series production programs currently under negotiation with automotive OEMs for the start of production in 2025-2026 timeframe, which are collectively worth over $1 billion in potential revenue. The acquisition is expected to not only be revenue accretive, but also technology accretive. Our two technologies have incredible synergies. Like Ouster, Sense's digital solid-state platform uses VCSEL and SPAD technology. It's high-performance, small in size, highly flexible, and cost-efficient. Most importantly, their digital architecture uses the same silicon CMOS technology that has enabled Ouster to rapidly improve performance with every chip tape out, in line with Moore's law. Unlike legacy analog lidar technologies, we do not have to re-architect our products from the ground up to achieve major performance gains.
Together, we can efficiently add greater complexity onto the chip to drive increased efficiency and output from our sensors. Ouster already has a leading patent portfolio with 45 granted and over 100 pending patents. Through the acquisition, we expect to grow our portfolio with over 100 pending patents and over 250 exclusively licensed patents from Sense, further extending our competitive position in digital lidar. The combination of our two companies marks a monumental change in the lidar industry as we launch a digital lidar powerhouse well-positioned to lead across each of our four industry verticals: automotive, industrial, robotics, and smart infrastructure. With the addition of Sense's digital solid-state lidar, Ouster expects to expand its product portfolio to win even more markets. Both the scanning and solid-state products are built on a digital architecture, they have reduced system complexity compared to analog LiDAR, making all of our products easy to manufacture.
Solid-state LiDAR has even fewer components than scanning, resulting in a lower bill of materials and increased manufacturability. Our shared digital architecture will also allow Ouster to benefit from shared componentry, helping us to achieve greater economies of scale. Even more, we believe that having the solid-state product in the market today will enable us to drive down the cost curve further by locking in more volume production yields sooner than expected. Lastly, Ouster's maturity in product development, including firmware management, can be applied to Sense's solid-state technology so that all products share a single operating system and can benefit from our continuous over-the-air updates. To accomplish this, we need the right people. The addition of key talent from Sense with deep automotive and engineering expertise will not only support our automotive endeavors but is expected to further extend our competitive position and multi-market lead.
We're thrilled to have Shauna McIntyre lead Ouster Automotive, bringing with her a formidable team with extensive experience from companies like Ford, Aptiv, Mobileye, and Intel. What the Sense team has accomplished is an incredible achievement and shows the magnitude of the engineering and commercial expertise that they have been able to cultivate. I'm excited to integrate our two teams to continue this journey together. With that, it's my pleasure to introduce you to Shauna, who will share more about Ouster Automotive and their product offering.
Thanks, Angus Pacala. I am thrilled to be joining as the President of Ouster Automotive, which will combine the best of Sense and Ouster. Sense has developed breakthrough 200-meter digital solid-state technology, which has generated serious interest from global automotive OEMs. Our founding team figured out how to overcome the historical challenges of flash LiDAR using innovative silicon CMOS SPAD technology, resulting in what some auto OEMs have called the best LiDAR they have ever seen. With absolutely no moving parts and one of the richest point clouds in the market, our platform can deliver the performance, reliability, and scalability needed for automotive production programs. We expect the acquisition to pull forward Ouster's previous solid-state roadmap by more than a year.
We believe that Ouster Automotive's ability to compete for series production design wins following the close of the transaction will put the combined company in an excellent position to accelerate growth. Not only do we expect to be ready to deliver on the flagship strategic development agreement awarded by a major global auto OEM earlier this year, we also expect to be able to advance five series production programs currently under negotiation with automotive OEMs for start of production in the 2025-2026 timeframe. These programs, which are currently in the evaluation RFI and RFQ stages, collectively represent over $1 billion in potential revenue. While other LiDAR companies are focused on delivering a single forward-looking LiDAR, Ouster Automotive plans to deliver a multi-sensor suite of short, medium, and long-range solid-state LiDAR that offer 360-degree coverage and meet the performance and price requirements for consumer and commercial vehicles.
This type of range versatility is one of the unique attributes of CMOS digital lidar. This is why Ouster Automotive plans to offer a package of sensors for surround view of the vehicle for a combined price of approximately $1,000. When comparing Ouster Automotive's solid-state product to other automotive lidar offerings, it is clear we have the most differentiated technology. Digital lidar with absolutely no moving parts. Our solid-state lidar outperforms across a variety of criteria important to automakers, including range, resolution, field of view, cost, and scalability. Further, our platform versatility enables us to offer short, medium, and long-range solutions, which are inherently suited to high-volume manufacturing. With superior performance across key criteria, we are poised to be a leading lidar solution for the automotive industry. I'd like to transition to Anna Brunelle to go over the transaction in more detail.
