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Item 7. Management’s Discussion and Analysis

2025-03-21 compared with 2024-03-28 · 141 added, 173 removed, 249 unchanged (56% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

The following discussion and analysis of our results of operations and financial condition should be read together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this Annual Report on Form 10-K.

On April 20, 2023, we filed with the Secretary of State of the State of Delaware a Certificate of Amendment to our Certificate of Incorporation to effect a one-for-10 reverse stock split of our common stock and a corresponding reduction in our authorized shares of common stock (the “Reverse Stock Split”).

The historical share and per share information included herein have been adjusted to reflect the Reverse Stock Split.

We founded Ouster in 2015 with the invention of our high-performance digital lidar.

To continue to grow our bus iness in the coming years, we have expanded and plan to continue to maintain and opportunistically expand our sales and marketing efforts and our software development capabilities, and to accelerate sensor development efforts.

We are headquartered in San Francisco, CA.

We are a leading global provider of high-resolution digital lidar sensors that offer advanced 3D vision to machinery, vehicles, robots, and fixed infrastructure assets, which allows each to understand and visualize the surrounding world and enable safe operation and autonomy.

We design and manufacture digital lidar sensors that we believe are one of the highest-performing, lowest-cost lidar solutions available today across each of our four target markets:

industrial automation;

smart infrastructure;

and automotive.

Ouster’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” and in other parts of this Annual Report on Form 10-K.

Ouster was founded in 2015 with the invention of our high-performance digital lidar.

To continue to grow our bus iness in the coming years, we expanded and plan to continue invest in growing our digital lidar product portfolio, increasing the capabilities of our software solutions, and opportunistically expanding our sales and marketing efforts.

We are headquartered in San Francisco, California.

We are a leading global provider of lidar sensors and solutions.

We design and manufacture high-resolution digital lidar sensors that offer advanced 3D vision to machinery, vehicles, robots, and fixed infrastructure assets, which allows each to understand and visualize the surrounding world and enable safe operation and autonomy.

We believe our sensors are one of the highest-performing, lowest-cost lidar solutions available today across each of our four target markets:

automotive, industrial, robotics, and smart infrastructure.

Our digital lidar sensors leverage a simplified architecture based on two semiconductor chips and are backed by a suite of patent-protected technology.

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Our digital lidar sensors leverage a simplified architecture based on two semiconductor chips and are backed by a suite of patent-protected technology.

We have invested heavily in patents since our inception, pursuing comprehensive coverage of invention families and use cases, with broad international coverage.

We believe that our extensive patent coverage creates material barriers to entry for anyone aiming to compete in the digital lidar space.

Our product offering currently includes four models of sensors in our OS product line:

Our hardware product offering currently includes four models of sensors in our OS product line:

the hemispheric field of view OSDome, the ultra-wide field of view OS0, the mid-range OS1, and the long-range OS2.

Within our OS sensor models, we offer numerous customization options, all enabled by embedded software.

For each of our three models in the OS product line, we offer resolution options of 128 lines vertically (“channels”), 64 channels, or 32 channels, as well as many beam spacing options.

On October 19, 2022, we announced the launch of our newest OS series scanning sensors, REV7, powered by our next-generation L3 chip.

REV7 features the all-new OSDome sensor, as well as upgraded OS0, OS1, and OS2 sensors that deliver double the range, enhanced object detection, increased precision and accuracy, and greater reliability.

The new REV7 sensors offer performance upgrades that we believe will enhance Ouster’s market opportunity, driven by new opportunities for longer-range and mapping applications.

We are currently developing our solid-state DF product line, which is a suite of short, mid, and long-range solid-state digital lidar sensors that provide uniform precision imaging without motion blur across an entire field of view.

For each of our models in the OS product line, we offer resolution options of 128 lines vertically (“channels”), 64 channels, or 32 channels, as well as many beam spacing options.

In 2022, we launched our REV7 OS series scanning sensors powered by L3 chip.

We are currently developing our solid-state digital flash (“DF”) sensors, which is a suite of short, mid, and long-range solid-state digital lidar sensors that provide uniform precision imaging without motion blur across an entire field of view.

We also provide perception software platforms for smart infrastructure deployments.

Our software enables real-time people and object detection, classification, and tracking for actionable, intuitive, and customizable insights while preserving personally identifiable information.

Ouster Gemini is a perception platform designed for smart infrastructure deployments like security and crowd analytics, and is optimized exclusively for Ouster’s digital lidar sensors.

BlueCity is a Gemini-powered solution for traffic operations, planning, and safety.

BlueCity provides real-time data analytics and predictions, which can be used to improve traffic and crowd flow efficiency, improve urban planning, advance sustainability, and protect vulnerable road users in a wide range of weather and lighting conditions.

We have invested heavily in patents since our inception, pursuing comprehensive coverage of invention families and use cases, with broad international coverage.

We believe that our extensive patent coverage creates material barriers to entry for anyone aiming to compete in the digital lidar space.

We believe the simplicity of our digital lidar design gives us a meaningful advantage in costs related to manufacturing, supply chain, and production yields.

Within our OS sensor models, we offer numerous customization options, all enabled by embedded software which minimizes changes to manufacturing or inventory.

Our main manufacturing partners are Benchmark and Fabrinet.

Benchmark and Fabrinet manufacture the majority of our products at their facilities in Thailand, which we expect will continue to reduce our product costs and allow us to continue to rapidly scale production to meet our anticipated product demand.

Based on cost quotes for our products in mass production, we anticipate our manufacturing costs per unit will decrease further with higher volumes.

Our main manufacturing partners are Benchmark and Fabrinet, which manufacture the majority of our products at their facilities in Thailand.

We expect this will allow us to continue to reduce our product costs and rapidly scale production to meet our anticipated product demand.

