AEye, Inc. Q4 FY2023 earnings call

• Signed a letter of intent with a global Tier 1 automotive ADAS sensor supplier for OEM ADAS opportunities. • Introduced Apollo, the first member of the 4Sight Flex family, a compact ultra-long-range LiDAR sensor with 50% range improvement and 10x resolution increase compared to first-gen product, with samples to be unveiled to OEMs in Q2. • Collaborated with NVIDIA for advances in high-speed long-range detection performance, on track for integration with NVIDIA's Hyperion platform. • Ended collaboration with Continental, obtained design collateral and IP for HRL131, and focusing on quoting RFQs with next Tier 1 partner. • Capital-light business model extended cash runway into 2025, with cash burn reduced for third consecutive quarter. • Focus in 2024 on market-leading product performance and go-to-market via Tier 1 partners, leveraging product maturity and plug-and-play Tier 1 partnership model.

There is no distinct breakdown of product segments with revenue contribution provided. Overall, fourth quarter revenues were $69,000 compared to $188,000 in the prior quarter. Gross margins decreased due to lower revenue and increased noncash inventory write-downs. GAAP net loss was $27.8 million in the fourth quarter compared to $17 million in the prior quarter.

• Expect cash burn to be in the range of $20 million to $25 million for full year 2024, a 75% reduction in cash burn rate compared to Q1 2023. • Beat non-GAAP EPS guidance by $0.10 in Q4 2023 but fell short of GAAP EPS guidance due to long-lived asset impairments. • Continues to focus on market-leading product performance and go-to-market via Tier 1 partners, leveraging product maturity and existing supply chain infrastructure.

• Broader market conditions causing delays in LiDAR adoption within OEM vehicle programs. • Industry challenges with scarcity of capital and resources needed to bridge to commercialization. • Forward-looking statements subject to inherent risks, uncertainties, and changes in circumstances that may cause actual results to differ materially. • Differences between non-GAAP and GAAP financial measures, with non-GAAP measures for supplemental purposes only.

Q: So Matt, I was curious, you announced 4Sight Flex back in November. It's been four months. Can you walk us through how you guys were able to turn that around into a product in just four months?

A: John, welcome back. Yes, absolutely. I think really, there's a couple of key points here. First and foremost, it's the power of our software-defined LiDAR architecture. When you're mostly focused on making software updates and changes, things go very quickly. And of course, we can't do that without an incredibly strong technical engineering products and operations teams. These guys have been outstanding and driving hard and committed since back then in November. So, what we have at the end of the day is, what we believe to be the most compact design now in this ultra-long range performance category, which allows us to do things like seamlessly integrate into -- behind the windshield type designs, get the bump out of the roof, get a nice quiet and compact solution inside the cabin and the performance delivered by our 1550 technology, in this case, is incredible.

Q: On a second element, I mean, obviously, the Tier 1 announcement is key for all of us here. Can you give us any more color around the announcement? Are they going to use Apollo? I mean any kind of information would be helpful.

A: Absolutely. We'll hit the last part first. I think that our partners committed to entire product range. And the key thing here is what we've been doing is looking outside what I'll call this traditional monolithic very large Tier 1 space. And instead turning our attention to more focused Tier 1 partners. And in this case, we really found great synergy with a partner that's focused on delivering ADAS solutions, okay? And the other part of their charter is to leverage heavily into innovation and new technology to grow their business is actually, we're seeing quite a few guys out there like that now that are hungry and moving ahead. We're already working with this particular partner on inbound RFI and RFQs. So, we're already jumped in and working together on that, they're really to hope to have a bit more information, so we expect to be sharing more information and details on that soon. The other thing I wanted to point out is that we do have multiple engagements in the space is this, I'll call it, technology-driven, more focused in growing their business through technology and innovation. We have multiple of these engagements ongoing right now and hope to talk more about those also in the not-too-distant future.

Q: Congrats on the LOI. A two-part question. Have you structured the LOI with the Tier 1 similar to Continental where you're going to get royalties and you'll receive collateral, if they decide to continue the program? And then for the second part, can you just explain a little bit the time line? So, you now have that commitment with the Tier 1 on what tests need to be done at the Tier 1 facility? How long does that take kind of things like that?

A: All right. So, a couple of things here on that, just maybe we'll kind of take it in reverse order. But in sort of testing and integration, those type of tasks, look, we actually did a lot through our work with Continental. And they've been -- even though the relationship has ended effectively, they've really been great at transitioning collateral and information over. So, this thing -- this aspect of things takes a lot of the start from ground zero type work over again. We're already jump in working very deeply together. We expect testing to happen very quickly. And again, we're using the work that we did with Continental as a baseline. So again, we expect that to happen very quickly here. I'm sorry, what was the first part of the question again?

Q: It was just whether you -- first of all, was just whether you structured the LOI just similar to Continental where you're going to get royalties and receive collateral, which you pretty much answered.

A: Yes. Look, let me hit that real quick. Yes, we expect to see a similar type of structure, I'll call it, revenue sharing-based structure. It fits right into our capital-light model. I wouldn't say we're heading for it to be exactly the same as Conti, but it will be similar.

Q: Just kind of wondering what your thoughts are on the LIDAR market playing out in 2024. I mean I'm sure you've heard a few of your competitors think this is kind of the year of series production awards, which I know we heard the same thing last year and things keep getting pushed out. So just kind of wondering what your thoughts are on the LIDAR market, series production agreements for 2024, whether you kind of think this might be the year where a lot get awarded?

A: Yes. Look, I want to be careful about the crystal ball here as we all know the market has been tricky. But the one thing that I can share with certainty is the activity that we're seeing in Q1. It was coming at Office EES and into the new year, given all the delays that we had from last year were going okay, is it going to be real quiet? Is it going to be noisy? And there's been quite a bit of activity. And I think that's one thing I can speak to definitively, I'm relieved to see through this activity that LiDAR is still very important and relevant when it comes to ADAS safety, first and foremost, and then also autonomous driving, which we know has been sort of part of the underpinnings of some of the delays that we've seen. I'm not going to say cautiously optimistic at this point based on the larger-than-expected RFI and RFQ activity we've already seen in Q1.

Q: Just to add to that. I think the other thing to mention is just the progress we've made in general on the execution side. If you think about everything that we've delivered, and we alluded to this on the earnings call, if you think about the progress we've made on Apollo, the fact that we now have an LOI with a Tier 1, and we've all done that at a very cost-competitive cost structure. And I think we deserve some credit for that, the fact that we've been able to go out and execute, and we've done that while we're keeping our costs low.

A: Yes, absolutely. That makes a ton of sense. Yes. Congrats again.