Ouster(OUST) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section covers the company's unaudited financial statements, management's analysis, market risks, and internal controls Item 1. Financial Statements This section provides the unaudited condensed consolidated financial statements, including balance sheets, income statements, equity, cash flows, and detailed explanatory notes Condensed Consolidated Balance Sheets (Unaudited) This section presents the company's unaudited condensed consolidated balance sheets, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands USD): | Metric | June 30, 2025 (in thousands USD) | December 31, 2024 (in thousands USD) | | :-------------------------------- | :-------------- | :---------------- | | Total Assets | $321,840 | $276,148 | | Total Liabilities | $100,807 | $95,237 | | Total Stockholders' Equity | $221,033 | $180,911 | | Cash and cash equivalents | $76,120 | $45,542 | | Short-term investments | $150,385 | $126,480 | Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) This section details the unaudited condensed consolidated statements of operations, showing revenue, expenses, and net loss over specified periods Condensed Consolidated Statements of Operations (in thousands USD, except per share data): | Metric | Three Months Ended June 30, 2025 (in thousands USD) | Three Months Ended June 30, 2024 (in thousands USD) | Six Months Ended June 30, 2025 (in thousands USD) | Six Months Ended June 30, 2024 (in thousands USD) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $35,049 | $26,990 | $67,681 | $52,934 | | Cost of revenue | $19,207 | $17,892 | $38,356 | $36,411 | | Gross profit | $15,842 | $9,098 | $29,325 | $16,523 | | Loss from operations | $(26,822) | $(25,250) | $(50,652) | $(51,071) | | Net loss | $(20,612) | $(23,869) | $(42,629) | $(47,718) | | Net loss per common share, basic and diluted | $0.38 | $0.53 | $0.80 | $1.08 | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) This section outlines changes in stockholders' equity, including additional paid-in capital, accumulated deficit, and total equity Changes in Stockholders' Equity (in thousands USD): | Metric | Balance — December 31, 2024 (in thousands USD) | Balance — June 30, 2025 (in thousands USD) | | :-------------------------------- | :-------------------------- | :---------------------- | | Additional Paid-in Capital | $1,094,938 | $1,177,232 | | Accumulated Deficit | $(913,071) | $(955,700) | | Total Stockholders' Equity | $180,911 | $221,033 | Key Changes (Six Months Ended June 30, 2025): * Issuance of common stock from at-the-market offering: $58.5 million * Stock-based compensation expense: $21.7 million * Net loss: $(42.63) million Condensed Consolidated Statements of Cash Flows (Unaudited) This section presents the unaudited condensed consolidated statements of cash flows, categorizing cash movements by operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands USD, Six Months Ended June 30): | Activity | 2025 (in thousands USD) | 2024 (in thousands USD) | | :-------------------------------- | :------- | :------- | | Net cash used in operating activities | $(6,188) | $(27,366) | | Net cash (used in) provided by investing activities | $(23,877) | $9,069 | | Net cash provided by financing activities | $60,173 | $20,335 | | Net increase in cash, cash equivalents and restricted cash | $30,588 | $1,571 | | Cash, cash equivalents and restricted cash at end of period | $78,687 | $54,205 | Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed notes to the unaudited condensed consolidated financial statements, explaining various financial aspects Note 1 – Description of Business and Basis of Presentation Ouster, Inc. provides high-resolution digital lidar sensors, operating on a going concern basis with sufficient liquidity for the next twelve months - Ouster, Inc. provides high-resolution digital lidar sensors for machinery, vehicles, robots, and fixed infrastructure assets, enabling advanced 3D vision and autonomy[25] - The unaudited condensed consolidated financial statements are prepared on a going concern basis, despite recurring losses from operations and negative cash flows[29] - As of June 30, 2025, the Company's liquidity, including cash, cash equivalents, restricted cash, and short-term investments, totaled $229.1 million, which management believes is adequate to fund operations for at least twelve months[29] Note 2 – Summary of Significant Accounting Policies This note outlines significant accounting policies, including a $5.4 million Employee Retention Credit, credit risk concentrations, and accounting pronouncement evaluations - The Company recognized a $5.4 million Employee Retention Credit (ERC) in the six months ended June 30, 2025, which reduced cost of revenue ($1.7 