Thank you, Shauna. The acquisition is expected to help Ouster accelerate the capture of our multi-billion dollar total addressable market by executing on our hiring goals and product roadmap on a faster timeline while generating incremental cash flow through the existing development agreement with an automotive OEM. Additionally, through this planned transaction, we also expect to advance five series production programs collectively worth over $1 billion in potential revenue for start of production in the 2025 to 2026 timeframe. Ouster's ability to compete for design wins upon the closing puts us in an excellent position to ramp automotive revenues sooner than expected. We believe the acquisition will be both revenue and technology accretive, with strategic benefits that will enable Ouster to strengthen its digital advantage and multi-market lead.
In turn, we've agreed to purchase 100% of the capital stock of Sense Photonics and all of its property for approximately 9.5 million shares of Ouster common stock, contingent upon customary closing adjustments and conditions. Following the close of the transaction, Ouster expects approximately 80 Sense Photonics employees to join the Ouster team, which will bolster our engineering, semiconductor, and automotive expertise.
Importantly, even with the headcount increase resulting from this all-stock deal, Ouster management expects that the approximately $17 million of additional spend in 2022, excluding stock-based compensation, will be completely offset by R&D savings related to our solid-state product roadmap shift tapeouts and design fees that same year. We look forward to sharing more about the expected impact of the integration during our Q3 earnings call next month. Together with Sense, our differentiated digital platform, diversified business, and proven ability to execute continues to separate Ouster from the rest of the lidar industry. We are well-positioned to continue to increase the adoption of digital lidar across all of our end markets and to deliver value to shareholders. I'll now turn it back over to Angus to wrap up.
Ouster and Sense Photonics are an ideal pairing. Through the acquisition and formation of Ouster Automotive, we are solidifying our position as a frontrunner in the automotive market. Together, we stand to lead in technology and performance with established manufacturing capabilities and a leading technical team poised to capture the full multi-market opportunity for digital lidar that enables the safe and efficient movement of people and goods throughout our world. We are light years ahead of our competitors, and I'm truly excited about the road ahead of us.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your phone. If you are using a speakerphone, please pick up your handset before pressing the keys. Again, that is star one to ask a question. To withdraw the question, just press the pound key. When called upon, please limit yourself to two questions. Our first question today comes from Tristan Gerra from Baird. Please go ahead.
Yeah. Hi, this is Tyler on for Tristan. Sense Photonics uses a single photon technology and claims very high resolution. How is that resolution latency trade-off? Since latency is critical in highway autonomy, are you able to reach sufficient resolutions for this application?
Thanks, Tristan. This is Angus. One of the things that is unique about Ouster and our automotive strategy has always been that we are targeting the end complete needs of the auto industry from a performance product portfolio and affordability standpoint. That is unique to Ouster, that combination of a multi-sensor suite, an incredibly low, affordable price point for a combination of sensors, then best-in-class performance driven by Moore's law. To your question, absolutely. One of the things that is great about the solid-state digital flash architecture is that it has best-in-class resolution. You can see in the presentation that we put out, the pixel throughput per second is second to none. It has none of the drawbacks of a raster scanning system or some system that has to wait in between each measurement to collect data.
It's got absolutely best-in-class data throughput and resolution by extension. That's one of the many things that I think the automakers have been blown away by, is just how it's approaching near camera-like resolution in a lidar for the very first time, and has really blown our potential customers away with the prototypes that we have today.
I might just jump in there, Angus Pacala. Angus Pacala touched on some of the benefits of our flash lidar over raster scanning, for example. We don't have the trade-off of resolution versus field of view. We flash it all in one timestamp, you don't have the inherent trade-offs of scanning lidar. It results in very data-rich imagery. At the end of the day, it's the data that's the currency that enables the vehicle to navigate in the world around itself. Our data density is beyond competition, and we're excited to be here to extenuate the product portfolio with Ouster.
All right, great. For my follow-up, is Sense Photonics lidar already automotive-grade? If not, what needs to be done to get it there?