Based on cost quotes for our products in mass production, we anticipate our manufacturing costs per unit will decrease further as production volumes increase.

Merger with Velodyne Lidar, Inc.

On November 4, 2022, we entered into an Agreement and Plan of Merger (the “Velodyne Merger Agreement”) with Velodyne Lidar, Inc., a Delaware corporation (“Velodyne”), Oban Merger Sub, Inc., a Delaware corporation and one of our direct, wholly owned subsidiaries (“Velodyne Merger Sub I”) and Oban Merger Sub II LLC, a Delaware limited liability company and one of our direct, wholly owned subsidiaries (“Velodyne Merger Sub II”).

On February 10, 2023, we completed our merger of equals with Velodyne pursuant to the terms of the Agreement and Plan of Merger with Velodyne, Merger Sub I and Merger Sub II (the “Velodyne Merger”).

In connection with the closing of the Velodyne Merger, we and Velodyne now operate as a single combined company.

We believe the Velodyne Mergers will enhance our robust suite of product offerings;

grow our diverse customer base;

increase operational efficiencies;

further develop our innovative product roadmap in anticipation for the future needs of the market;

reduce our production costs;

improve our path to profitability;

and strengthen our future financial position.

Our product offerings acquired through the Velodyne Merger includes three models of sensors.

The Alpha Prime (VLS-128) is a lidar sensor designed for autonomous driving and advanced vehicle safety, offering a 300-meter range with 128 lasers and real-time 3D data at 0.1-degree vertical and horizontal resolution.

Recognized at the Pace Automotive Award in 2019, it provides a superior combination of range, resolution, and precision for Level 4 and Level 5 autonomous vehicles in both highway and low-speed urban environments.

On the other hand, the Puck (VLP-16) is designed for mass production and affordability, featuring 16 lasers, a 100-meter range, and a multi-laser design with lower power consumption, lighter weight, and a compact footprint, making it suitable for low-speed autonomy and driver assistance.

The Puck Hi-Res (VLP-16 Hi-Res) is an enhanced version of the original Puck, designed for applications requiring high image resolution, maintaining a 100-meter range and introducing a tighter laser distribution for more details in the 3D image at longer ranges, enabling better object identification.

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On February 10, 2023, we completed our merger of equals with Velodyne pursuant to the terms of the Velodyne Merger Agreement with Velodyne, Merger Sub I and Merger Sub II (the “Velodyne Merger”).

The product offerings we acquired through the Velodyne Merger include the VLP-16, VLP-16 Lite, VLP-16 Hi-Res, VLP-32 and VLS-128.

These product offerings are in the final stages of their product life cycle and we plan to discontinue manufacturing them in 2025.

Amazon Warrant

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50% of the unvested Amazon Warrant as of the date of the Velodyne Merger vested as a result of the Velodyne Merger and the remainder will vest over time based on payments by Amazon or its affiliates to us in connection with Amazon’s purchase of goods and services from us.

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Factors Affecting Our Performance

Commercialization of Lidar Applications.

We believe that lidar and system solutions, including our subscription-based software, are approaching an inflection point of adoption across our target end market applications, and that we are well-positioned to capitalize on this market adoption.

We believe that our lidar solutions are approaching an inflection point of adoption across our target end market applications, and that we are well-positioned to capitalize on this market adoption.

However, as our customers continue research and development projects that rely on lidar technology, it is difficult to estimate the timing of ultimate end market and customer adoption.

As a result, we expect that our results of operations, including revenue and gross margins, will continue to fluctuate on a quarterly and annual basis for the foreseeable future.

As a result, we expect that our results of operations, including revenue and gross margins, will improve over time but may fluctuate on a quarterly and annual basis for the foreseeable future.

As the market for lidar solutions matures and more customers reach a commercialization phase with solutions that rely on our technology, the fluctuations in our operating results may become less pronounced.

In May 2023, the Company announced that it had been awarded a serial production agreement with Motional, a global leader in driverless technology, to be Motional’s exclusive supplier of long-range lidar using the VLS-128 lidar sensor through 2026, and we intend to seek to establish similar relationships with other customers.

In 2024, our strategic business objectives include expanding software solutions.

Accordingly, we expect to make progress towards growing our revenue and expanding gross margins.

Nonetheless, our revenue and gross margins may not increase as we expect unless and until more customers commercialize their products and lidar technology becomes more prevalent across our target end markets.

In 2025, our strategic business objectives include growing the software-attached business, transforming the product portfolio, and executing towards profitability.

Number of Customers in Production.

For certain strategic customers and markets, our products must be integrated into a broader platform, which then must be tested, validated, and achieve system-level performance and reliability thresholds that enable commercial production and sales.

The time necessary to reach commercial production varies from six months to seven years, based on the market and application.

For example, the production cycle in the automotive market tends to be substantially longer than in our other target markets, including industrial automation, smart infrastructure and robotics.

It is critical to our future success in each of our target end markets that our customers reach commercial production and sales and that they select our products in their commercial production applications.

Because the timelines to reach production vary significantly and the revenue generated by each customer in connection with commercial production and sales is unpredictable, it is difficult for us to reliably predict our financial performance.

For certain strategic customers and markets, our products must be integrated into a broader platform, which then must be tested and validated to achieve system-level performance and reliability thresholds that enable commercial production and sales.

The time necessary to reach commercial production varies from six months to several years, based on the market and application.

For example, the production cycle in the automotive market tends to be substantially longer than in our other target markets.

It is critical to our future success in each of our target end markets that our customers reach commercial production and select our products in their commercial production applications, and that we avoid unexpected cancellations of major purchases of our products.

Because the timelines to reach production vary significantly and the revenue generated by each customer in connection with commercial production is unpredictable, it is difficult for us to reliably predict our financial performance.

