Lidar technology continues to present expanding opportunities, as evidenced by the recent surge in the stock market. Ouster, a company specializing in lidar manufacturing, reported earnings of $22 million in the third quarter, resulting in a loss of $18 million before interest, taxes, depreciation, and amortization (Ebitda). Analysts had predicted a slightly larger loss of $19 million from sales totaling $21 million. The company experienced a 15% increase in sales compared to the previous quarter, and they anticipate generating approximately $24 million in sales for the fourth quarter, aligning with analyst forecasts.
Investors reacted positively to these results, causing a 14% increase in Ouster’s after-hours trading shares on Thursday. Lidar, often referred to as laser-based radar, finds applications in various industries, particularly in the automotive sector. However, Ouster distinguishes itself by primarily focusing on lidar applications for industrial and infrastructure purposes.
This stock surge provides welcome relief for investors who have witnessed a 63% decline in Ouster’s stock value over the past year. In comparison, the S&P 500 and Nasdaq Composite have achieved growth rates of 10% and 22% respectively during the same period.
In related news, Innoviz Technologies recently reported strong sales of $3.5 million for the third quarter, surpassing analysts’ expectations of $3 million. Comparatively, the company had generated less than $1 million in sales during the same quarter last year. Following this announcement, Innoviz’s shares rose by almost 11%. However, despite this positive development, the company’s stock value has seen a decline of 61% over the past year.
The thriving lidar industry showcases immense potential for future advancements and profitability.
Challenging Times for Lidar Makers
Impact of Higher Interest Rates and Slowing Economy
In recent times, smaller start-ups, such as lidar makers, have been facing significant challenges due to higher interest rates and a slowing economy. This has led to a decrease in enthusiasm among investors. One prominent example is Luminar Technologies (LAZR), a leading lidar franchise, whose shares have plummeted by approximately 59% over the past year. Just last Thursday, Luminar’s stock took a hit of 15% following disappointing earnings and a revised guidance.
Ouster-Velodyne Merger: Navigating the Unfavorable Operating Landscape
To combat the difficulty in the operating environment, Ouster and Velodyne decided to merge in February. This strategic move has already resulted in substantial cost savings. In the third quarter of 2022, Velodyne incurred operating expenses of around $32 million, while Ouster’s expenses totaled approximately $47 million. Collectively, their expenses amounted to roughly $79 million during that period. The merger has allowed them to reduce operating expenses by an impressive $21 million.
Encouraging Cost Savings
Ouster management anticipates that the merged companies could achieve cost savings of approximately $30 million per quarter in the foreseeable future. This shows promising prospects for streamlining operations and enhancing profitability.
Financial Overview
As of the end of the quarter, Ouster had approximately $202 million in cash reserves. During the third quarter, they invested around $30 million towards their business expansion.
Pursuing Higher Profit Margins
Management at Ouster aims to improve gross profit margins significantly. While the current margins stand at approximately 13%, the target is set at an ambitious 35% to 40% within the next 18 months.
