Ouster, Inc. (NYSE:OUST) Q3 2022 Results Conference Call November 7, 2022 5:00 PM ET
Company Participants
Sarah Ewing – Director of Investor Relations
Angus Pacala – Chief Executive Officer
Anna Brunelle – Chief Financial Officer
Conference Call Participants
Kevin Cassidy – Rosenblatt
Andres Sheppard – Cantor Fitzgerald
Tyler Bomba – Baird
Brian Dobson – Chardan Capital Markets
Richard Shannon – Craig-Hallum
Operator
Good afternoon and welcome to Ouster’s Third Quarter Earnings 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 [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 now would like to turn the conference over to Sarah Ewing, Director of Investor Relations. Please go ahead.
Sarah Ewing
Thank you, operator and good afternoon everyone. Thank you for joining us for our 2022 third quarter earnings call. I’m joined today by Ouster’s Chief Executive Officer, Angus Pacala and Chief Financial Officer, Anna Brunelle.
Before we begin the prepared remarks, we would like to remind you that earlier today Ouster issued a press release announcing its third quarter results and its proposed merger with Velodyne. The company also published an investor presentation, which is available on the Investor Relations section of ouster.com.
I would also like to remind everyone that during the course of this conference call, Ouster’s management will discuss forecasts, targets and other forward-looking statements regarding the company, including forecast, target, statements from its press release, potential future customer orders and shipments, near and long-term revenue opportunities, strategic customer agreements, market share trends, the Company’s proposed merger equal to Velodyne, ability to recognize the benefits of cost savings initiatives, future products, anticipated benefits and applications of new product releases, technological advancements and commercial path potential future market opportunities, customer traction in the Company’s business outlook and 2022 financial guidance and trajectory that are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and for forward-looking statements and should not be regarded a representation of such plans estimate and expectations will be achieve.
Thus, these statements represent management’s expected future results and performance, Ouster’s actual results are subject to total risks and uncertainties that could cause actual results to differ materially from current expectations that we may share with you today.
In addition to any risks highlighted during this call, you should consider the important risk factors and other disclosures that may affect Ouster’s future results as described in its most recent annual report on Form 10-K quarterly report on Form 10-Q and other reports the Company files with or furnishes to the SEC. Except as required by law, rule or regulation, the Company undertakes no obligation to update any of these forward-looking statements for any reason after the date of this call.
Lastly, information discussed on this call concerning the Company’s industry competitive position in the markets in which it operates is based on information from independent industry and research organizations, other third-party sources and management estimates which are derived from publicly available information released by independent industry analysts and other third-party sources, as well as data from the Company’s internal research and are based on reasonable assumptions and computation made upon reviewing such data and its experience in and knowledge of such industry end markets. By definition, assumptions are subject to uncertainty and risks, which could cause results to differ materially from those expressed in the estimates.
During this call, we may discuss certain non-GAAP financial measures, which exclude the effects of events and transactions we consider to be outside our core operations as outlined in our press release. These non-GAAP measures should be considered as a supplement to and not a substitute for, measures prepared in accordance with GAAP. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures, please refer to today’s press release.
I would now like to turn the call over to Angus.
Angus Pacala
Thank you, Sarah. Good afternoon, everyone and thank you for joining us today. Ouster had a terrific third quarter, we delivered over 11.2 million in revenue, our second highest quarter ever, representing a 44% increase over the third quarter last year.
We shipped 2136 sensors worldwide for an average selling price of $5,246 and did so while also recording the highest gross margins in Ouster’s history at 33%. We continue to grow our business with approximately 80 new customers bring our total 12-months customer count to approximately 700 across over 50 countries. We signed four new Strategic Customer Agreements or SCAs. During the third quarter, bring our total current SCA count to 84.
While we delivered strong quarterly growth supported by our world class, commercial and operations teams, we also executed on our product roadmap and doubled our serviceable obtainable market through the launch of our breakthrough L2 chip, our upgraded OS sensor suite REV7, and with it are all new OSDome sensor. This is our largest expansion in songs since first entering the market and a game changer in our ability to win an expanded set of deals.
Our focus on digital semiconductor design continues to set us apart in the lidar industry. Digital Products aligned with the exponential performance path of Moore’s Law to eventually displace legacy technologies.
Engineered the state-of-the-art 3d backside illumination, the L3 chip packs an incredible amount of processing capability within a compact die area. With 125 million transistors on chip and a maximum computational power of 21.47 giga max, the L3 is capable of counting and processing approximately 10 trillion photons per second. This allows the sensor to output up to 5.2 million points per second, while consuming less power than previous generations.
