AEye, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited results are presented in U.S. dollars; financial statement amounts below are in millions unless noted. AEye develops lidar systems for automotive, ADAS, and industrial applications.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0.571 | $0.706 | $1.207 | $1.788 |
| Gross loss | $(1.340) | $(0.721) | $(2.965) | $(1.121) |
| Operating expenses | $14.846 | $25.912 | $39.110 | $50.434 |
| Operating loss | $(16.186) | $(26.633) | $(42.075) | $(51.555) |
| Net loss | $(16.031) | $(26.467) | $(42.296) | $(51.348) |
| Basic and diluted loss per share | $(0.09) | $(0.17) | $(0.25) | $(0.33) |
- Q2 gross margin was approximately negative 235%, versus negative 102% a year earlier; six-month gross margin was approximately negative 246%, versus negative 63%. Costs of revenue exceeded revenue in each period.
- Revenue comprised prototype sales and development contracts. Six-month prototype sales fell 30% to $0.370 million and development-contract revenue fell 33% to $0.837 million. Management attributed the development-contract decline chiefly to a Tier 1 supplier program nearing completion of design validation.
- Six-month operating cash use was $32.445 million, compared with $33.112 million in 2022. Investing activities provided $35.138 million, largely from marketable-security maturities; financing activities used $5.515 million, including $4.973 million of convertible-note redemptions.
- At June 30, cash and cash equivalents were $18.392 million and marketable securities were $40.260 million, totaling $58.652 million. Current assets were $67.152 million versus current liabilities of $14.331 million. Total liabilities were $30.263 million, including $15.888 million of noncurrent operating lease liabilities.
- The 2022 convertible note had a $1.641 million reported fair value at June 30. The company stated that all remaining principal and accrued interest were paid by August 1, 2023.
Changes and management commentary
- Net loss improved year over year in Q2 and the first half, primarily because operating expenses declined following restructuring and cost reductions. Q2 operating expenses fell 43%; first-half expenses fell 22%.
- In Q1, AEye began a revised strategic plan focused on selected products and customer engagements and reduced its workforce by approximately one-third, most effective April 3. First-half restructuring charges were $1.298 million; management said implementation would continue through the rest of 2023.
- Management expects R&D, sales and marketing, and general and administrative expenses to be lower in 2023 under the revised plan. It expects continued losses for at least several years and says additional capital may be needed. Management believed existing resources would fund requirements for at least 12 months from August 9, 2023; this is an estimate, not a guarantee.
- Continental AG accounted for approximately 71% of first-half revenue, compared with 64% in the prior-year period, making customer and partner concentration a material consideration. Automotive represented 71% of first-half revenue.
- Common shares outstanding increased to 181.4 million at June 30 from 163.1 million at year-end 2022. Note conversions and equity awards contributed to the increase; further capital raising could dilute shareholders.
Outlook, risks, and unusual items
- AEye is prioritizing automotive ADAS, autonomy, and commercial trucking, while narrowing industrial activity to selected opportunities. Management says OEM integration and commercialization timelines are difficult to predict and can span years.
- Key risks include persistent losses and cash consumption; uncertain lidar adoption and design-win timing; reliance on Continental and other partners; customer program delays or cancellations; competition and pricing pressure; supplier concentration and component costs; and the need for additional financing.
- Nasdaq granted an additional compliance period through January 16, 2024 to regain the $1.00 minimum bid-price requirement. AEye said it intended to cure the deficiency, including through a possible reverse stock split if needed; failure to regain compliance could lead to delisting.
- The company reported no legal proceedings expected to have a material effect and said disclosure controls were effective at June 30. The landlord drew $2.150 million from the headquarters letter of credit in April; after quarter-end, a new letter of credit was issued and the landlord refunded the security deposit on July 21.
- Management identified no material impact from inflation to date, but noted exposure to interest-rate, foreign-currency, credit, supply-chain, cybersecurity, regulatory, and product-liability risks. A hypothetical 10% interest-rate change was not expected to materially affect results because investments were short-term.
Important facts for investors to verify
- Whether cash burn, cost reductions, and any additional financing support operations beyond management’s stated 12-month runway estimate.
- Progress toward commercial design wins, production volumes, and revenue beyond development work—particularly with Continental—and any changes in customer concentration.
- Whether gross losses and inventory write-downs improve as program work winds down and product sales or licensing scale.
- Nasdaq bid-price compliance by January 16, 2024, including any reverse stock split or other action.
- Completion and terms of the August 2023 convertible-note repayment, and potential dilution from equity awards or future capital raising.