Customers’ Sales Volumes.

Our customer base is diversified and we aim to continue to penetrate into diverse end markets to increase our sales volumes.

Ultimately widespread adoption of our customers’ products that incorporate our lidar solutions will depend on many factors, including the size of our customers’ end markets, end market penetration of our customer’s products that incorporate our digital lidar solutions, our end customers’ ability to sell their products, and the financial stability and reputation of the customers.

In 2024, our strategic business objectives include growing our installed base of customers.

We believe our sales volume by customer depends on the end market demand for our customers’ products that incorporate our digital lidar solutions as well as our ability to grow our sales force.

Ultimately, widespread adoption of our customers’ products that incorporate our lidar solutions will depend on many factors, including the size of our customers’ end markets, market penetration of our customers’ products that incorporate our digital lidar solutions, our customers’ ability to sell their products, and the financial stability and reputation of our customers.

Average Selling Prices (“ASPs”), Product Costs and Margins.

Our product costs and gross margins depend largely on the volumes of sensors shipped, the mix of existing and new products sold and the number and variety of solutions we provide to our customers.

We anticipate that our selling prices will vary by target end market and application due to market-specific supply and demand dynamics.

We expect to continue to experience some downward pressure on margins from signing anticipated large multi-year agreements in the near term with multi-year negotiated pricing.

We expect that our selling prices will vary by target end market and application due to market-specific supply and demand dynamics.

We expect to continue to experience some downward pressure on prices from signing anticipated large multi-year agreements in the near term with multi-year negotiated pricing.

We expect that these customer-specific selling price fluctuations combined with our volume-driven product costs may drive fluctuations in revenue and gross margins on a quarterly basis.

However, notwithstanding any short-term price surcharges on our products, we expect that over time our volume-driven product costs will decrease.

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Lidar is an emerging market, and there are many competitors for the growing market.

This has created downward pressure on our ASPs.

We expect this pressure to continue to push our ASPs lower in the coming years.

However, we believe that because of our complementary metal-oxide-semiconductor, digital lidar technology, we are well-positioned to scale more rapidly than our competitors and leverage our scale to deliver positive gross margins.

However, notwithstanding any short-term price surcharges on our components, we expect that our volume-driven product costs will decrease over time.

In addition, we expect that the current uncertainty surrounding U.S.

trade relationships may impact our future product costs and margins, particularly to the extent there are significant tariffs or trade restrictions imposed on goods imported from Thailand, Canada, or China that are used in our products.

These costs could also impact customer demand as described above under “Customers’ Sales Volumes.”

Lidar is an emerging technology, and there are many competitors for this growing market which has created downward pressure on our ASPs.

Absent the introduction of new technology, we expect this pressure to continue to push our ASPs lower in the coming years.

However, we believe that because of the simplicity of our digital lidar technology, we are well-positioned to scale more effectively than our competitors and can leverage this scale to deliver positive gross margins.

Continued Investment and Innovation.

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We believe it is essential that we continue to identify and respond to rapidly evolving customer requirements, including successfully progressing our digital lidar roadmap and developing technologies that will enhance the operating performance of our products.

For example, our next generation L4 custom silicon chip is taped out and we believe it will bring significant improvements in range, field of view, and manufacturability, along with safety certifications to the OS sensor family, and we currently plan to integrate the Chronos chip into its solid-state digital flash sensors in 2024.

Our “L4” sensor prototypes are generating rich point clouds and have moved into validation testing.

Our “Chronos” chip has been fabricated by our foundry partner and is now undergoing in-house testing.

If we fail to continue our innovation, our market position and revenue may be adversely affected, and our investments in that area will not be recovered.

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Supply Chain Continuity.

Some of the key components in the products we have designed or are currently designing come from limited or single source suppliers.

If these third parties experience financial, operational, manufacturing capacity or other difficulties, or experience shortages in required components, or if they are otherwise unable or unwilling to continue to manufacture these components in required volumes or at all, our supply may be disrupted or be on less favorable terms.

For example, we may be required to seek alternate manufacturers or suppliers for our products.

It would be time-consuming, and could be costly and impracticable, to begin to use and qualify new manufacturers, components or designs, and such changes could cause significant interruptions in supply and could have an adverse effect on our ability to meet our scheduled product deliveries and may subsequently lead to the loss of sales.

Market Trends and Uncertainties.

We anticipate increasing demand for our digital lidar solution.

We estimate a multibillion dollar total addressable market (“TAM”) for our solutions in the future.

We define our TAM as automation applications in the industrial, smart infrastructure, robotics and automotive end markets where we actively engage and maintain customer relationships.

We estimate a multi-billion dollar total addressable market (“TAM”) for our solutions in the future.

We define our TAM as applications in the automotive, industrial, robotics, and smart infrastructure end markets where we actively engage and maintain customer relationships.

Each of our target markets is potentially a significant global opportunity, and these markets have historically been underserved by limited or inferior technology or not served at all.

We believe we are well positioned in our market as a leading provider of high-resolution lidar sensors.

Although increasing adoption of semi-autonomous solutions that rely on lidar technology may generate higher demand, we may not be able to take advantage of demand if we are unable to anticipate regulatory changes and adapt quickly enough to meet such new regulatory standards or requirements applicable to us or to our customers’ products in which our lidar sensors are used.

Market acceptance of semi-autonomous solutions and active safety technology depend upon many factors, including cost, performance, safety performance, regulatory requirements and international taxes or tariffs related to such technologies.

We may not be able to take advantage of demand if we are unable to anticipate regulatory changes and adapt quickly enough to meet such new regulatory standards or requirements applicable to us or to our customers’ products in which our lidar sensors are used.

Market acceptance of lidar technology and active safety technology depend upon many factors, including cost, performance, safety performance, regulatory requirements and international taxes or tariffs related to such technologies.

