AEye, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Unaudited U.S. GAAP results; financial statement amounts below are in millions unless otherwise noted. AEye develops lidar systems and its 4Sight sensing platform for automotive, industrial, and mobility applications.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0.706 | $0.747 | $1.788 | $1.076 |
| Gross profit (loss) | $(0.721) | $0.293 | $(1.121) | $0.005 |
| Operating expenses | $25.912 | $12.387 | $50.434 | $22.820 |
| Operating loss | $(26.633) | $(12.094) | $(51.555) | $(22.815) |
| Net loss | $(26.467) | $(11.075) | $(51.348) | $(22.584) |
| Basic and diluted loss per share | $(0.17) | $(0.11) | $(0.33) | $(0.22) |
- Margins: Gross margin was approximately negative 102% in Q2 and negative 63% for the first half, compared with approximately 39% and near break-even, respectively, in the 2021 periods.
- Cash flow: First-half operating cash use was $33.112 million, versus $18.339 million in 2021. Investing activities provided $24.475 million, primarily from marketable-security redemptions; financing activities used $1.310 million. Cash, cash equivalents, and restricted cash declined by $9.947 million to $6.386 million.
- Liquidity and debt: Cash and marketable securities totaled $125.762 million at June 30, 2022, including $4.236 million of cash and $121.526 million of marketable securities. The company reported no outstanding borrowings. Operating lease liabilities totaled $19.618 million.
- Balance sheet: Total assets were $161.319 million, total liabilities $33.731 million, and stockholders’ equity $127.588 million. Accumulated deficit was $203.143 million.
Material changes versus comparable periods
- Q2 revenue decreased 5% year over year, while first-half revenue increased 66%, primarily due to revenue from a large Tier 1 automotive supplier development contract and higher prototype sales.
- Cost of revenue rose substantially; AEye attributed the increase to the Tier 1 contract, higher labor and warranty costs, and increased prototype sales. The company moved from a small gross profit in first-half 2021 to a gross loss in first-half 2022.
- First-half operating expenses more than doubled. Research and development increased 67%, sales and marketing 184%, and general and administrative 173%, with personnel and stock-based compensation among the drivers. First-half stock-based compensation was $11.897 million.
- First-half net loss increased 127%. The prior-year periods included a $2.297 million gain from PPP loan forgiveness; that nonrecurring gain did not recur. Lower debt-related interest costs partly offset increased expenses.
- Accumulated other comprehensive loss increased to $1.629 million, reflecting unrealized losses on available-for-sale securities. Common shares outstanding were 158.5 million at June 30, versus 155.1 million at December 31, 2021.
Outlook, risks, and unusual items
- Management said existing liquidity was sufficient to fund operations for at least 12 months from June 30, 2022. A specific revenue or earnings forecast was not provided. The company expects continuing losses through at least 2024 and expects substantial R&D, sales and marketing, and administrative spending.
- AEye expects to complete its transition to contract manufacturing in late 2022 and said prototype sales were affected by lower average selling prices as it prepared to release a new product in the coming months. It expects future revenue to rely increasingly on technology licensing and product sales, but commercialization timing and customer adoption remain uncertain.
- Customer concentration is material: Continental AG accounted for approximately 64% of first-half 2022 revenue, compared with 13% in first-half 2021. Management identified dependence on Continental and the ability to secure automotive design wins as significant business risks.
- The company has a Common Stock Purchase Agreement with Tumim Stone for up to $125 million, subject to share-count, ownership, market-price, and other limits. It issued 435,000 shares for $1.422 million in the first half. Further sales could dilute existing stockholders, and the full commitment may not be available.
- AEye initiated litigation to enforce a defaulting PIPE investor’s subscription agreement for $5 million. Separately, management said it was not aware of ordinary-course legal matters expected to materially affect financial position, results, or cash flows.
- Disclosure controls were deemed ineffective at June 30 because a previously identified material weakness in financial reporting controls remained unremediated. Management reported remediation work, including hiring accounting personnel and using external consultants, but said remediation requires effective controls to operate and be tested for a sufficient period.
- Key risks include uncertain lidar and ADAS adoption, lengthy automotive development and validation cycles, failure to secure design wins, reliance on major customers and third-party or single-source suppliers, component costs and shortages, competition and pricing pressure, product reliability and liability, and macroeconomic, pandemic, geopolitical, foreign-exchange, and cybersecurity risks.
Important facts for investors to verify
- Whether the cash-burn rate and spending plans remain consistent with management’s stated 12-month liquidity assessment, including marketable-security values and operating lease commitments.
- Progress on Continental-related programs, automotive OEM design wins, contract manufacturing, and the anticipated product release; distinguish development revenue from scalable production or licensing revenue.
- Customer concentration and the terms, actual proceeds, share limits, and potential dilution under the Tumim Stone agreement.
- Status and outcome of litigation concerning the defaulted $5 million PIPE subscription.
- Whether management remediates and tests the material weakness in internal controls, and whether any reporting or accounting issues arise.
- How gross margins, inventory write-downs, warranty costs, and operating expenses evolve as AEye moves toward manufacturing and commercialization.