A 10x increase in photon sensitivity enables our REV7 sensors to deliver 2x increase in range, a 50% improvement in precision and a 7x improvement in object detection and new features that we can now offer are approximately 700 customers and many more prospective customers across our fast growing markets.
With the extended range of REV7, we are unlocking an all new category of long range and higher speed use cases, essential for many robotaxi, shuttle bus and truck operators. The REV7 OS2 opens up the unique ability to track vehicles and objects beyond a quarter mile in all directions.
The 10x signal improvement of the L3 also improves near range detection. Automotive and industrial customers alike can expect incredible detection performance on challenging objects such as tires, black cars, cables, fencing or the forks on a forklift. This also makes REV7 excellent fit for mapping applications with a combination of longer-range, high point density and upgraded precision are based on direct feedback from this customer set.
We are seeing incredible demand for REV7 from our customers. Ouster’s first REV7 customer signed a multiyear SCA for several hundred OS1 and OS0 REV7 sensors through 2023. After working with us for some time, the performance and reliability increases of REV7 made it the clear center of choice for scaling production of their commercial applications including transit buses, Class 8 trucks and yard trucks.
We are also seeing traction with early adopters of the OSDome, including some of the world’s largest companies, one of which has already ordered several hundred sensors for initial rollout of cloud analytics technology in their retail stores.
Our partner SkyFi, a global software technology company, is also an early adopter of the OSDome and plans to offer the sensor as part of its cloud analytics solution to help businesses enhance the guest experience, boost revenue and optimize operational efficiency. SkyFi and Ouster have several active cloud analytics deployments across globe, including at international airports, major event venues and retail stores.
With the unique capabilities of the OSDome, we are better positioned to sell into more use cases and scale deployments with existing customers. We are thrilled with the product performance of our new REV7 suite and fantastic early response from customers. We are excited to get the products into more hands this quarter as we ramp production and shipments.
The benefits of RAV7’s performance upgrades will also support Ouster’s recently released 3D industrial sensor suite, configured to meet the unique requirements of forklift, forklift equipment and autonomous mobile robot manufacturers with high volume pricing to enable adoption on production fleets.
Complemented by the all new OSDome with a hemispherical field of view for floor to ceiling and wide area coverage, our industrial sensors are an excellent fit for material handling applications.
We expect these new offerings to accelerate expansion into the estimated $15 billion warehouse automation market. With the incredible range and precision improvements of the L3 powered REV7, we now offer the highest performing family of sensors on the market.
It also provides a glimpse of what will be possible by applying the same advancements to our upcoming Digital Flash or DS sensors for automotive applications. The advancements in the L3 architecture paved the way for Ouster’s upcoming premise chip, the automotive grade fully custom digital lidar silicon receiver that will power our DEF sensors, which is slated to be integrated into the first DEF units in 2023.
Auto makers and Tier 1s alike have responded with consistent abatement after seeing the incredible performance of our first DFA samples, and are eager to begin testing with B samples next year.
While product features and performance upgrades will represent major growth drivers for our business, for the foreseeable future, we also have a significant access on which to catalyze new business, vertical specific product and safety certifications as well as software solutions.
We are on track to achieve ASIL-B and IATF-16949 functional safety certifications for automotive, SIL-2 safety certifications for industrial and NEMA TF2 certifications for smart infrastructure applications within the next 12 to 24-months.
The mechanical and electrical upgrades we made to our OS sensors with REV7 put us even closer towards achieving these market expanding certifications. These included reducing their power draw and doubling the resistance to shock and vibration, while maintaining the same small, lightweight and power efficient form factor design of previous generations.
All REV7 sensors include approximately 95% automotive brake components feature in upgraded FPGA that is qualified for functionally safe automotive and industrial applications and offer an option for a thousand based T1 automotive Ethernet.
We also see an immense opportunity to speed our customers time to market build stickiness, and drive higher margin revenues through verticalized software solutions. We continue to build a robust software ecosystem built on three foundational pillars, a best-in-class software development experience that provides resources and tools to reduce our customers time to test, validate and integrate our sensors, and expanded partner platform to bring targeted solutions to our customers, and verticalized software solutions that drive new customers and higher margin revenues.