These factors may impact the ultimate market acceptance of our lidar technology.

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We have an existing presence in three regions:

Asia-Pacific;

Asia and Pacific;

and Europe, Middle East and Africa.

We intend to expand our presence in these regions over time including through distribution partnerships.

Expanded global reach will require continued investment and may expose us to additional foreign currency risk, international taxes and tariffs, legal obligations and additional operational costs, risks and challenges that may impact our ability to meet our projected sales volumes, revenue and gross margins.

Expanded global reach will require continued investment and may expose us to additional foreign currency risk, international taxes and tariffs, legal obligations, export/import regulations and additional operational costs.

These risks and challenges that may impact our ability to meet our projected sales volumes, revenues, and gross margins.

In addition, the current uncertainty surrounding U.S.

trade relationships may impact our future international sales, particularly to the extent there are significant tariffs or trade restrictions imposed on goods imported from the United States.

Components of Results of Operations

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We recognize revenue from product sales when the performance obligation of transferring control of the product to the customer has been met, generally when the product is shipped.

We also recognize revenue by performing services related to product development, validation, maintenance under our extended warranty contracts and shipping;

however, we do not expect product development and validation and license and services to be material components of revenue, cost of revenue or gross margin in the foreseeable future.

We also recognize revenue by performing services related to product development, validation, licenses, maintenance under our extended warranty contracts, and shipping.

We do not expect these services to be material components of revenue, cost of revenue or gross margin in the near future.

Performance obligations related to services are generally recognized over time, based on cost-to-cost input basis or straight-line over time.

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Our gross profit equals total revenues less our total cost of revenues, and our gross margin is our gross profit expressed as a percentage of total revenue.

Subject to quarterly fluctuations and volatility, we expect unit costs to decline as we manufacture higher unit volumes of sensors and a greater portion of our sensors are produced by our contract manufacturers in Thailand.

Our gross margin is subject to quarterly fluctuations in product mix, price and volume.

Operating Expenses

Research and Development Expenses

Research and development (“R&D”) activities are primarily conducted at our San Francisco based headquarters and our additional R&D facilities in Scotland and Canada and consist of the following activities:

Research and development (“R&D”) activities are primarily conducted at our San Francisco headquarters and our additional R&D facilities in Scotland and Canada and consist of the following activities:

• Design, prototyping, and testing of proprietary electrical, optical, and mechanical subsystems for our digital lidar products;

• Robust testing for industrial and autonomous vehicle safety certifications;

• Development of new products and enhancements to existing products in response to customer requirements including firmware development and software development of lidar integration products;

• Custom system-on-a-chip (“SoC”) design for Ouster’s digital lidar products;

• Robust testing for safety certifications;

• Development of new products and enhancements to existing products in response to customer requirements including firmware and software development of lidar integration products;

• Custom SoC design for Ouster’s digital lidar products;

• Development of custom manufacturing equipment.

R&D expenses consist of personnel-related expenses, including salaries, benefits, and stock-based compensation, for all personnel directly involved in R&D activities, third-party engineering and contractor costs, prototype expenses, amortization of intangible assets, and an allocation of shared overhead costs including facilities, utilities and IT-related costs that support R&D activities.

R&D expenses consist of personnel-related expenses, including salaries, benefits, and stock-based compensation, for all personnel directly involved in R&D activities, third-party engineering and contractor costs, prototype expenses, amortization of intangible assets, and an allocated portion of overhead, facility and information technology (“IT”) costs that support R&D activities.

R&D costs are expensed as they are incurred.

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Our absolute amount of R&D expenses is expected to grow over time;

however, we expect R&D as a percentage of revenue to decrease over time as our business grows.

however, we expect R&D as a percentage of revenue to decrease as our business grows.

Sales and Marketing Expenses

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Selling and marketing expenses consist of personnel-related expenses, including salaries, benefits, and stock-based compensation, for all personnel directly involved in business development, customer support, and marketing activities, and marketing expenses including trade shows, advertising, and demonstration equipment.

Sales and marketing expenses also include amortization expense of intangible assets related to customer relationships associated with the acquisitions.

We have experienced additional sales and marketing expenses as a result of our global expansion, and expect sales and marketing spend as a percentage of revenue to decrease over time as our business grows.

Sales and marketing expenses also include amortization expense of intangible assets related to customer relationships associated with the acquisitions and an allocated portion of facility and IT costs that support sales and marketing activities.

We expect sales and marketing expenses as a percentage of revenue to decrease over time as our business grows.

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General and Administrative Expenses

General and administrative expenses consist of personnel-related expenses, including salaries, benefits, and stock-based compensation, of our executives and members of the board of directors, finance, human resources, an allocation of shared overhead costs including facilities, utilities and IT-related costs that support general and administrative activities, as well as amortization of intangible assets, fees related to legal fees, patent prosecution, accounting, finance and professional services, as well as insurance and bank fees.

General and administrative expenses consist of personnel-related expenses, including salaries, benefits, and stock-based compensation, of our executives and members of the board of directors, finance, human resources, an allocated portion of facility and IT costs that support general and administrative activities, as well as amortization of intangible assets, fees related to legal fees, patent prosecution, accounting, finance and professional services, as well as insurance and bank fees.

We have experienced and may in the near-term experience additional increases in general and administrative expenses related to legal, accounting, finance and professional services costs associated with litigation activities, hiring more personnel and consultants to support our international activities and compliance with the applicable provisions of the Sarbanes-Oxley Act and other SEC rules and regulations as a result of being a public company.

Our absolute amount of general and administrative expenses will grow over time;

however, we expect the general and administrative spend as a percentage of revenue to decrease over time as our business grows.

