In the laser light-bouncing technology space awash with struggling startups, selling to more than autonomous vehicle makers is a popular growth strategy to survive a coming industry shakeout.
Only one of six startups that began public life via special purpose acquisition company sponsorship in the last year is trading above the typical SPAC offering price of $10 a share. A seventh SPAC merger awaits shareholder approval and is trading close to the $10 mark.
The industry that makes light-detecting and radar sensors that work with cameras and radar for vision near and far in autonomous cars and trucks will soon enough reveal its winners and losers.
“We’re on the verge of that as we start to get some actual production contracts happening,” Sam Abuelsamid, principal analyst at Guidehouse, told FreightWaves.”I think we’ll see a bunch of them either get acquired or go out of business.”
Lidar is similar to radar, but it offers higher-resolution images because the wavelength of light is about 100,000 times smaller than radar wavelengths. A lidar system transmits a beam of infrared light and measures the returning signal when the light reflects off an object.
LIdar is a critical component in autonomous vehicles, but measuring lidar companies and their prospects for success is difficult.
For example, startup Aeye has one nonexclusive AV partnership for 2024 and a nonexclusive licensing deal with Tier One German automotive supplier Continental. Aeye (NASDAQ: LIDR) also has a relationship with German supplier Hella, an early investor. Yet it has the lowest share price of the group.
Others are spreading their bets by seeking customers beyond the AV space. One targeting multiple verticals is San Francisco-based Ouster Inc., which supplies autonomous trucking startup Plus with close-range lidars for its PlusDrive software. It also is working with Torc Robotics, the Daimler Trucks subsidiary that is creating a driverless Freightliner Cascadia.
A shakeout survivor?
Co-founder and CEO Angus Pacala thinks Ouster (NYSE: OUST), which went public in March, can survive the shakeout.
“Ouster has taken a diversified approach to lidar as an industry,” Pacala told FreightWaves. “It’s industrial, smart infrastructure, robotics and automotive. Those are the four key [areas] and there’s a bunch of sub-verticals within them.”
On Monday, Ouster advanced the lidar consolidation thesis by acquiring Sense Photonics, which has a digital solid-state lidar sensor that will form the basis of an Ouster automotive division focused on adoption of digital lidar in consumer and commercial vehicles. Ouster’s 9.5 million share deal with Sense was worth $67.4 million at Thursday’s closing price of $7.10.
Even with a 50% increase of its workforce by hiring Sense’s 80 employees, Ouster won’t try to be all things to all customers. It offers a long-range lidar product, but others offer better-performing, longer-range lidars.
“The majority of our business today is in wider field of view, short-to-medium sensors,” Pacala said. “We have the longest range sensors in those fields of view of any competitor,” including an ultrawide fisheye sensor that can see about 98 feet at 80% accuracy.
Luminar in the lead?
Heavy-duty autonomous trucks need to see a half-mile ahead. Daimler’s Torc partnered with Luminar for long-range lidars in combination with Ouster short range sensors to detect the area immediately around the truck.
By contrast, Plus is passing on a long-range lidar for its initial deployment, Pacala said,t because forward-looking camera and radar technology “is so mature, and it can truly see out to a kilometer or more, that they are emboldened to do it with those sensors.”
Luminar (NASDAQ: LAZR) has a production contract with Volvo Cars’ self-driving software subsidiary Zenseact for the next-generation Volvo XC90 SUV. Luminar and Zenseact are offering the system, called Sentinel, to other automakers including China’s SAIC’s R brand electric vehicles.
Those projects may be keeping Luminar’s stock price elevated compared to other startups trading in the single digits.
A brutally tough market
San Jose, California-based Cepton Technologies Inc., which has agreed to a SPAC merger with Growth Capital Acquisition Corp. (NASDAQ:GCAC), has a large-volume production lidar program for General Motors as part of its Ultra Cruise advanced driving assistance system for 2023.
In August, Cepton attracted a $50 million investment from Japanese conglomerate Koito Manufacturing Co. Ltd. Cepton focuses on both ADAS, or semi-automated driving, and full autonomous systems, as well as smart infrastructure applications like Ouster.
Even before Ouster’s acquisition of Sense, some lidar companies found merger partners. Blackmore Sensors and Analytics, a Bozeman, Montana-based maker of longer nanometer wavelength lidars, was purchased by AV startup Aurora Innovation in May 2019.
Industry consultant Gartner Inc. tallied as many as 60 lidar companies a couple of years ago, according to analyst Mike Ramsey. Many of those have fallen away. Some have merged or decided to pursue other technology. Publicly traded companies have a leg up, he said.
“They’re already more likely to be the survivors than the ones that have not, partly because they’ve been newly capitalized,” Ramsey said. “And they probably were able to get this investment because they have some sort of development or production contract.”
Autonomous trucks to yard tractors and warehouse robots
Ouster claims supremacy in surround-view lidar sensors, using a microchip-based digital lidar that consists of an array of vertical laser emitters called a vertical cavity surface emitting laser. VCSELs are cheaper to produce but are less powerful than edge-emitting lasers. They have 75 configurations.
“They’ve got some interesting technology,” Abuelsamid said. “Most of their business so far has actually been nonautomotive.”
Pacala said before the Sense acquisition that consumer and commercial vehicle lidar, including robo-trucking, accounted for 30% of Ouster’s revenue, meaning 70% comes from other businesses.
The work with Torc involves three sensors “providing a kind of a cocoon of safety immediately surrounding the vehicle,” he said.
Providing 2,000 lidar sensors to Plus — two each for 1,000 Amazon trucks — may be the largest production contract to date in autonomous trucking. “Plus found a way to do it that actually makes financial sense and can convince a customer like Amazon,” Pacala said.
Through its work with Plus, Ouster has a connection to Amazon (NASDAQ: AMZN), which invested in French robotic company Balyo, a maker of autonomous forklifts and other warehouse machinery that could “see” better with Ouster’s short-range lidars.
Ouster also works with Outrider, which is automating freight yard logistics and yard tractors, arguably as important as autonomous trucks themselves.
“They are not quite classic vehicles but relatively large hauling vehicles doing logistics,” Pacala said.
And Ouster has business in buses, which Pacala said is a mix between robo-trucking and ride-hailing robo-taxis. Autonomous urban shuttle maker May Mobility is an Ouster customer.
All in, Ouster has shipped more than 6,000 lidar sensors. About 600 customers have received the company’s products in the last 12 months, according to the Ouster website. It has 140 patents granted and pending on its technology.
Still losing money
As a startup founded in 2015, Ouster is still losing money — $32 million in Q2 compared to $11.3 million in the second quarter of 2020 and $21 million in Q1.
But its revenue and profit margins outstrip the competition, Pacala said. Q2 revenue of $7.4 million was up 72% year-over-year and 11% from Q1. Its 26% gross margin was up 9% year-over-year and flat with Q1. Ouster shipped 1,460 sensors, a 342% year-over-year increase and 49% more than in Q1. It has 53 strategic customer agreements that could be worth $422 million.
For the full-year 2021, Ouster expects to book $33 million to $35 million of revenue and 25% to 27% gross margins.
“I’m interested in letting our customers’ purchasing do the talking for us,” Pacala said.
As to the competition, he’s a little skeptical about what he reads.
“A lot of the announcements made in this industry, unfortunately, are very difficult to unravel and understand what’s real,” he said. “It can be so narrowly construed that maybe hypothetically it’s true, but it doesn’t have any impact on production-scale deployments.”