million), R&D ($2.2 million), sales & marketing ($0.7 million), and G&A ($0.8 million)[31] Major Customer Concentrations (June 30, 2025): | Category | Customer | Percentage (%) | | :-------------------- | :--------- | :--------- | | Accounts Receivable | Customer A | 35% | | Accounts Receivable | Customer E | 14% | | Revenue (Q2 2025) | Customer E | 23% | | Revenue (Q2 2025) | Customer G | 14% | | Revenue (6M 2025) | Customer E | 19% | | Revenue (6M 2025) | Thailand | 11% | Major Supplier Concentrations (June 30, 2025): | Category | Supplier | Percentage (%) | | :-------------------- | :--------- | :--------- | | Accounts Payable | Supplier B | 52% | | Purchases (6M 2025) | Supplier B | 24% | Note 3. Fair Value of Financial Instruments This note details fair value measurements of financial assets, totaling $193.6 million, categorized by input levels, and non-recurring Level 3 intangible assets Fair Value of Financial Assets (in thousands USD): | Asset Type | June 30, 2025 (Total, in thousands USD) | December 31, 2024 (Total, in thousands USD) | | :-------------------- | :-------------------- | :---------------------- | | Money market funds (Level 1) | $37,219 | $24,740 | | Commercial paper (Level 2) | $68,747 | $56,886 | | Corporate notes/bonds (Level 2) | $87,628 | $69,594 | | Total Financial Assets | $193,594 | $151,220 | - Intangible assets are measured at fair value on a non-recurring basis and are categorized within the Level 3 valuation hierarchy due to the subjective nature of unobservable inputs[43] Note 4. Balance Sheet Components This note breaks down key balance sheet items, including increased cash, decreased inventory, and reduced net intangible assets with future amortization details Cash and Cash Equivalents (in thousands USD): | Component | June 30, 2025 (in thousands USD) | December 31, 2024 (in thousands USD) | | :-------------------- | :-------------- | :---------------- | | Cash | $32,911 | $20,802 | | Money market funds | $37,219 | $24,740 | | Commercial paper | $5,990 | — | | Total | $76,120 | $45,542 | Inventory (in thousands USD): | Component | June 30, 2025 (in thousands USD) | December 31, 2024 (in thousands USD) | | :-------------------- | :-------------- | :---------------- | | Raw materials | $3,067 | $3,610 | | Work in process | $97 | $307 | | Finished goods | $10,739 | $12,500 | | Total | $13,903 | $16,417 | Intangible Assets, Net (in thousands USD): | Asset Type | June 30, 2025 (in thousands USD) | December 31, 2024 (in thousands USD) | | :-------------------- | :-------------- | :---------------- | | Developed technology | $11,793 | $13,705 | | Customer relationships | $3,790 | $4,125 | | Total Intangible Assets, Net | $15,583 | $17,830 | Estimated Future Amortization Expense: * 2025: $2.27 million * 2026: $3.78 million * 2027: $3.68 million Note 5. Debt The Company fully repaid its $44.0 million revolving credit line under the UBS Agreement on August 12, 2024. As a result, there was no outstanding debt as of June 30, 2025 - The Company repaid in full all outstanding indebtedness and terminated all commitments under the UBS Agreement on August 12, 2024, including a $44.0 million revolving loan[56] - As of June 30, 2025, the Company had no outstanding debt[56] Note 6. Amazon Warrant The Amazon Warrant allows Amazon to acquire up to 3.26 million shares, with anti-dilution adjustments and 2.33 million shares vested as of June 30, 2025 - The Amazon Warrant, assumed from the Velodyne Merger, allows Amazon to acquire up to 3.26 million shares of common stock at an exercise price of $50.71 per share, subject to anti-dilution adjustments[57] - An anti-dilution adjustment occurred in Q2 2025 due to an at-the-market offering, increasing the number of issuable shares by 3,097 and reducing the strike price to $50.59 per share[57] - As of June 30, 2025, 2.33 million shares Amazon Warrant shares had vested, including 142.0 thousand shares that vested during the three months ended June 30, 2025[60] Note 7. Commitments and Contingencies This note details commitments, including $1.4 million in letters of credit, and legal proceedings with a $27.5 million settlement and $11.7 million accrued for litigation - Outstanding letters of credit totaled $1.4 million as of June 30, 2025, collateralized by certificates of deposit included in restricted cash[61] - The Company accrued $11.7 million in connection with Velodyne Legacy and Ouster legal proceedings as of June 30, 2025[71] - Velodyne Legacy Litigation included a $27.5 million class action settlement, with $23.4 million funded by insurance proceeds, and a confidential settlement for a lawsuit filed by David and Marta Hall[64][65] - Ouster Litigation involved a patent infringement complaint against Hesai Group, dismissed without prejudice in