AEye, Inc.

Good afternoon, and thank you for joining AI's second quarter 2023 earnings call. With me today are Matt Fish, Chief Executive Officer, and Connor Tierney, Chief Financial Officer. Earlier today, we announced our financial results for the second quarter 2023. A copy of our press release can be found on our website at investors.ai.ai. Before we begin, I would like to remind participants that today's discussion may include forward-looking statements as defined in the securities laws and regulations of the United States with reference to future events, future operating results, or financial performance. Forward-looking statements are based on our current expectations and assumptions regarding our business, the industry and other conditions. These forward-looking statements are subject to inherent risks, uncertainties and changes in circumstances that are difficult or impossible to predict. Our actual results may differ materially from those contemplated by these forward-looking statements. We caution you, therefore, against placing undue reliance on any of these forward-looking statements. You can find more information about the risks, uncertainties, and other factors in our reports filed from time to time with the Securities and Exchange Commission, including in our most recent periodic report. All information discussed today is as of August 7, 2023, and we do not intend and undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments, or otherwise, except as may be required by law. In addition, today's discussion will include references to certain non-GAAP financial measures. These non-GAAP measures are presented for supplemental information purposes only and should not be considered as a substitute for financial information presented in accordance with GAAP. A reconciliation of the measures to the most directly comparable GAAP measures is available in our press release, and you should refer refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures in our earnings release. Now, let me pass the call over to Matt.

Thanks, Jan. And thank you all for joining us, especially those of you who are new investors based on our recent trading volume and stock price activity. On today's call, I'll provide an update on our progress in executing against the plans we laid out in our first quarter earnings call and the continued demand for LIDAR we are seeing in the automotive space. Then I'll spend a few minutes talking about how our technology that delivers safety at speed and our Capital Light licensing model position AI to win in the ADAS market. This allows us to quickly scale across automotive and other industries. Let me start by reviewing the important progress we have made in automotive design validation. I'm excited to tell you that we recently achieved major in-vehicle test milestones with both NVIDIA, who is a major ADAS player, and two tier one global automotive OEMs. We received tremendously positive feedback from all three about the performance of our HRL131 long-range technology in both urban and high-speed highway scenarios. We are especially gratified that after road testing our technology, NVIDIA commented that AI's technology is best in industry based on a crucial set of their KPIs. Safety at speed is a critical advantage in the LiDAR space that enables safe, hands-free highway driving. In addition, supply chain readiness and cost have been barriers to widespread adoption of LiDAR. As expected, automotive OEMs are focused on all of these factors. Over the course of our longstanding partnership with Continental, AI has made substantial progress in addressing these critical issues. And this past quarter, due to our cost reduction initiatives and our intensely focused work with Continental's team, we have made a significant breakthrough in lowering the BOM, or bill of material, costs. This ensures that we now have a production-ready supply chain in ADAS product at a price point well below $1,000, even at modest volumes. This attractive price point, along with the rigor of the supply chain we have established with Continental, are distinct competitive advantages that give AI a clear path to manufacturing at scale. We are highlighting this important benefit in all of our RFQ responses to automotive OEMs. We have a huge opportunity ahead of us. The automotive LIDAR market is expected to grow at a compound annual growth rate of 55% over the next five years to reach $4.7 billion in 2028. As I mentioned last quarter, we're in the process of responding to six RFQs through Continental. I'm pleased to report that since then, AI has been named as a finalist for two of the six RFQs, and we expect those award decisions by the end of the year. Furthermore, we expect to bid on additional RFQs later this year. RFQs typically range in size from $250 million to more than $1 billion, so each RFQ is an important opportunity for AI. And taken together, our pipeline of RFQs represents a sizable revenue opportunity. To be clear, these are series production awards, not development projects. As revenue begins to ramp for us, we also expect to benefit from our capital light and royalty-based business model that delivers high margins. In the second quarter, AI launched Foresight Plus, a solution that enables vehicles to detect pedestrians, small objects, and vehicles at distance at speeds of up to 80 miles per hour. This functionality is key to OEM successfully delivering safe, hands-free highway driving. Foresight Plus has received tremendous positive feedback from OEMs and the ADAS ecosystem and is currently being incorporated into Continental's HRL131 long-range LiDAR product. Beyond automotive, we continue to gain traction in other markets, including intelligent transportation systems, or ITS. For those of you who might not be familiar, ITS is critical to urban planning and enables smarter and more connected transportation systems. ITS has many applications, including in smart intersections, highway automated tolling, traffic management, and highway incident detection to improve both safety and performance. In the ITS category, we have been working with our systems integration partner in Tetra on a LiDAR tolling system in Turkey that is nearly complete. We recently expanded our engagement within Tetra to deliver LiDAR-based tolling solutions for a major international highway in Kazakhstan. Based on our success, we expect to expand into new markets within Tetra, including Southern Europe and APAC. In partnership with another systems integrator in the US, AI's LiDAR has already been successfully deployed on a 22-mile stretch of interstate highway to improve highway monitoring and automated incident detection. Before we close, I'd like to touch on our Capital Light business model, which is based on licensing and royalties. The beauty of our licensing model is that it allows us to rinse and repeat across automotive suppliers, and then quickly move into other markets by leveraging the foundation we have in place. Looking ahead, as we scale, we expect to benefit from the leverage in our business model that is unmatched in the marketplace. With that, I'll turn the call over to Conor to discuss our financial performance.