We have experienced and may in the near-term experience additional increases in general and administrative expenses related to legal, accounting, finance and professional services costs associated with the Velodyne Merger, litigation activities, hiring more personnel and consultants to support our growing international expansion and compliance with the applicable provisions of the Sarbanes-Oxley Act (“SOX”) and other SEC rules and regulations as a result of being a public company.

however, we expect general and administrative expenses as a percentage of revenue to decrease as our business grows.

Goodwill Impairment Charges

In the year ended December 31, 2023, we recorded goodwill impairment charges of $166.7 million.

These charges were primarily driven by the decrease in the Company’s market capitalization during the period.

In the year ended December 31, 2023, we recorded goodwill impairment charges of approximately $166.7 million.

These charges were primarily driven by the decrease in our market capitalization during the period.

Our goodwill impairment analysis includes a comparison of the aggregate estimated fair value of our reporting unit to our total market capitalization.

There were no goodwill impairment charges during the year ended December 31, 2022.

As of December 31, 2023, our remaining goodwill balance was nil.

There was no addition to goodwill as of December 31, 2024, and as such, our remaining goodwill balance was nil.

Interest Income, Interest Expense, and Other Income (Expense), Net

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These amounts will vary based on our respective balances and market rates.

Interest expense consists primarily of interest on our debt, amortization of debt issuance costs and discounts, fees paid on refinancing and loss on debt extinguishment from our former credit line with Hercules.

Other income (expense), net consists primarily of realized and unrealized gains and losses on foreign currency transactions and balances, realized gains and losses related to sales of our available-for-sale investments, the change in fair value of the private placement warrant liability.

Interest expense consists primarily of interest on our debt and the amortization of debt issuance costs and discounts.

Other income (expense), net consists primarily of realized and unrealized gains and losses on foreign currency transactions and balances, realized gains and losses related to sales of our available-for-sale investments and the change in fair value of the private placement warrant liability.

Our income tax provision consists of federal, state and foreign current and deferred income taxes.

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Federal and state deferred tax assets, excluding specific balances due to the Velodyne Merger.

Income tax provision for the years ended December 31, 2023 and 2022, respectively, was not material to the Company’s consolidated financial statements.

The income tax provision for the years ended December 31, 2024 and 2023, respectively, was not material to the Company’s consolidated financial statements.

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Loss from operations (104,177) (373,192)

Other (expense) income:

Other income (expense):

Interest income 8,846 9,038

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Loss from operations (94) (448)

Other (expense) income:

Other income (expense):

Interest income 8 11

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Americas $ 58,429 $ 45,744 $ 12,685 28 %

Asia-Pacific 12,929 9,510 3,419 36

Asia and Pacific 20,158 12,929 7,230 56

Europe, Middle East and Africa 32,513 24,606 7,907 32

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Revenue increased by $27.8 million , or 33% , to $111.1 million for the year ended December 31, 2024 from $83.3 million for the prior year.

The increase in revenue was driven by higher volume that was primarily due to the Velodyne Merger, which contributed $29.0 million of revenue in 2023.

In addition, the Company realized higher revenues relating to sales of our OS sensors.

The increase in revenue was primarily driven by increased sales of the REV7 sensors as customers increased their purchase levels compared to the prior year period.

Geographic Locations

Revenue increased across the geographic regions of the Americas, Asia-Pacific, and Europe, Middle East and Africa as compared to the comparable period in the prior year.

The revenue increases in those geographic regions were primarily attributable to the Velodyne Merger, our focus and investment in our global sales team and increased demand for our OS sensors during the year ended December 31, 2023.

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Revenue increased across the geographic regions of the Americas, Asia and Pacific, and Europe, Middle East and Africa as compared to the comparable period in the prior year.

The revenue increases in those geographic regions were primarily attributable to higher sales of the REV7 sensor.

Cost of Revenue and Gross Margin

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Cost of revenue $ 70,641 $ 74,965 $ (4,324) (6) %

Cost of revenue and Gross Margin

Cost of revenue increased by $44.9 million, or 149%, to $75.0 million for the year ended December 31, 2023 from $30.1 million for the prior year.

The increase in cost of revenue was primarily attributable to the Velodyne Merger.

In addition, the Company recognized $10.0 million in inventory write downs primarily related to canceling certain Velodyne products and transitioning to the REV7 sensors.

In addition, we had higher costs due to higher OS product revenues in the year ended December 31, 2023.

Gross margin fell to 10% for the year ended December 31, 2023 from 27% in the prior year primarily as a result of the factors described above related to the Velodyne Merger.

Cost of revenue

Cost of revenue decreased by $4.3 million, or 6%, to $70.6 million for the year ended December 31, 2024 from $75.0 million for the prior year.

The decrease in cost of revenue was primarily attributable to lower excess and obsolete inventory charges and compensation-related expenses, partially offset by increased shipments over the period.

Gross margin rose to 36% for the year ended December 31, 2024 from 10% in the prior year primarily as a result of the factors described above related to the increased sales of REV7 sensor.

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Operating Expenses

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Research and Development

Research and development expenses increased by $26.9 million, or 42%, to $91.2 million for the year ended December 31, 2023 from $64.3 million in the prior year.

The increase was primarily attributable to the Velodyne Merger, which increased headcount-related expenses including stock based compensation by $19.0 million in 2023.

Research and development expenses decreased by $33.1 million, or 36%, to $58.1 million for the year ended December 31, 2024 from $91.2 million in the prior year.

The decrease was primarily attributable to the reduction in compensation expenses and other costs from the restructuring and cost reduction initiatives after the closing of the Velodyne Merger.

Sales and Marketing

Sales and marketing expenses increased by $10.8 million, or 35%, to $41.6 million for the year ended December 31, 2023 from $30.8 million in the prior year.