April 2025 subject to arbitration, and Hesai's challenges to Ouster's patents via Inter Partes Review, some of which were found unpatentable, leading to appeals by Ouster[68][70] Note 8. Common Stock The Company is authorized for 100 million common and preferred shares, terminated its old ATM, and sold 3.5 million shares for $58.5 million under a new ATM - The Company is authorized to issue 100.00 million shares of common stock and 100.00 million shares of preferred stock[74] - The Former ATM Agreement was terminated in April 2025, having generated approximately $88.7 million in cumulative net proceeds from the sale of 9.71 million shares[76][77] - A new ATM Agreement was entered into on May 12, 2025, for up to $100.0 million. During Q2 2025, 3.52 million shares were sold under this agreement, generating $58.5 million in net proceeds, with approximately $40.0 million remaining availability[78][79][80] Note 9. Stock-based Compensation The Company maintains five equity incentive plans, with stock-based compensation increasing to $21.7 million and $47.1 million in unrecognized RSU expense Total Stock-based Compensation Expense (in thousands USD): | Period | 2025 (in thousands USD) | 2024 (in thousands USD) | | :-------------------------------- | :------- | :------- | | Three Months Ended June 30, | $13,226 | $10,695 | | Six Months Ended June 30, | $21,724 | $20,099 | Stock-based Compensation Expense by Award Type (Six Months Ended June 30, 2025): * RSUs: $19.30 million * RSAs: $1.79 million * Employee stock purchase plan: $0.63 million - As of June 30, 2025, total compensation expense related to unvested RSUs was $47.1 million, with a weighted-average remaining vesting period of 1.7 years[89] - During the three and six months ended June 30, 2025, 201.5 thousand shares of common stock were issued under the 2022 ESPP[85] Note 10. Net Loss Per Common Share This note presents basic and diluted net loss per share, with Q2 2025 at $(0.38) and 13 million potentially dilutive shares excluded as antidilutive Net Loss Per Common Share (Basic and Diluted): | Period | Three Months Ended June 30, 2025 (USD) | Three Months Ended June 30, 2024 (USD) | Six Months Ended June 30, 2025 (USD) | Six Months Ended June 30, 2024 (USD) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss per common share | $(0.38) | $(0.53) | $(0.80) | $(1.08) | | Weighted average shares | 54.47 million | 44.74 million | 53.48 million | 44.08 million | - Potentially dilutive securities, including options, warrants, RSUs, and ESPP shares, totaling 13.31 million as of June 30, 2025, were excluded from the diluted net loss per share computation because their inclusion would have been antidilutive[93] Note 11. Income Taxes The Company recorded income tax benefits of $3.6 million for Q2 2025 due to an IRS examination, maintaining a full valuation allowance against deferred tax assets Income Tax (Benefit) Expense (in thousands USD): | Period | Three Months Ended June 30, 2025 (in thousands USD) | Three Months Ended June 30, 2024 (in thousands USD) | Six Months Ended June 30, 2025 (in thousands USD) | Six Months Ended June 30, 2024 (in thousands USD) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax (benefit) expense | $(3,616) | $123 | $(3,421) | $254 | | Effective tax rate | 14.9% | (0.5)% | 7.4% | (0.5)% | - The income tax benefits for Q2 and the six months ended June 30, 2025, primarily relate to the resolution of an IRS examination for the 2017 and 2018 tax years, offset by foreign operations taxes[96] - The Company maintains a full valuation allowance against its net deferred tax assets, as it is more likely than not that some or all will not be realized[95] Note 12. Revenue Revenue from lidar sensor sales increased by 30% in Q2 2025, with $1.5 million in patent royalty revenue and $33.1 million in contract liabilities Total Revenue by Geographic Area (in thousands USD): | Region | Three Months Ended June 30, 2025 (in thousands USD) | Three Months Ended June 30, 2024 (in thousands USD) | Six Months Ended June 30, 2025 (in thousands USD) | Six Months Ended June 30, 2024 (in thousands USD) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Americas | $24,548 | $13,570 | $40,076 | $24,194 | | Asia and Pacific | $6,096 | $4,566 | $18,560 | $10,715 | | Europe, Middle East and Africa | $4,405 | $8,854 | $9,045 | $18,025 | | Total | $35,049 | $26,990 | $67,681 | $52,934 | - The Company recognized $1.5 million of patent royalty revenue from a long-term IP license agreement in the first quarter of 2025[99] Contract Liabilities (in thousands USD): | Component | June 30, 2025 (in thousands USD) | December 31, 2024 (in thousands USD) | | :-------------------------------- | :-------------- | :---------------- | | Contract liabilities, current | $29,464 | $34,351 | | Contract liabilities, non-current portion | $3,588 | $2,538 | | Total Contract Liabilities | $33,052 | $36,889 | Changes in Contract Liabilities (Six Months Ended June 30, 2025): * Beginning balance: $36.89 million * Revenue recognized from beginning balance: $(9.21) million * Ending balance: $33.05 million Note 13. Segment Ouster operates as a single reportable and operating segment, focusing on the sale and production of lidar sensor kits - The Company operates as one reportable and operating segment, which relates to the sale and production of lidar sensor kits[109] - The Chief Executive Officer is the chief operating decision maker (CODM) and reviews financial information on a consolidated basis for resource allocation and performance evaluation[109] - The financial statements are prepared on a going concern basis, despite recurring losses and negative cash flows from operations, with management believing existing liquidity is adequate for at least twelve months[29] Key Financial Highlights (Six Months Ended June 30): | Metric | 2025 (in thousands USD) | 2024 (in thousands USD) | Change (in thousands USD) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Revenue | $67,681 | $52,934 | $14,747 | 27.8% | | Gross Profit | $29,325 | $16,523 | $12,802 | 77.5% | | Net Loss | $(42,629) | $(47,718) | $5,089 | -10.6% | | Net Cash Used in Operating Activities | $(6,188) | $(27,366) | $21,178 | -77.4% | | Net Cash Provided by Financing Activities | $60,173 | $20,335 | $39,838 | 195.9% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Ouster's financial performance and condition, detailing its business overview, the impact of the Velodyne merger, key factors affecting performance, components of financial results, a comparative analysis of operations for the three and six months ended June 30, 2025 and 2024, liquidity and capital resources, and critical accounting estimates Overview Ouster is a global leader in high-performance digital lidar sensors and intelligent software solutions, offering advanced 3D vision with patent-protected architecture - Ouster is a global leader in high-performance lidar sensors and intelligent software solutions, bringing Physical AI to automotive, industrial, robotics, and smart infrastructure sectors[112] - The company designs and manufactures high-resolution digital lidar sensors with a simplified architecture based on two semiconductor chips, backed by extensive patent coverage[113][116] - Product offerings include four OS product line models (OSDome, OS0, OS1, OS2) with various resolution options, and perception software platforms like Ouster Gemini and BlueCity for smart infrastructure[114][115] Merger with Velodyne Lidar, Inc. The merger with Velodyne Lidar Inc. was completed on February 10, 2023. The product offerings acquired through this merger are in their final stages of the product life cycle and are planned for discontinuation of manufacturing in 2025 - The merger of equals with Velodyne Lidar Inc. was completed on February 10, 2023[118] - Acquired Velodyne product offerings (VLP-16, VLP-16 Lite, VLP-16 Hi-Res, VLP-32, VLS-128) are in their final product life cycle stages and will be discontinued in 2025[118] Factors Affecting Our Performance Ouster's performance is influenced by lidar commercialization, customer volumes, ASPs, competition, innovation, supply chain, and market trends, aiming for 2025 profitability - Lidar solutions are approaching an inflection point of adoption, but the timing of end-market and customer adoption is difficult to estimate, leading to potential fluctuations in operating results[119] - The Company expects downward pressure on prices from anticipated large multi-year agreements but believes its digital lidar technology and value proposition position it to scale effectively and maintain positive gross margins[122] - Supply chain continuity is a risk due to reliance on limited or single-source suppliers and potential impacts from tariffs and trade policy actions, particularly on goods imported from Thailand, Canada, or China[124] - International expansion is an important element of the Company's strategy but exposes it to additional foreign currency risk, international taxes, tariff and trade policy actions, and operational costs[127] - The Company received a $5.5 million Employee Retention Credit (ERC) in the three months ended June 30, 2025[128] Components of Results of Operations This section outlines Ouster's financial components: revenue from lidar sales, cost of revenue, operating expenses, and other income/expense items - The majority of revenue comes from the sale of lidar sensors and accessories, recognized when control of the product is transferred to the customer, generally upon shipment[129] - Cost of revenue includes manufacturing