In the third quarter, we released an updated version of the Ouster SDK and new firmware. We continue to expand our partner platform and started working with applied intuition. A provider of software solutions for autonomous systems development, including sensor simulation, to create, test and release synthetic models of our lidar data to empower customers to generate synthetic data that accelerates the deployment of perception systems. This is just the beginning of what is in store for our software ecosystem. And we are excited to share more about it early next year.
I’m as confident as I have ever been in our ability to make ousters digital lidar the sensors of choice across autonomy and intelligent infrastructure applications. I believe we have a clear and winning strategy to make our technology more affordable, more performance and more ubiquitous.
That said, execution on our strategy requires thoughtful capital management. With this in mind, we took proactive steps to optimize our cost structure and reduce our gross cash spend in the third quarter.
While these steps bolstered our cash runway and path to profitability, we are taking advantage of another exciting opportunity to accelerate the adoption of lidar across fast growing markets and further strengthen our financial position, merging with Velodyne.
This morning, we announced our plan to merge with Velodyne and an all stock merger of equals transaction that is expected to drive significant value creation for our customers, our company and our shareholders.
As one combined company led by new CEO and Ted Tewksbury as Executive Chairman of the board, we will be a leading lidar company with a deep history, strong balance sheet, industry leading technology and world-class commercial organization.
Together, we can offer robust product offerings, including verticalized software to serve a broader set of customers. We expect the proposed merger to unlock significant synergies creating a company with the scale and resources to deliver stronger solutions for customers and society, while accelerating time to profitability and enhancing value for shareholders.
Overall, this proposed merger accelerates our ability to reduce product costs through volume purchasing and scaled manufacturing. Develop a combined product roadmap of low cost performance sensors that aligns with the future needs of the market, cast a wider net to reach a broader set of customers and strengthen our competitiveness against other established something modalities like cameras and radar.
We are excited to build on both of our strengths. I look forward to providing the market with more information around the combined companies strategy upon closing, which is expected in the first half of 2023. For more information on the proposed merger, please refer to our joint release and webcasts published on both company websites earlier today.
I will now turn it over to our CFO, Anna Brunelle who will provide an update on our third quarter performance and our expectations for the remainder of the year.
Anna Brunelle
Thank you, Angus and good afternoon, everyone. As Angus stated in the third quarter of 2022, we recorded our second highest quarterly revenue of 11.2 million, up 44% over the third quarter of 2021, and up 8% over the second quarter of 2022. We shipped 2,136 sensors in Q3, a 31% increase over the third quarter of 2021, which amounts to approximately 16,000 sensors shipped to-date.
Continuing our positive gross margin traction, we saw further improvement in the third quarter, delivering the highest gross margin in Ouster’s history at 33%. Up from the 24% gross margins recorded in the third quarter of 2021 and up from the 27% gross margins recorded in the second quarter of 2022.
Over the course of the third quarter, our average sales price per unit remained strong at over $5200. While we saw a slight decrease in our cost per unit sold at approximately $3500 due primarily to lower purchase price variance in the quarter.
Ouster continues to have the highest hardware gross margin profile of our public lidar peer group, validating our leading cost structure associated with our CMOS digital lidar architecture, which enables high scalability in both performance and cost.
In the third quarter, we sold sensors to approximately 80 new customers, with growth seen across verticals and particularly out of the Americas, as well as Europe, Middle East and Africa. Additionally, through the end of the third quarter, we increase the number of SCAs to 84 from 80 recorded at the end of the second quarter of this year.
Our largest revenue growth from new and existing customers was found in the industrial and robotics verticals accounted for 38% and 37% of sales in the third quarter respectively. In line with ongoing global trends, this growth included substantial orders for material handling, and drone inspection customers, as well as for robotic security applications.
We also continued to see meaningful traction in our automotive and smart infrastructure verticals with other large orders from customers for trucks and buses, as well as in the expanding crowd analytics space.
Ouster is able to capitalize on a broad range of opportunities to support steady growth, which is exemplified by our approximately 700 customers, including a growing number of multiyear SCAs across our four market verticals.
While market uncertainties can impact our customers ramp rates and estimated forecasts are flexible, CMOS digital architecture enables us to sell into multiple verticals, eliminating dependency on adoption within a single market.
Turning to our expectations for the remainder of the year, we are reiterating our full year 2022 revenue guidance of 40 million to 55 million and gross margin target of 25% to 30%. Despite ongoing macro economic pressures, resulting in staggered or delayed ramp rates for some of our customers. We remain confident in our bottoms up analysis for 2022 and our ongoing competitiveness in the market.
