AEye, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Unless stated otherwise, financial figures below are in millions of dollars. The interim financial statements are unaudited.
Business context and reporting period
AEye develops active LiDAR and its iDAR perception platform for vehicle autonomy, ADAS, and robotic vision. On August 16, 2021, it completed a SPAC business combination, accounted for as a reverse recapitalization, and began trading on Nasdaq as LIDR (common stock) and LIDRW (warrants). The transaction materially increased cash and shares outstanding; no goodwill or intangible assets were recorded.
Financial performance and position
| Metric | Three months ended Sept. 30, 2021 | Three months ended Sept. 30, 2020 | Nine months ended Sept. 30, 2021 | Nine months ended Sept. 30, 2020 |
|---|---|---|---|---|
| Revenue | $0.127 | $1.137 | $1.203 | $1.300 |
| Gross profit (loss) | $(0.339) | $0.820 | $(0.334) | $0.836 |
| Gross margin | (267%) | 72% | (28%) | 64% |
| Operating expenses | $16.545 | $5.569 | $39.365 | $18.679 |
| Loss from operations | $(16.884) | $(4.749) | $(39.699) | $(17.843) |
| Net loss | $(17.393) | $(3.778) | $(39.977) | $(17.495) |
| Basic and diluted loss per share | $(0.15) | $(0.04) | $(0.39) | $(0.17) |
| Cash used in operating activities | Not presented for quarter | Not presented for quarter | $(39.588) | $(13.958) |
Q3 revenue fell 88.8%, principally because no development-contract revenue was recognized, compared with $1.05 million from a large Tier 1 contract in Q3 2020. Prototype sales rose 46% to $0.127 million. For the nine months, prototype sales increased to $0.588 million, while development-contract revenue declined to $0.615 million; total revenue decreased 7.5%. The filing attributes increased losses primarily to higher operating expenses, including R&D, sales and marketing, and G&A.
At September 30, cash and cash equivalents were $52.468 million and marketable securities were $129.910 million, totaling $182.378 million; restricted cash was an additional $2.150 million. Current assets were $194.078 million and current liabilities $8.361 million, for working capital of $185.717 million. Total assets were $201.232 million, total liabilities $11.702 million, and stockholders’ equity $189.530 million. No borrowings or convertible notes remained outstanding; the SVB loans were repaid and notes converted in connection with the business combination. Nine-month investing cash outflow of $130.712 million mainly reflects purchases of marketable securities. Financing cash inflow was $208.421 million, including business-combination and PIPE proceeds.
Shares outstanding were 154.566 million at September 30, compared with 101.287 million at December 31, 2020, reflecting the transaction and related conversions and issuances. Stock-based compensation was $6.522 million for the nine months. A $2.297 million PPP-loan-forgiveness gain benefited nine-month results; it was noncash in the cash-flow reconciliation.
Outlook, commentary, risks, and unusual items
- Management expects continued operating losses and says existing cash, cash equivalents, and marketable securities should fund operations and capital expenditures for at least 12 months from issuance of the statements. The company anticipates losses through at least 2024 and may need additional capital over time.
- Management expects automotive technology licensing to begin generating revenue in 2024, but this is a stated expectation, not a guarantee. It expects development contracts to become a smaller share of revenue over time and product margins to improve as outsourced production scales; contract-manufacturer transition began in September 2021.
- Commercial prospects depend on customer adoption, automotive design wins and long development cycles, successful partnerships (including Continental), production scale-up, and the ability to manage component availability and costs. COVID-19-related operating and supply-chain disruption, competition, pricing pressure, and customer program delays or cancellations are identified risks.
- A February 2021 MOU with an existing investor and automotive electronics supplier included a stated $3.8 million payment commitment for joint development, although no definitive agreement had been drafted or signed as of September 30.
- The company disclosed a material weakness in internal control over financial reporting identified as of December 31, 2020, related to accounting staffing and financial-close controls; remediation was in progress and not yet complete.
- Adoption of lease accounting standard ASC 842 was expected January 1, 2022. Management estimated additional balance-sheet right-of-use assets and lease liabilities of approximately $8.5–$12.5 million and expected a material effect on the financial statements.
- The Orfin lawsuit alleging an agreement for a $2.5 million convertible-note investment was voluntarily dismissed on August 30, 2021. Management reported no other known legal matters expected to have a material effect.
Important facts for investors to verify
- Whether reported cash and marketable securities, and the stated 12-month runway, remain adequate given operating cash burn and planned R&D and commercialization spending.
- Progress toward automotive design wins, definitive commercial agreements with Tier 1 partners and OEMs, and the anticipated 2024 licensing revenue timeline.
- Whether contract manufacturing can scale reliably and improve product costs and gross margins, given supplier concentration and supply-chain risks.
- Quarterly revenue concentration and volatility, including the timing and continuation of development contracts and prototype orders.
- Remediation and testing of the disclosed material weakness, as well as dilution from outstanding equity awards, warrants, and the 2021 plan’s annual share reserve increases.
- Actual costs and balance-sheet effects of public-company operations, the business combination, and ASC 842 adoption; transaction costs were substantial and the filing reports differing cash-flow and equity presentation of those costs.