That's a great question. Sense Photonics has accomplished something incredibly significant by producing a functional 200-meter range, incredibly high resolution, solid-state digital lidar. This is actually a first of its kind to have that kind of range at incredibly high resolution in a true solid-state form factor. That's all based on a CMOS technology set. I really have to give credit to their team. It's an immense achievement that they've been able to accomplish with a relatively small team. Super cool. You can see some of the data that we've incorporated into our materials. It's just frankly staggering how impressive it is. That is a functioning sensor today. We, like any company in automotive, are on a roadmap to achieving full functional safety and automotive certification of that product lineup.
One of the things that Ouster is bringing to the table here is actually our automotive know-how in the certification environment, the quality, and the functional safety, as well as the manufacturing certification or the certified manufacturing environment to produce Sense's products in an automotive grade, in a functionally safe way, and on automotive certified manufacturing lines. Absolutely, we're accelerating that roadmap, and they're bringing this fantastic technology to the table to allow us to be off to the races.
All right, great. Thanks. Congrats on the acquisition.
Thanks, Tristan.
Your next question comes from Richard Shannon with Craig-Hallum Capital. Your line is now open.
Hi, Angus and Shauna. Thanks for taking my question. I guess my first one is on technology and products here. Maybe if you can both kind of discuss what the overlap and the differences are in your technology set here. Particularly, probably more so for Shauna, since I know Ouster reasonably well. Then how do we put these technologies together? I'm assuming since you're talking about accelerating Ouster's entrance into the auto space, that you're really standardizing, really starting from the basis of Sense's product here. How do you meld those together, particularly when, Angus, you talk about your portfolio having a lot of commonality overall products, both solid state and rotational?
Yeah. Shauna, I'll pass this to you in just a sec here.
Sure.
I really meant it when I said this was a perfect pairing. It's uncanny how closely aligned I would say the technology sets are that the two companies have gone after. The VCSEL and SPAD CMOS digital lidar architecture is remarkably similar at a very low level. That's been one of the great synergies about this deal is just we're not having to educate each other on what the underlying technology is. It also slots in incredibly well into our product strategy. We have been developing solid state sensors to pair with scanning systems because that's what the multi-market opportunity needs. We need to be offering products that are scanning and solid state, depending on the application. That's going to be the case really for the foreseeable future.
It's great that Sense exists and that we were able to get this done given what a good pairing it is. Let me pass it to Shauna to comment more on her technology.
Sure. I'll just reiterate my personal excitement and the excitement amongst my team to be joining Ouster. It's a testament to their ability to industrialize and miniaturize technology for very high volume already. To apply that now to automotive with the same base technology, we're really starting out at a very good position to then leverage what the market is ahead. From a Sense Photonics perspective, what really sets us apart is that we're very camera-like. We're like a camera. We just illuminate a field with a wavelength beyond what the human eye can see. Otherwise, it's like a camera with global shutter, a one timestamp. That really sets us apart. I do agree with Angus that there's an opportunity to have a suite of sensors.
Vehicles need to be surrounded, cocooned for safety, and then also to be able to see the long range. To combine this base platform technology together, but then have the ability, that inherent flexibility to tailor the technology for each vehicle's particular use case. An L2 is going to be very different from an L5. We have that base platform that we'll then apply to a plethora of different use cases, and that is really exciting.
Excellent. Thanks for that detail. My following question is on the Sense Photonics pipeline here. You talked about a strategic agreement and I think five other situations in some level of negotiations here. Can you give us any sense of profile of this pipeline here in terms of size of OEMs here? Are any of these in, say, the top five global auto OEMs? Any sense of timeframe, any distinctive application sets we're talking about here? Thank you.
Sure. This is another area where there's good complementarity between Sense Photonics and Ouster, in that we have been largely finding the ADAS market to be really relevant for us as well, certainly as AV. We have been predominantly going after a lot of different OEMs, but perhaps largely because of my background in the industry, 25 years of automotive experience, we resonate very well with the large OEMs because, again, this is a technology that can scale and at a cost that can easily integrate into their bill of materials. The ability to actually have practical lidar that is within reach in future model years is where the OEMs and the industry really see the potential. I can't say names, but we certainly are engaged with the world's largest OEMs across multiple geographies to bring solid state digital lidar to market.
Yeah.