During our second quarter earnings call, we announced three pillars to strengthen Ouster’s financial position, including target spend, strategic fundraising and accelerated growth. In the third quarter, we continued to make progress in-line with these objectives.
First, for target spend, we announced cash reduction initiatives to lower gross cash spend across operational expenditures, capital expenditures and inventory. This represents a reduction of more than 15%, compared to annualized gross cash spend based on the second quarter of 2022.
Second, focusing on strategic fundraising efforts, we raised $1.8 million, through the at the market offering, which was suspended in September, down from approximately $15 million in the second quarter. At the end of the third quarter, we maintained a cash balance of approximately $135 million. Further, in October, we received lender consent for the planned merger of Equals and drew the remaining $20 million on the first tranche of our term loan facility.
Finally, Ouster took additional steps to accelerate growth across each of our submarkets through targeted commercial efforts and the launch of our groundbreaking REV7 OS sensor products, powered by the L3 chip, which doubles Ouster’s collective serviceable, obtainable market by opening up new opportunities, primarily for longer range and mapping applications. Collectively, traction across each of these pillars, target spend, strategic financing and accelerated growth, provide Ouster with additional flexibility to execute on our business plan.
And of course, as announced this morning, Ouster looks to bolster our position within the market through the proposed all-stock merger with Velodyne. We look forward to providing more information about a combined company strategy following the closing, which is currently expected to occur in the first half of 2023.
I would now like to turn the call back over to Angus.
Angus Pacala
Thank you, Anna. Ouster is focused on building a great team and great products, scaling the adoption of digital lidar across our fast growing end markets and building a profitable business that can sustain our growth.
We remain energized about the remainder of 2022, excited about upcoming product announcements slated for early next year and eager to close the proposed merger with Velodyne, to accelerate the adoption of lidar, bolster our financial position and drive sustainable growth and shareholder value on our mission to building a safer and more sustainable future.
And with that, I would like to open it up for Q&A.
Question-and-Answer Session
Operator
Thank you. Before we open the call to questions, I want to remind everyone that Ouster management will only address questions in connection with Velodyne on a standalone basis, exclusive of the proposed merger with Ouster, which remains subject to completion.
[Operator Instructions] Our first question today comes from the line of Kevin Cassidy with Rosenblatt. Please go ahead.
Kevin Cassidy
Yes. Thanks for taking my question and congratulations on the strong results. And also on the announced merger or proposed merger. Just one question your range for the year is 40 million to 55 million. What are the factors for reaching those numbers? It seems like a large range at this point in the year.
Angus Pacala
Yes. Thanks for the question, Kevin. Anna, do you want to cover that?
Anna Brunelle
Yes. Happy to. I think Kevin, were really expecting to have a great Q4 and hit our guidance given the REV7 launch and just the immense customer interests we are seeing from that. And we saw our customer in count, this quarter increased from about 600 to about 700. And so our funnel is really strong, and we just are looking forward to having a great Q4.
And then similarly, we saw margins, you may remember we guided to 25% to 30% on margins, Q3 came in at 33%, the highest in our history. So all of those things together really gave us a strong confidence and reiterating our guidance.
Kevin Cassidy
Okay great. And, the REV7 was very impressive launch and that you’re ready to ship it off as soon as you announced it that is very strong. Can you say what percentage of your revenue do you think REV7 is it going to be significant in the first quarter will be more of a ramp into 2023?
Angus Pacala
Kevin, yes, that is a great question. So we will absolutely be ramping into REV7 eventually being the vast majority of our revenue. But we typically ramp production between our divisions across multiple quarters, and REV7 will be no different. So we will ship significant revenue REV7 revenue this quarter. But it will take a couple quarters before we really transition to the majority of revenue coming from that line.
Kevin Cassidy
Okay, great. Thank you.
Operator
Your next quick question comes from the line of Andres Sheppard with Cantor Fitzgerald. Please go ahead.
Andres Sheppard
A couple of quick questions for me. In regards to the strategic customer agreements, it looks like that number increased to 84. Can you just let us know what does that now translate in terms of revenue opportunities through 2026 and maybe when do you expect those to start materializing or ramping up? Thanks.
Angus Pacala
So a couple points here. The first is that, at the beginning of the year, we changed our approach to strategic customer agreements to require that they all have a binding component. So we increase the threshold for signing FTAs. And that is just a really important note. So all SCA signed this year have a binding component, and we are realizing revenue off of those signed deals already. So those are already taking effect.