The increase was primarily attributable to the Velodyne Merger, which increased headcount-related expenses including stock based compensation by $8.1 million in 2023.

Sales and marketing expenses decreased by $13.8 million, or 33%, to $27.9 million for the year ended December 31, 2024 from $41.6 million in the prior year.

The decrease was primarily attributable to the reduction in compensation expenses and other costs from the restructuring and cost reduction initiatives after the closing of the Velodyne Merger.

General and Administrative

General and administrative expenses increased by $20.8 million, or 34%, to $82.0 million for the year ended December 31, 2023 from $61.2 million in the prior year.

The increase was primarily attributable to the Velodyne Merger, which increased headcount-related expenses including stock based compensation and litigation related costs by $29.6 million.

General and administrative expenses decreased by $23.3 million, or 28%, to $58.7 million for the year ended December 31, 2024 from $82.0 million in the prior year.

The decrease was primarily attributable to the reduction in compensation expenses and other costs from the restructuring and cost reduction initiatives after the closing of the Velodyne Merger.

Goodwill Impairment Charges

Goodwill impairment charges were $166.7 million for the year ended December 31, 2023 and related to the reasons described above under “Goodwill impairment charges.” There were no goodwill impairment charges during the year ended December 31, 2022.

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There was no addition to goodwill for the year ended December 31, 2024, and as such, our remaining goodwill balance was nil.

Goodwill impairment charges were $166.7 million for the year ended December 31, 2023, primarily driven by the decrease in our market capitalization during the period.

Interest Income, Interest Expense and Other Income (Expense), Net

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Interest expense (1,823) (9,303) 7,480 (80)

Other income (expense), net (130) 7,654 (7,784) (102)

Interest income was $9.0 million for the year ended December 31, 2023 compared to $2.2 million for the prior year.

The increase in interest income was primarily attributable to a higher average cash and cash equivalent balance driven by additions from the Velodyne Merger transaction and higher interest rates earned on held balances.

Interest expense was $9.3 million for the year ended December 31, 2023 compared to $2.7 million for the prior year.

We utilized proceeds from a revolving credit line with UBS to prepay and terminate our existing term loan with Hercules.

We recognized a loss of extinguishment of debt of $3.6 million and recorded it is interest expense, along with amortization of debt issuance costs and discount in the year ended December 31, 2023.

Interest expense recorded in the year ended December 31, 2022 primarily consisted of interest and amortization of debt issuance cost and discount on the Loan and Security Agreement with Hercules Capital, Inc.

and interest expense on the Revolving Credit Line Agreement with UBS Bank USA and UBS Financial Services Inc.

Other income (expense), net was $(0.1) million for the year ended December 31, 2023 compared to $7.7 million for the prior year.

Other income (expense) included the fair value change of private placement warrant liability and was not material during the year ended December 31, 2023.

During the year ended December 31, 2022, we recorded a gain of $7.4 million for the fair value change of private placement warrant liability.

Other expense (income), net

646 (130) 776 (597)

The year-over-year decrease in interest income was primarily attributable to lower average cash and cash equivalent balances.

The year-over-year decrease in interest expense was due to entering into the UBS Agreement in October 2023, which had a lower interest rate than our prior debt arrangement and a reduction in the outstanding debt balance which was paid off in full on August 12, 2024.

Other income (expense), net was not material for the years ended December 31, 2024 and December 31, 2023.

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Year Ended December 31, 2024 - 2023 Change

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Loss before income taxes $ (96,508) $ (373,587) $ 277,079 (74) %

Provision for income tax expense 523 305 218 71

Provision for income tax expense (benefit) 537 523 14 3

Effective tax rate (0.56) % (0.14) %

Our effective tax rate was (0.56)% for the year ended December 31, 2024 compared to our effective tax rate of (0.14)% for the prior year.

Our tax expense changed by $0.2 million during the year ended December 31, 2023, compared to the prior year, primarily due to withholding taxes in the United States and income tax expense from profitable foreign jurisdictions.

Our tax expense changed during the year ended December 31, 2024, compared to the prior year, primarily due to income tax expense from profitable foreign jurisdictions.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents and short-term investments, cash generated from product revenues, sales of common stock under our at-the market equity offering program and proceeds from debt financing.

Our primary requirements for liquidity and capital are working capital, inventory management, capital expenditures, public company costs and general corporate needs.

Our principal sources of liquidity are our cash and cash equivalents and short-term investments, cash generated from sales of our products, and sales of common stock under our at-the market equity offering program.

Our primary requirements for liquidity and capital are to finance working capital, inventory management, capital expenditures, and general corporate purposes.

We expect these needs to continue as we develop and grow our business.

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We have experienced recurring losses from operations, and negative cash flows from operations, and we expect to continue operating at a loss and to have negative cash flows from operations for the foreseeable future.

Because we are in the growth stage of our business and

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operate in an emerging field of technology, we expect to continue to invest in research and development and expand our sales and marketing teams worldwide.

We may require additional capital to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances and in either the short-term or long-term may determine to engage in equity or debt financings or enter into credit facilities for other reasons.

Because we are in the growth stage of our business and operate in an emerging field of technology, we expect to continue to invest in research and development and opportunistically expand our sales and marketing teams worldwide.

We may require additional capital to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions, or unforeseen circumstances and in either the short-term or long-term may determine to engage in equity or debt financings.

If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

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and Oppenheimer & Co.

(the “ATM Agreement”), pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to $150.0 million under an “at the market” offering program.

Subject to the terms and conditions of the agreement, we may sell the shares in amounts and at times to be determined by us but we are under no obligation to sell any of the shares.

(the “ATM Agreement”), which expires three years from the May 2, 2022 Form S-3 filing date, pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to $150.0 million under an “at the market” offering program.

