Competition for dominance in the important lidar market has been intense, raising competition but driving stock prices down.
Two of those firms, Velodyne (NASDAQ: VLDR) and Ouster (NYSE: OUST), announced Monday that they will join forces in hopes of improving both companies’ positions going forward. In an all-stock transaction, executives from both companies announced they have signed a definitive agreement to merge, creating a single portfolio that includes 173 patents and 504 patents pending and approximately $355 million in cash as of September becomes. 30
“Ouster’s state-of-the-art digital lidar technology, demonstrated by strong unit economics and the performance gains of our new products, complemented by decades of innovation, Velodyne’s powerful hardware and software solutions, and established global customer footprint, positions the combined company to accelerate… will drive the adoption of lidar technology in fast-growing markets with diverse customer needs,” said Angus Pacala, CEO of Ouster. “Together, we will aim to deliver the performance customers demand while achieving price points low enough to encourage mass adoption.”
The new company, which is expected to be complete in the first half of 2023, has yet to be named but will be led by Pacala as CEO and Ted Tewksbury, CEO of Velodyne, as chairman of the board. It would have an overall valuation of around $400 million.
“Lidar is a valuable enabler technology for autonomy, with the ability to dramatically improve the efficiency, productivity, safety and sustainability of a world on the move. Our goal is to create a vibrant and healthy lidar industry, both by offering affordable, high-performance sensors to drive mass adoption in a variety of customer applications, and by creating scale to drive profitable and sustainable revenue growth,” said Tewksbury. “The combination of Ouster and Velodyne is expected to unlock tremendous synergies and create a company with the scale and resources to deliver stronger solutions for customers and society while accelerating time to profitability and increasing value for shareholders.”
The board will consist of eight members, with each company sending an equal number of members. These members will be announced at a later date.
Under the terms of the agreement, holders of Velodyne shares will receive 0.8204 shares of Ouster. The result will be shareholders in each company holding approximately 50% of the new company. In a joint statement, the companies said the merger will result in annual cost savings of at least $75 million within nine months of closing.
Both companies will continue to operate independently until all terms and conditions are approved.
Lidar, which stands for Light Detection and Ranging, is a crucial element of autonomous vehicles. The technology reads objects up to 1,000 meters away and sends signals back to on-board computer processors, which create a virtual map of the road ahead for a robot driver. But it’s also a very competitive space. And that competition has intensified as the widespread deployment of autonomous vehicles has been slow.
In June, Velodyne sued Ouster for patent infringement. In a complaint filed with the US International Trade Commission, Velodyne accused Ouster of illegally importing lidar sensors in violation of Velodyne patents.
“Velodyne invented rotary lidar, and our company is dedicating significant financial and human resources to research and development to advance smart vision technology,” Tewksbury said in a June statement. “Velodyne has a long history of vigorously protecting this investment through strong and successful legal action against companies that violate our intellectual property, and this action is no different.”
Velodyne has also seen its share of drama over the years. An early entry into the lidar space, the company’s previous CEO, Anand Gopalan, suddenly resigned in July 2021 and was replaced by Tewksbury in November. Velodyne’s founder, David Hall, was previously removed as CEO and his wife, Marta Hall, was ousted as chief marketing officer after the two clashed with SPAC, which merged with Velodyne. TechCrunch also reported that the two were under investigation for “inappropriate behavior.”
Ouster also faces headwinds. Shares of the company are down 77% since Jan. 1 to trade at $1.16 as of Monday morning. The stock’s high water mark came in mid-December 2020 when it peaked at around $17.80 per share.
Likewise, shares of Velodyne are down 80% year-to-date, trading at 90 cents as of Monday morning. In August 2020, Velodyne stock exceeded $32 per share.
Unlike Velodyne, however, Ouster continued to post some growth, reporting a 44% year-over-year jump in revenue for the third quarter at $11.2 million on Monday. It said it sold 2,136 sensors in the quarter, but the net loss rose to $36 million, compared to $13 million a year earlier. Ouster reported an Adjusted EBITDA loss of $24 million compared to $19 million in the third quarter of 2021 and $22 million in the second quarter of 2022.
Velodyne posted a net loss of $28 million in the second quarter on a 41% decline in revenue.
Click here to see more Modern Shipper articles by Brian Straight.