And then to your question on potential contracted revenue opportunity. You will notice that we left that out of our earnings release, we chose to leave it out, because while the number has gone up. We have seen from our customers a reluctance to provide concrete updates in some cases, to their forecasts just given kind of market uncertainty and macroeconomic climate.
And instead of giving a number, we just wanted to give a number that we can stand behind in this case, we have run into a situation where we don’t feel we can stand behind the number even though it technically has gone up. We don’t feel we could stand behind it.
So we are looking at how we can revise our approach to contract and revenue opportunity, in the case that customers are having difficulty forecasting their businesses. Again, the reason they might be having difficulty is because of supply chain uncertainty, things like that, that are impacting their ability to ship in some cases.
So, we are trying to be perfectly open on why we left that out. And hopefully that makes sense. But overall, what is critical is SCA counts are continuing to increase, we raised the bar at the beginning of the year. And now we are at 84 of these signed active contracts, which is a fantastic place to be given where we were a year and a half ago and went public.
Andres Sheppard
Understood, thanks, Angus, know that that is very helpful, indeed. And maybe for my follow-up, as it pertains to the merger with Velodyne. I’m curious, how do you foresee your capital needs changing if at all? Thank you.
Angus Pacala
Yes, I mean, a big part of this merger is the opportunity to build a strong company financially. So absolutely one of the goals here is to limit the need for outside capital and limit dilution at the close of the deal.
We haven’t provided a complete outlook, forward looking outlook. We will do that upon closing the deal in the first half of next year. But absolutely, a major benefit here is that it provides much more clarity on the path to profitability as a combined company.
Andres Sheppard
Wonderful. Thanks Angus. Congrats again, that is it for me. I will pass it on. Thank you.
Operator
Your next question comes from the line of Tristan Gerra with Baird. Your line is now open.
Tyler Bomba
Hi, this is Tyler on Tristan. Thanks for taking the questions on building off the previous question. Should we expect cash burn to accelerate or slow in the next two years as revenue hits an inflection point, but more spending will be needed to ramp production?
Angus Pacala
Thanks for the question there. So we expect for cash burn to decrease overtime. As the company grows, so we have outlined as part of the deal up as much as 75 million and cost synergies between the companies with a combined 355 million in cash on hand as of Q3 between the two companies and expect to this provides better clarity on the path of profitability for the company, meaning reduce cash burn over time. No question. Hopefully that provides some clarity there.
Tyler Bomba
Yes. That is great.
Anna Brunelle
I was just going to say I could build on that a little bit, too, if you don’t mind. We are, as we said, seen just incredible reception with REV7 and we expect to continue to see increased demand for digital lidar.
And so you know, obviously, is that top line growth, we feel we have the right cost structure in place to get us on that path to profitability. And so if you look at the cash use for EBITDA so far this year, we have used about 23 million or 24 million per quarter each quarter this year and we expect Q4 to be similar.
And then I think we have mentioned before on the CapEx side, we don’t need a significant amount of CapEx to run our business. We have previously said it is about five million or so per year. And it is a little lumpy per quarter, but about 1.5 million per quarter.
And so, that covers us for cables and equipment for manufacturing capacity increases in such generally. And so I think as we see our top line growth as we continue to introduce these great products, we feel we have the right cost structure in place to get us on that path to profitability.
Tyler Bomba
Great. Yes, that is super helpful. For my follow-up, what is the current situation with Velodyne’s IP. I know that they rank intention with the Chinese supplier of lidar for patent infringement and the licensing deals put in place. Is that going to be relevant going forward from a revenue standpoint?
Angus Pacala
Yes. Thanks for the question. We haven’t provided insight in that level of detail on the combined company or expectations around revenue mix. But we will be providing a much more fulsome update when the deal closes.
Tyler Bomba
Great, thanks again for taking the questions.
Operator
Your next question comes from the line of Brian Dobson with Chardan Capital Markets. Your line is now open.
Brian Dobson
Yes. Thanks very much. Congratulations on the L3 chip launch and the merger announcement. So I guess first turning to the chip launch. Do you see your revenue mix by end user industry shifting as that new technology is introduced?
Angus Pacala
I absolutely think there will be some shift because one of the things we have highlighted with this release is that, we have doubled our SOM or Serviceable, Obtainable Market. And that has allowed us to tap into new longer range markets, the mapping market where there is a need for higher precision accuracy and range as well.
And so overtime, I do expect to see new use cases introduced in a shift, but not a shift because of a move off of other markets, it is just an expansion of the overall opportunities that we are addressing.
