AEye, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. AEye develops active lidar systems for automotive autonomy and ADAS, as well as industrial and mobility applications. Unless noted otherwise, financial figures below are in U.S. dollars; statement amounts are in thousands.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $1.082 million | $329,000 |
| Gross loss | $400,000; gross margin approximately -37% | $288,000; approximately -88% |
| Operating expenses | $24.522 million | $10.433 million |
| Operating loss | $24.922 million | $10.721 million |
| Net loss | $24.881 million | $11.509 million |
| Basic and diluted loss per share | $0.16 | $0.11 |
| Cash used in operating activities | $16.023 million | $8.814 million |
At March 31, 2022, cash, cash equivalents and marketable securities totaled $143.9 million, including $11.2 million of cash and cash equivalents and $132.7 million of marketable securities. Current assets were $152.9 million and current liabilities were $12.8 million. The company reported no borrowings outstanding. Operating lease liabilities totaled $19.6 million, including $2.3 million current.
Cash, cash equivalents and restricted cash declined by $3.0 million during the quarter to $13.3 million. Investing cash flow was positive $14.7 million, mainly reflecting $15.5 million of marketable-security redemptions; financing cash flow was negative $1.7 million, primarily due to taxes paid on equity award net settlements. Stock-based compensation was $5.3 million.
Changes versus the prior comparable period
- Revenue rose 229% year over year, driven primarily by development-contract revenue from a large Tier 1 automotive supplier contract; prototype sales also increased.
- Cost of revenue rose 140%, and the company continued to record a gross loss despite higher revenue.
- Operating expenses increased 135%. R&D rose 47%, sales and marketing 191%, and general and administrative 276%; management cited higher personnel costs, stock-based compensation, public-company expenses, and other spending.
- Net loss more than doubled, increasing 116%, as the expense increase substantially exceeded revenue growth.
- Interest income increased with earnings on marketable securities. Prior-period borrowing costs did not recur because the company had repaid its debt; there was no debt outstanding at quarter-end.
Outlook, commentary and risks
- Management expects continued losses for at least the next several years; the risk factors state losses are expected through at least 2024. It believes existing liquidity and expected resources are sufficient for at least 12 months from March 31, 2022. No specific quarterly or annual revenue or profit guidance is provided.
- Management expects automotive technology licensing to begin generating revenue in 2024 and expects contract-manufacturing transition work to be completed in mid-to-late 2022. These are forward-looking expectations, not reported results.
- Commercialization depends on winning customer design selections and on lengthy automotive development and validation programs. Management says one Tier 1 partner was bidding for production awards expected to represent a substantial portion of its 2026 revenue forecast.
- Revenue and customer exposure are concentrated: management identifies Continental as representing 58% of Q1 2022 revenue. Automotive applications represented 58% of revenue. The filing also identifies customer concentration in accounts receivable.
- Risks include uncertain lidar adoption and design-win timing, reliance on Continental and other partners, competition, component shortages and outsourced manufacturing execution, pricing and margin pressure, and COVID-19, geopolitical and macroeconomic disruptions including the war in Ukraine.
- The company has a $125 million common-stock purchase agreement with Tumim Stone, subject to share, ownership and other contractual limitations. No shares had been sold under it by March 31, 2022; a resale registration statement was filed May 6. Sales could dilute existing shareholders, and the filing says proceeds and shares available cannot be determined.
- Disclosure controls were deemed ineffective at quarter-end because of an unremediated material weakness in financial reporting controls, related to insufficient qualified accounting and IT personnel and control design. Management reported remediation work underway, including additional hires and external consultants.
- No material legal proceedings were reported. The company adopted ASC 842 on January 1, 2022, recognizing operating lease assets and liabilities; the filing says adoption did not materially affect operating results or cash flows.
Important facts for investors to verify
- Whether customer design wins, particularly through Continental, progress into signed production programs and meaningful recurring revenue.
- Whether revenue growth can outpace operating costs and improve gross margins, and how cash burn affects the stated 12-month liquidity outlook.
- The terms, share limits, potential proceeds and dilution under the Tumim Stone agreement, and whether the company uses it.
- Progress toward remediating the material weakness and establishing effective financial reporting controls.
- Execution of the manufacturing transition and exposure to suppliers, component availability, customer concentration and commercialization delays.