costs, sensor components, personnel-related expenses, third-party contract manufacturer costs, depreciation, amortization of intangible assets, and warranty expenses[131] - Research and development expenses are expected to grow in absolute amount due to investments in new lidar technology and software, but decrease as a percentage of revenue as the business scales[134] - General and administrative expenses are expected to grow due to litigation, international expansion, and public company compliance, but decrease as a percentage of revenue over time[136] Results of Operations: This section analyzes Ouster's financial performance for Q2 and H1 2025 vs 2024, highlighting revenue growth, improved gross margins, and expense changes Key Financial Performance (YoY Change, %): | Metric | Q2 2025 vs Q2 2024 (%) | 6M 2025 vs 6M 2024 (%) | | :-------------------- | :----------------- | :----------------- | | Revenue Growth | 30% | 28% | | Gross Margin | 45% vs 34% | 43% vs 31% | | Net Loss Change | -13.7% | -10.6% | | R&D Expense Growth | 19% | 14% | | G&A Expense Growth | 41% | 34% | - Gross margin improved significantly due to lower excess and obsolete inventory charges and a $1.7 million Employee Retention Credit (ERC) cost reduction[145][156] - Interest expense decreased by 100% for both periods due to having no outstanding debt in 2025[151][162] Liquidity and Capital Resources Ouster's liquidity sources include cash, investments, and ATM equity offerings, with $229.1 million in liquidity deemed sufficient for the next twelve months - Principal sources of liquidity are cash and cash equivalents, short-term investments, cash from product sales, and sales of common stock under the at-the-market equity offering program[165] - As of June 30, 2025, the Company had an accumulated deficit of $955.7 million but $229.1 million in cash, cash equivalents, restricted cash, and short-term investments, which management believes is sufficient for at least twelve months[166] Cash Flow Summary (Six Months Ended June 30, in thousands USD): | Activity | 2025 (in thousands USD) | 2024 (in thousands USD) | | :-------------------------------- | :------- | :------- | | Net cash used in operating activities | $(6,188) | $(27,366) | | Net cash (used in) provided by investing activities | $(23,877) | $9,069 | | Net cash provided by financing activities | $60,173 | $20,335 | - During Q2 2025, the Company sold 3.52 million shares under the new ATM Agreement, generating approximately $58.8 million in net proceeds, with $40.0 million remaining availability[171][172] Critical Accounting Policies and Estimates This section refers to the Company's 2024 Annual Report for a detailed description of its critical accounting estimates. It notes that there have been no significant changes to these policies and estimates since the previous filing, emphasizing that financial statements require subjective judgments and estimates that can materially impact results - There have been no significant changes to the Company's critical accounting policies and estimates since the filing of its 2024 Annual Report[180] - The preparation of financial statements requires estimates and assumptions, with certain policies involving subjective or complex judgments that can materially impact financial condition and operating results[181] - Ouster is a global leader in high-performance lidar sensors and intelligent software solutions, aiming to bring Physical AI to automotive, industrial, robotics, and smart infrastructure sectors[112] - Strategic business objectives for 2025 include growing the software-attached business, transforming the product portfolio, and executing towards profitability[119] - The Company expects continued investment in R&D and sales & marketing, with expenses as a percentage of revenue decreasing over time as the business grows[134][135][136] Item 3. Quantitative and Qualitative Disclosures About Market Risk Ouster faces market risks from interest rates and foreign currency, monitors inflation, manages interest rate risk with liquid investments, and has no debt-related interest rate risk Inflation Risk The Company has not experienced a material effect from general inflation on its business, financial condition, or results of operations to date. However, it is actively monitoring the current inflationary environment, particularly in relation to potential impacts from proposed and/or newly implemented tariffs - General inflation has not had a material effect on the Company's business, financial condition, or results of operations to date[183] - The Company is monitoring the current inflationary environment, especially as it may be impacted by proposed and/or newly implemented tariffs[183] Interest Rate Risk Ouster's cash, cash equivalents, restricted