Ouster, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Ouster designs and sells digital lidar sensors for industrial automation, smart infrastructure, robotics and automotive applications. The March 11 SPAC merger was accounted for as a reverse recapitalization; the reported prior-period results represent Ouster Technologies, Inc. (OTI).
Financial performance and position
- Revenue: $6.6 million, up 187% from $2.3 million. Management attributed growth mainly to 240% higher unit volume, broader geographic sales and more customers entering production-stage orders. Average selling price fell 15%.
- Gross profit and margin: $1.7 million and 26%, compared with a $1.9 million gross loss and (83)% margin. Cost of revenue rose 15% to $4.9 million, while cost per unit declined 66%.
- Operating expenses: $18.0 million, up 74%. R&D was $4.7 million, sales and marketing $3.4 million, and G&A $9.9 million. The G&A increase included higher stock-based compensation and merger-related professional fees.
- Loss: Operating loss was $16.3 million versus $12.3 million. Net loss was $21.0 million, compared with $18.7 million; basic and diluted loss per share was $0.38 versus $2.41. The per-share comparison reflects a substantially higher weighted-average share count after merger-related share conversion and issuance.
- Cash flow: Operating cash use was $12.4 million versus $11.8 million; investing cash use was $0.6 million versus $1.4 million. Financing provided $258.8 million, primarily from the merger and PIPE, net of offering costs and debt repayment.
- Liquidity and debt: Cash and cash equivalents were $257.2 million at quarter-end, versus $11.4 million at December 31, 2020. The company repaid its $7.0 million Runway loan in March and reported no short-term debt at quarter-end. Management said available cash was sufficient for at least 12 months from issuance of the statements, while expecting ongoing losses and negative operating cash flows.
- Other balance-sheet items: Total liabilities were $38.3 million, including $14.7 million of warrant liabilities. Accumulated deficit was $230.3 million. Non-cancelable purchase commitments totaled approximately $9.5 million; operating lease obligations totaled $16.5 million.
Changes, outlook and risks
- The company received $299.9 million of gross proceeds from the merger and private offering; $26.6 million of offering costs were recorded. Redeemable preferred stock converted to common stock at closing, materially changing the capital structure.
- Management expects significant operating losses and negative operating cash flows to continue, and plans to keep investing in product development and global sales and marketing. It expects gross margins to improve with higher volumes, but revenue and margins may fluctuate as customers move through evaluation, integration and production. No specific quarterly or full-year financial guidance is provided.
- Management said the semiconductor-chip shortage could persist into 2022. It did not expect a material near-term effect on current-product supply, based on mitigation efforts, but warned that a prolonged or worsening shortage could affect supply and future product development. COVID-19 had disrupted operations, fulfillment and customer schedules; its future effects remain uncertain.
- Revenue growth depends on customer commercialization and product adoption; customer timelines to production can range from six months to seven years. Ouster also cited competition, pricing and volume pressures, dependence on third-party suppliers—including Benchmark—and execution risks in scaling manufacturing and international operations. One supplier represented 17% of Q1 purchases and 48% of accounts payable at quarter-end.
- Private placement warrants are carried as liabilities and remeasured at fair value, potentially creating material non-cash earnings volatility. The filing also describes a planned restatement of Colonnade Acquisition Corp.’s 2020 financial statements following SEC warrant-accounting guidance; those statements should no longer be relied upon. The company warned of possible costs, proceedings and reputational effects.
- Disclosure controls were deemed ineffective at March 31, 2021 because of material weaknesses in staffing and accounting expertise, period-end reporting and IT general controls. Management described remediation efforts, which require ongoing implementation and testing.
- There was no material litigation pending, and the company reported no off-balance-sheet arrangements.
Key facts for investors to verify
- Reconcile geographic revenue: the notes report Q1 2021 EMEA revenue of $3.1 million and Asia-Pacific revenue of $1.3 million, while the MD&A geographic table appears to assign those amounts in reverse.
- Review the warrant-liability valuation, its earnings impact, and the scope and consequences of the Colonnade 2020 financial-statement restatement.
- Track remediation and testing of the disclosed material weaknesses and the company’s progress toward effective internal controls.
- Assess whether customer evaluations convert into sustained production orders, and whether volume growth offsets lower selling prices and operating costs.
- Monitor cash burn, purchase commitments, supplier concentration and semiconductor availability, as well as potential dilution from warrants and equity awards.