Just very briefly, if it isn't clear, we are forming Ouster Automotive to win consumer ADAS first instance, right? L2, L3, L4 placements. High volume applications with end consumer vehicles. That's the traction that we're talking about is with top automakers that are looking at series production of high volume consumer vehicles for ADAS. Having this focused team now driving towards it and actually having been engaged for the better part of a year or more across many of these accounts is something that you rarely can claw back time. In this case, we are gaining the advantage of significant momentum with a customer base that Sense has been interfacing with for over a year in many cases.
Okay, great. I appreciate the comments from both of you. That's all from me.
Your next question comes from Joseph Osha with Guggenheim Partners. Please go ahead.
Hi, Angus. How are you? Hi, Shauna.
Hey, Joe.
Hey, Joe. Hey.
In looking at this, is it fair to say that the position Ouster and Ouster Sense is now taking is for automotive grade lidar, you don't need any kind of beam steering technology at all, MEMS or OPA or whatever, and the future is 905 flash for even long-range front-facing sensors?
The future is digital lidar, full stop, across verticals. I think that's one of the core messages. Absolutely. I think in consumer applications, consumer auto applications, we've always talked about the need for the solid state digital lidar sensors in a multi-sensor suite that hits $1,000 price point, right? That's been our strategy since we went public almost nine months ago. This is not about shifting the focus of our roadmap. We feel we have a lot of confidence in what our strategy is product-wise, technology-wise, scanning and solid state devices with best in class affordability and performance. By bringing on Sense, we get to accelerate that roadmap on the solid state side. We get to combine the best of both worlds with the best technology and minds on both teams to build something more affordable and more performant than any one company on its own.
We get the benefit of more than a year's worth of commercial traction already established with the solid state sensors in consumer auto applications. Absolutely the world is digital. The world when you need the most affordability is going to be fully solid state digital lidar sensors.
Thank you. Yeah, thank you for that. I certainly, you know I'm right there with you in terms of the advantage of using SPAD and CMOS integration and pixels and all that, right? I guess the underlying question still remains the same, right? There's the debate about whether you illuminate the full field, or regardless of the approach, whether it's some kind of phase array or MEMS or however you're steering the beam, whether you're trying to scan the field. I guess what I'm trying to understand is whether you still think there's, leaving your spinner business aside, whether you're saying here, "Hey, no, we can really make just a flash full field illumination business work, even with the kind of performance you need for a forward-facing lidar." That's what I'm trying to understand.
Sure. I think you can. I think you very much can. I think as long as you have the energy efficiency of your system, then you should be able to illuminate the surface or the environment to maximize the amount of data that you can bring into the vehicle and in a streamlined way, which is what CMOS enables. It's a trade-off. There's no reason not to illuminate more of a surface if you can do it. More data is certainly going to illuminate and provide more data back to the vehicle.
Yeah.
More than should be able to. Sense has, I mean, they have a sensor that just does this. That's the impressive thing. This isn't a hypothetical system. They have functioning 200-meter range, fully solid state, flash illuminated pixel SPAD digital lidar sensors. They're incredibly impressive, incredibly high resolution and high range. This isn't theory. It's an incredibly impressive demonstration of the technology. Absolutely, there is no need for some sort of MEMS or OPA scanning devices. An incredibly simple, fully solid state digital lidar sensor is all that's required to win this industry.
Exactly. Why introduce complexity when you don't need to?
Yeah, I'm not a big fan of moving parts. I guess my second question would be then, it kind of just sets you up, it would seem, for a transition to FMCW as that becomes more viable. Can you guys offer a comment on that?
I never want to say never as an engineer, and I'm sure Shauna feels the same way, but we're committed to digital lidar. Digital lidar and FMCW are not compatible. You cannot make them on the same technology set, unfortunately. We don't see the same type of cost affordability trajectory and performance trajectory through Moore's law with FMCW technology. I think that digital technology will long eclipse the FMCW capabilities before there's a need to go that route.
Okay, thanks. Well, I'm sorry. I'll jump back in the queue. Thank you. Congratulations to both of you.
Thanks so much.
Thanks, Joe.
This does conclude our question and answer session. I'd like to turn the conference back over to Angus Pacala for any closing remarks.
Well, I'd like to thank everyone for joining the call. I want to welcome the Sense team on board. I'm incredibly happy to have Shauna joining Ouster as the President of Automotive. I'm just incredibly excited for the road ahead and our ability to execute on this incredibly differentiated multi-market opportunity that we have before us. Everybody have a good evening and good night, and thanks for joining.
Ladies and gentlemen, the conference is now concluded. Thank you for attending today's presentation. You may now disconnect your line at this time.