cash, and short-term investments, totaling $229.1 million, are subject to interest rate risk, though their short-term and liquid nature limits potential material losses. The Company's investment policy prioritizes liquidity and capital preservation. Following the full repayment of its UBS Agreement debt on August 12, 2024, the Company has no outstanding debt and thus no interest rate risk related to debt as of June 30, 2025 - As of June 30, 2025, $229.1 million in cash, cash equivalents, restricted cash, and short-term investments are subject to interest rate risk[184] - The Company's investment policy prioritizes liquidity and capital preservation, and a hypothetical 100 basis point change in interest rates would not materially impact its financial condition due to the short-term, liquid nature of investments[184][185] - The UBS Agreement debt was fully repaid on August 12, 2024, resulting in no outstanding debt and thus no interest rate risk with respect to debt as of June 30, 2025[186] Foreign Currency Exchange Risk Ouster's financial results are exposed to foreign currency exchange rate fluctuations, primarily because its expenses are denominated in non-U.S. dollar currencies in regions like Asia and Europe. However, a hypothetical 10% change in exchange rates would not have a material impact on historical consolidated financial statements, and the Company currently does not employ any hedging strategies - The Company's results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, as expenses are primarily denominated in non-U.S. dollar currencies (Asia and Europe)[187] - A hypothetical 10% change in foreign currency exchange rates would not have a material impact on the Company's historical consolidated financial statements[187] - To date, the Company has not engaged in any hedging strategies to manage foreign currency risk[187] - The Company is exposed to market risks primarily from fluctuations in interest rates and foreign currency exchange rates[182] - Inflation has not had a material effect on the business, financial condition, or results of operations to date, but the Company is monitoring the current inflationary environment[183] - Interest rate risk on investments is mitigated by their short-term, highly liquid nature; a hypothetical 100 basis point change would not materially impact financial condition. The Company has no outstanding debt as of June 30, 2025, eliminating debt-related interest rate risk[185][186] - Foreign currency exchange risk arises from expenses denominated in non-U.S. dollar currencies, but a hypothetical 10% change would not materially impact historical financial statements. No hedging strategies are currently employed[187] Item 4. Controls and Procedures Disclosure controls were ineffective due to material weaknesses in internal control, including an ineffective control environment and inadequate segregation of duties, with remediation ongoing Limitations on Effectiveness of Controls and Procedures Disclosure controls and procedures are designed to provide reasonable assurance of achieving control objectives, but they are subject to inherent limitations. Management acknowledges that resource constraints and the need to apply judgment in evaluating benefits versus costs mean that no control system can offer absolute assurance - Disclosure controls and procedures, no matter how well designed, can only provide reasonable assurance of achieving desired control objectives[189] - The design of controls must reflect resource constraints and management's judgment in evaluating the benefits of controls relative to their costs[189] Evaluation of Disclosure Controls and Procedures Management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of June 30, 2025. Based on this evaluation, they concluded that these controls were not effective due to identified material weaknesses in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025[190] - This conclusion was based on the existence of material weaknesses in the Company's internal control over financial reporting[190] Material weaknesses and remediation measures The Company identified material weaknesses in its internal control over financial reporting, specifically an ineffective control environment due to insufficient personnel with accounting knowledge and ineffective controls over segregation of duties (SOD) in the period-end financial reporting process. Remediation efforts are ongoing, focusing on improving SOD controls, recruiting qualified personnel, and providing internal control training to enhance the stability and effectiveness of the accounting organization - Material weaknesses include: (1) an ineffective control environment due to insufficient personnel with appropriate internal controls and accounting knowledge; and (2) ineffective controls over the period-end financial reporting process to ensure segregation of duties (SOD) conflicts were identified, reviewed, and mitigated[193] - Remediation measures are ongoing and include improving SOD controls, recruiting personnel with relevant expertise, reallocating roles within the accounting team, and providing internal control training[194][196] - The material weakness related to the control environment resulted in adjustments to prior financial statements, while the SOD weakness did not lead to a material misstatement[193] Changes in Internal Control over Financial Reporting The Company reported that there were no changes in its internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect these controls[195] - Management concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting[190] - Identified material weaknesses include an ineffective control environment (insufficient personnel with accounting knowledge) and ineffective controls over the period-end financial reporting process (segregation of duties conflicts)[193] - Remediation measures are ongoing and include improving segregation of duties (SOD) controls, recruiting personnel with appropriate accounting knowledge, and providing internal control training[194][196] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect these controls[195] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings This section refers to Note 7, 'Commitments and Contingencies,' in the unaudited condensed consolidated financial statements for a comprehensive discussion of the material legal proceedings the Company is involved in - Material legal proceedings are discussed in Note 7. Commitments and Contingencies to the unaudited condensed consolidated financial statements[198] Item 1A. Risk Factors Investing in Ouster's securities involves high risk, including impacts from political events, trade disputes, and increased costs from qualifying as a large accelerated filer - Investing in the Company's securities involves a high degree of risk, with a comprehensive list of risk factors provided in the 2024 Annual Report[199] - The Company's business can be materially impacted by political events, trade and other international disputes, geopolitical tensions, and tariffs, particularly on imports from countries like Thailand, Canada, China, and Mexico[200][201] - The Company expects to qualify as a large accelerated filer for the fiscal year ending December 31, 2026, which will impose significant costs and strain on financial and management systems due to increased reporting obligations, including independent auditor attestation of internal control over financial reporting[204][205] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company reported no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds to report[206] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities during the period - No defaults upon senior securities to report[207] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable[208] Item 5. Other Information This section discloses Rule 10b5-1 trading arrangements adopted or terminated by certain officers and directors. Megan Chung (General Counsel) terminated a plan in April 2025 and adopted a new one in June 2025 for periodic stock sales. Angus Pacala (CEO) and Mark Frichtl (CTO) adopted plans in June 2025, effective September 2025, to cover tax withholding obligations for vested equity - Megan Chung, General Counsel and Secretary, terminated a Rule 10b5-1 trading arrangement on April 14, 2025, and adopted a new one on June 4, 2025, for periodic sales of up to 17.51 thousand shares between October 2025 and May 2026[209] - Angus Pacala, CEO, and Mark Frichtl, CTO, each adopted Rule 10b5-1 trading arrangements on June 9, 2025, effective September 8, 2025, for sales to satisfy tax withholding obligations upon the future settlement of restricted stock units or vesting of restricted stock[210] Item 6. Exhibits This section lists all exhibits filed with the 10-Q report, including key corporate documents such as merger agreements, the Certificate of Incorporation, Bylaws, the Amazon Warrant, and various certifications (e.g., CEO and CFO certifications) - The exhibits include the Agreement and Plan of Merger for the Velodyne Lidar, Inc. merger, the Certificate of Incorporation, Second Amended and Restated Bylaws, and the Amazon Warrant[212] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350 are filed/furnished herewith[212] Signature This section contains the official signature and certification of the financial report by the Chief Financial Officer - The report was signed on August 11, 2025, by Kenneth P. Gianella, Chief Financial Officer (principal financial officer and principal accounting officer) of Ouster, Inc[218]