Thanks, Matt. Welcome, everyone. I'll begin with some comments on the expense management initiatives we announced in March, and then I'll provide an update on our financial performance and our outlook. I'm pleased with the progress we've made in streamlining our cost structure. Our cash burn decreased by $4.7 million from last quarter due to a combination of workforce reductions, office closures, vendor savings, and other efficiencies. We expect our burn rate to continue to decline next quarter as we realize further savings from these initiatives. We are also on track to achieve our goal of reducing last year's cash burn rate by 50% by the beginning of 2024. As a result of the steps we took to reduce expenses, our cost structure is now more closely aligned with our near-term revenue opportunities and our capital-light business model. Importantly, we have a plan to extend our cash runway to the end of 2024. Today, our balance sheet remains healthy and we have the financial resources we need to execute on our key objectives. Now turning to our second quarter financial results. Second quarter revenues were $571,000, which came in at the mid-range of guidance, but decreased slightly from the prior quarter. During the quarter, we shipped more units of our core Foresight LiDAR product compared to the prior quarter. Higher revenues from product sales were partially offset by lower automotive development contract revenues. Second quarter GAAP operating expenses were $14.8 million, down 39% from the prior quarter, due primarily to our cost reduction initiatives. Non-GAAP operating expenses were $10.7 million in the second quarter, down from $16.5 million last quarter. We reported a second quarter gap net loss of $16 million or a loss of $0.09 per share versus a gap net loss of $26.3 million or a loss of $0.16 per share reported last quarter. On a non-gap basis, our net loss was $11.7 million or a loss of $0.07 per share in the second quarter compared to a non-gap net loss of $17.7 million or $0.11 per share in the prior quarter. Overall, expense reductions for the second quarter exceeded our expectations and were an important driver of the improvement in our GAAP and non-GAAP net loss for the quarter. We continued to manage our cash carefully. Net cash used in operating activities for the second quarter was $13.1 million. CapEx in the second quarter was modest at $209,000. We closed the second quarter with a healthy balance sheet, including $58.7 million of cash, cash equivalents, and marketable securities. You may recall we had a convertible note on our balance sheet that was issued in September 2022. In July 2023, we paid the remaining balance on the note. The note is now paid in full. As an additional source of liquidity, we continue to have access to our equity line of credit facility. Now turning to our guidance for the third quarter of 2023. We expect third quarter revenue to be in the range of $500,000 to $700,000. Looking to the fourth quarter, we anticipate increased demand for our industrial products and expect revenue to increase sequentially. We expect our third quarter GAAP EPS loss to be $0.09 and our non-GAAP EPS loss to decrease to $0.06 as we continue to drive savings through our Capital Light licensing model with Continental. All told, I'm delighted about the progress we have made on key milestones related to product validation, manufacturability, and advancement to the quoting phase with multiple OEMs. This coupled with our healthy balance sheet puts us in a great position to execute on our 2023 strategic plan. We will continue to take a disciplined approach to managing our expenses as we navigate the path forward from design validation to high-volume production. With that, I'll pass it back to Matt to wrap things up.