Subject to the terms and conditions of the ATM Agreement, we may sell the shares in amounts and at times to be determined by us but we are under no obligation to sell any of the shares.

Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of our common stock, capital needs and determinations by us of the appropriate sources of funding.

During the year ended December 31, 2024, we sold 6,045,428 shares of common stock for net proceeds of $57.8 million under the ATM Agreement, and during the year ended December 31, 2023, we sold 2,878,875 shares of common stock for net proceeds of $14.6 million.

The remaining availability under the ATM Agreement as of December 31, 2024 is approximately $58.6 million.

We currently intend to use the net proceeds from the sale of shares pursuant to the ATM Agreement for working capital and general corporate purposes.

Debt Arrangements

On April 29, 2022, we entered into the Loan Agreement with Hercules, which provided us with a term loan facility of up to $50.0 million, subject to terms and conditions (the “Term Loan Facility”).

As of December 31, 2022, $40.0 million had been drawn under the Term Loan Facility, and could be used for general working capital purposes subject to certain terms and conditions.

On October 25, 2023, the Company entered into the Credit Line Account Application and Agreement for Organizations and Businesses (the “Credit Agreement”) and the Addendum to Credit Line Account Application and Agreement (the “Addendum”;

and the Credit Agreement as amended, modified, and/or supplemented by the Addendum, the “UBS Agreement”) by and among the Company, UBS Bank USA (the “Bank”), and UBS Financial Services Inc.

The facility under the UBS Agreement matures and terminates on August 2, 2025 (the “Maturity Date”).

The UBS Agreement provides us with a revolving credit line of up to $45.0 million, subject to certain terms and conditions.

We initially borrowed $44.0 million, and all of the proceeds were used to prepay and terminate our Term Loan Facility with Hercules on October 25, 2023.

We recognized a loss on extinguishment of debt of $3.6 million and recorded it as interest expense in its consolidated statements of operations and comprehensive loss.

Pursuant to the terms of the UBS Agreement, we have agreed to maintain minimum liquidity, comprised of unencumbered cash and cash equivalents, U.S.

treasuries and other assets acceptable to the Bank, of $52.0 million in an account maintained with the Bank or its affiliates at all times.

The facility under the UBS Agreement is secured by our assets in securities accounts and any other accounts maintained with the Bank or its affiliates, and any supporting obligations, general intangibles and other rights ancillary or attributable to such assets, subject to customary exceptions.

Loans under the UBS Agreement bear interest at a rate equal to (x) for variable rate loans, the sum of (i) the applicable SOFR average plus 0.110%, plus (ii) 1.20%, and (y) for fixed rate loans, the sum of either (1) CME Term Rate or (2) the U.S.

Treasury Rate, as applicable and as defined in the UBS Agreement, as determined based on the duration of the advance, plus the applicable liquidity premium with a range of 0.15% to 0.50%, as set forth in the UBS Agreement.

Interest payments are due (x) for variable rate loans, on the last day of each calendar month, and on each date that any portion of the principal amount is due, including on the Maturity Date, and (y) for fixed rate loans, on the last day of the applicable interest period, and on each date that any portion of the principal amount is due, including on the Maturity Date.

We may repay any variable rate loans at any time in whole or in part, without penalty.

We may repay any fixed rate loans in whole, but not in part, subject to certain breakage costs.

We have agreed to pay an unused line fee in an amount equal to (i) the commitment amount of $45.0 million less the average daily balance of the sum of the principal amount of the obligations outstanding during the preceding calendar quarter, multiplied by (ii) 0.50% per annum, and such unused line fee is payable quarterly in arrears on the last day of each calendar quarter.

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The UBS Agreement also contains affirmative and negative covenants customary for a credit line of this type, including requirements for maintenance of the collateral accounts and certain limitations on withdrawal of cash from such collateral accounts.

The UBS Agreement also provides for customary events of default, including, among others, non-payment, failure to maintain an amount equal to the greater of (x) the outstanding loans and (y) the collateral value as determined by the Bank, in the securities accounts maintained with the Bank, bankruptcy, or breach of a covenant, representation and warranty.

Prior Debt Arrangements

On October 25, 2023, we entered into the Credit Line Account Application and Agreement for Organizations and Businesses (the “Credit Agreement”) and the Addendum to Credit Line Account Application and Agreement (the “Addendum”;

and the Credit Agreement as amended, modified, and/or supplemented by the Addendum, the “UBS Agreement”) by and among the Company, UBS Bank USA (the “Bank”), and UBS Financial Services Inc.

The UBS Agreement provided us with a revolving credit line of up to $45.0 million, subject to certain terms and conditions.

We initially borrowed $44.0 million, and all of the proceeds were used to refinance and terminate our prior term loan facility.

On August 12, 2024, we repaid the $44.0 million principal amount outstanding under the UBS Agreement, along with accrued interest, and terminated all commitments and obligations thereunder.

We funded the repayment of the outstanding revolving loans under the UBS Agreement with cash on hand.

For additional information regarding the terms of the UBS Agreement, see Note 6.

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Leases and Note 9.

Commitments and Contingencies.

Commitments and Contingencies to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Cash Flow Summary

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During the year ended December 31, 2024, operating activities used $33.7 million in cash.

The primary factors affecting our operating cash flows during this period were our net loss of $97.0 million, offset by our non-cash charges of $51.9 million primarily consisting of depreciation and amortization of $9.8 million, stock-based compensation of $40.5 million, amortization of right-of-use asset of $4.9 million and inventory write-down of $2.1 million.

The changes in our operating assets and liabilities of $11.5 million was primarily due to a decrease in accounts receivable of $1.7 million, decrease in inventory of $4.7 million, an increase in prepaid expenses and other assets of $21.3 million, an increase in accounts payable of $2.5 million, an increase in contract liabilities of $19.0 million, a decrease in operating lease liability of $6.3 million, and a decrease in accrued and other liabilities of $28.1 million.