Brian Dobson
Yes, excellent. And you mentioned obtaining Vertical Safety Certification for your new sensor technology. Which of your core verticals offers the most opportunity if those certifications are obtained?
Angus Pacala
That is a really interesting question. And it depends on what timescale you are looking at. One of the things about Ouster is sort of versus our early diversification into industrial, smart infrastructure and robotics alongside our core strategy in auto. And that is because there is an established market, especially in the industrial lidar sector, over around $2 billion market today.
So I would say, there is a significant near term opportunity for the industrial certifications. But then setting that aside, the automotive sector. There are a lot of companies that are interested in automotive grade, automotive quality, whether or not they are true high volume automotive application.
So I think there is going to be a significant positive impact on the automotive certifications. And luckily, there is a lot of overlap between those two certification sets, so we can tackle them at once, which is what we are doing.
Brian Dobson
Excellent. And I will just sneak a quick one in about the merger. So you mentioned that the two companies have complementary customer bases. Can you just give us a little bit more color on Velodyne’s core business segments or customer segments?
Angus Pacala
Yes. I think that questions specific to Velodyne, you should definitely ask them. But on the complementary statement, one of the things that is common between us is a diversification across markets and there is natural complementary complementing that is going to happen as a result of the merger, just because we are two companies, two of the few companies that have diversified across markets more than just auto.
So we see an opportunity to provide a really robust set of products a really robust set of products and customer success that combines the best of each company and the learnings that we have, from operating as independent businesses for the better part of the past decade.
Brian Dobson
Great, thank you very much.
Operator
Your next question comes from the line of Richard Shannon with Craig-Hallum. Your line is now open.
Richard Shannon
Hi guys thanks for taking my question. Maybe my first one is for Anna on your guidance for the year here, both on sales and gross margins, the ranges here are pretty wide. And if you look at what numbers could give both the high and the low end here, it is pretty wide both revenues and gross margins. I think you just mentioned in an answer to a question about EBITDA being in a similar, maybe slightly improved level versus last quarter. So it seems like you have kind of pinpointed what those might look like versus a fairly wide range to left on the for both those numbers here. So maybe your comments are helping us kind of narrow that down a little bit from the wide ranges you have yourself?
Anna Brunelle
Like I said before, we are expecting to have a great quarter, we are already seeing traction from REV7, the 40 to 55 range was already in existence going into this quarter. And so we, it is still accurate, so we kept it.
But yes, we definitely expect to have a great quarter. And as I said, our customer count continues to increase and just our line of sight gives us very strong confidence that will be within that range.
Richard Shannon
Okay, fair enough. Follow on question for Angus. Last quarter, you talked about a little – macro seemingly affecting some of the sales cycles within a number of your end markets here and obviously had a good quarter growing nicely here with some continued strength in industrial robotics. Maybe you could give us a comment, kind of update a comment versus last quarter on whether the sales cycles are staying the same improving lengthening in any areas where it is kind of at the edges, either positive or negative by product line in markets or geographies, please.
Angus Pacala
Yes I think that the comments I made last quarter, and those observations are still hold true this quarter. And that is why we are sticking with our guidance. We revised it as of Q2 and sticking with and expect that will hit it.
So I think that maybe what has changed is really the, what we have done internally by releasing these new products, where we see the industrial sensor suite, releasing REV7 and the L3, that has generated a significant amount of external interest. Kind of additional new interest in our products. But that is kind of irrespective of the macroeconomic climate, which I think remains pretty similar to last quarter.
Richard Shannon
Okay, fair enough. That is all for me thanks.
Operator
And this does conclude our question-and-answer session. I would like to turn the conference back over to Angus Pacala for any closing remarks.
Angus Pacala
Alright. Well, thank you all for joining and for the questions. I’m incredibly excited about the merger with Velodyne that we have announced as of today and the positive impact that we are going to have through it for customers and for investors and for the maturation of the later industry as a whole. I really think consolidation is an important step for this industry, and glad to be leading the way here.
I’m also equally proud of what Ouster accomplished in the third quarter. We had a record gross margins, we had our second highest revenue quarter with over 44% year-over-year growth and we launched the L3 powered REV7 sensors, which expand raw performance to an extent, but I think few thought was possible with digital lidar. With REV7 digital lidar really is hitting its stride and there is plenty more to come in 2023 across our product portfolio. So thanks again for joining and have a great evening.
Operator
Ladies and gentlemen, the conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at this time.
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