During the year ended December 31, 2023, operating activities used $137.9 million in cash.

The primary factors affecting our operating cash flows during this period were our net loss of $374.1 million, impacted by our non-cash charges of $257.7 million primarily consisting of inventory write-down of $10.0 million, interest expense and loss on extinguishment of debt of $4.0 million, goodwill impairment charges of $166.7 million, depreciation and amortization of $17.1 million, stock-based compensation of $57.7 million, loss on write-off of construction in-progress and right-of-use asset impairment of $1.7 million, and amortization of right-of-use asset of $4.5 million.

The cash used in changes in our operating assets and liabilities of $21.5 million was primarily due to an increase in inventories of $4.0 million, a decrease in accounts payable of $8.5 million, an increase in accrued and other liabilities of $8.1 million.

During the year ended December 31, 2022, operating activities used $110.7 million in cash.

The primary factors affecting our operating cash flows during this period were our net loss of $138.6 million, impacted by our non-cash charges of $41.4 million primarily consisting of depreciation and amortization of $9.5 million, stock-based compensation of $33.3 million, change in right-of-use asset of $2.7 million, interest expense and amortization of debt issuance costs and debt discount of $1.0 million, a $7.4 million change in fair value of warrant liabilities, inventory write down of $1.6 million allowance for expected credit losses of $0.3 million and loss from disposal of property and equipment of $0.4 million.

The cash used in changes in our operating assets and liabilities of $13.5 million was primarily due to an increase in accounts receivable of $0.9 million, an increase in inventories of $13.7 million, an increase in prepaid expenses and other assets of $3.1 million, an increase in accounts payable of $4.2 million, an increase in accrued and other liabilities of $3.2 million and a decrease in operating lease liability of $3.2 million.

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Investing Activities

During the year ended December 31, 2024, cash provided by investing activities was $14.7 million, consisting primarily of $162.3 million proceeds from sales of short-term investments and purchases of short-term investments of $144.6 million.

During the year ended December 31, 2023, cash used in investing activities was $50.6 million, which was attributed primarily to the Velodyne Merger and proceeds and purchases of short-term investments.

During the year ended December 31, 2022, cash used in investing activities was $5.1 million, which was primarily related to purchases of property, plant and equipment of $5.4 million, partially offset by sales of property and equipment of $0.3 million .

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Financing Activities

During the year ended December 31, 2024, cash provided by financing activities was $15.4 million, consisting primarily of $57.8 million of proceeds from the issuance of common stock under the ATM Agreement, partially offset by the repayment of indebtedness of $44.0 million under the UBS Agreement.

During the year ended December 31, 2023, cash provided by financing activities was $15.7 million, consisting primarily of $14.6 million of proceeds from the issuance of common stock under the ATM Agreement and proceeds from employee stock purchase program of $1.2 million.

During the year ended December 31, 2022, cash provided by financing activities was $55.6 million, consisting primarily of $39.1 million of proceeds from borrowings, net of debt discount and issuance costs, $16.3 million of proceeds from the issuance of common stock under the ATM Agreement, net of commissions and fees, proceeds from exercise of stock options of $0.5 million and proceeds from ESPP purchase of $0.4 million.

Critical Accounting Estimates

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with U.S.

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Our actual results could differ significantly from these estimates under different assumptions and conditions.

We believe that the accounting policies discussed below are critical to understanding our historical and future performance as these policies involve a greater degree of judgment and complexity.

Business Combinations

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After the measurement period, all adjustments are recorded in the consolidated statements of operations within other income (expense), net.

The recoverability of goodwill is evaluated annually or whenever events or changes in circumstances indicate that the fair value of the reporting unit is less than its carrying amount.

The Company’s impairment evaluation of goodwill consists of a qualitative assessment to determine if it is more likely than not that the fair value of its single reporting unit is less than its carrying amount.

The Company’s qualitative assessment considers factors including changes in the macroeconomic, industry and market conditions, a sustained share price or market capitalization decrease, and if there is any other specific event.

If this qualitative assessment indicates it is more likely than not that the estimated fair value of a reporting unit exceeds its carrying value, no further analysis is required and goodwill is not impaired.

Otherwise, we compare the estimated fair value of the asset to its carrying amount with an impairment loss recognized for the amount, if any, by which carrying value exceeds estimated fair value.

When the Company performs the quantitative test for goodwill, fair values are determined using a combination of the discounted cash flow approach (“income approach”) and the guideline public company method (“market approach”).

This approach requires the use of significant estimates and assumption including forecasted future cash flows, long-term future growth rates and discount rates.

Estimating the fair value of reporting unit requires the use of estimates and significant judgments that are based on a number of factors including actual operating results.

It is reasonably possible that the judgments and estimates described above could change in future periods.

In connection with the Company’s goodwill impairment assessments for the year ended December 31, 2023, the Company impaired all of its goodwill.

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Inventory Valuation

Inventories are stated at the lower of cost or estimated net realizable value.

Costs are computed under the standard cost method, which approximates actual costs determined on the first in, first out basis.

Costs are computed under the standard cost method, which approximates actual costs determined on a first in, first out basis.

We record write-downs of inventories which are obsolete or in excess of anticipated demand.

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A change in our estimates could have a significant impact on the value of our inventory and our results of operations.

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We believe that the accounting policy discussed below is critical to understanding our historical and future performance as these policies involve a greater degree of judgment and complexity.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised products or services.

The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these products or services.

Significant judgment is applied when the Company determines the amount and timing of revenue from the intellectual property (“IP”) royalties when Company contracts with customers to license rights to its IP.

Refer to Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for additional information regarding our revenue recognition policies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis