0:06 Good afternoon. My name is Vaishnavi, and I will be your conference operator today. At this time, I would like to welcome everyone to AEye's Fourth Quarter and Full Year 2021 earnings conference call and webcast. All participant lines have been placed in a listen-only mode. [Operator Instructions]. 0:28 Joining us on the call today will be Blair LaCorte, Chief Executive Officer; and Bob Brown, Chief Financial Officer. Opening remarks by AEye management will be followed by a question-and-answer session. [Operator Instructions]. Please note this event is being recorded. 0:51 I will now turn the call over to AEye.

0:55 Thanks, and welcome everyone to AEye's fourth quarter and full-year 2021 earnings call. With me today are Blair LaCorte, our Chief Executive Officer; and Bob Brown, our Chief Financial Officer. Earlier today, we announced our financial results for the fourth quarter and full year 2021. A copy of our press release can be found on our website at investors.aeye.ai. 1:22 Before we start, I'd like to remind participants that during this call management may make forward-looking statements including without limitation, statements regarding our future performance, growth strategy, and financial outlook. 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. 1:51 Our actual results may differ materially from those contemplated by the 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 annual report on form 10-K for the year-ended December 31, 2021. 2:17 All information discussed today is as of March 28, 2022, 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 informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. 2:50 A reconciliation of these measures to the most directly comparable GAAP measures is available in our press release and you should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measure in our earnings release. 3:06 With that, I will pass it over to Blair.

3:09 Thank you for joining us today for AEye's quarterly investor update. For those of you I have not met before, my name is Blair LaCorte, and I am the CEO of AEye. Joining me here today is my CFO, Bob Brown. This is our second public earnings call and our first full year report. We are very excited to share our progress here today. First, we're going to provide some perspective on how the Lidar market has developed and where we believe we are in the cycle of commercialization. I will then touch on our progress in 2021, our key investment themes, and highlight AEye's business model and product differentiation. Bob will then take us through our Q4 and full-year 2021 financials. He will share a more in-depth review of 2021 accomplishments as well as our financial projections for 2022. 4:00 I will finish by highlighting two key culture initiatives and this year's strategic objectives. We will then transition to questions. As some of you may know, Lidar is not a new technology. It was invented in the 1960s for specialized applications because of its deterministic capabilities and measuring exact distance to an object with higher resolution, especially where other existing interpretive sensors like radars and cameras may be at a disadvantage. 4:33 For the next 40 years, Lidar was used to collect and transfer information in complex spatial environments. In the early 2000s, governments around the world began to look for ways to transition this technology into broader commercial markets. For example, the DARPA Grand Challenge was extremely successful in spawning over 85 Lidar companies to implement sensors into automotive and the wider industrial marketplace. Fast forward to 2021 and as with most foundational technology transitions, not only have the markets expanded but the original 85 plus privately…

13:19 Thanks Blair. Hi, I am HanBin Lee, Founder and CEO of Seoul Robotics. I'm happy to be able to tell you a little about how AEye and Seoul Robotics have developed a strong and mutually beneficial partnership. We started to working on Lidar perception software in 2017. And since then, we have successively developed and deployed end-to-end solutions at factories, airports, and intersections and many other domains. And over these five years, we've gotten a chance to work with every major Lidar company in the world. And we've never seen the fidelity of data that we are seeing from AEye today. By optimizing performance modes and AEye software definable 4Sight architecture, we can take a customer centric approach and change the field of view as well as scanning behavior to always maintain very high point density for specific use cases. This makes the data much more meaningful in terms of perception capabilities, and today, we are showing something that's never been done before. Using a mode optimized for highly monitoring, AEye and Seoul Robotics are striking all vehicles including small cars and large trucks out to 500 meters, enabling a paradigm shift for the world of smart infrastructure to tackle interstates all around the world. We will be improving incident detection, optimize traffic flow and reduce downtime caused by lane obstruction for all municipalities. So we are very excited to pursue future opportunities together with AEye. Back to you, Blair.

Thanks, HanBin. I would also like to publicly state I did not require him to wear a Boston Red Sox hat, but I do appreciate the gesture. Now, let's talk about our business model with one of our customers in the highly regulated, high-volume automotive ADAS and autonomous driving markets. Note again, we use the same sensing platform as we do for industrial markets. But we license it to Tier 1 automotive suppliers who build, manufacture and distribute their own products based on our architecture for their large installed base of OEM customers. This model delivers AEye high margin licensing stream with considerable scalability. Joining us from Continental, one of the largest automotive companies in the world, who is licensing our software platform to make their own product is my good friend Gunnar Juergens to give us an update on how our joint product is progressing. Gunnar?

16:11 Thank you, Blair. Thank you for the opportunity to say a few words on your quality update call. Actually, the collaboration between Continental in AEye is really gaining momentum. We are making significant progress both on the industrialization of the product and in building the business pipeline. With a history of more than 20 years and selling more than 20 million Lidar sensors to the automotive markets. Continental is actually uniquely positioned to anticipate the Lidar needs of the markets. And what we believe is that long range high performance Lidar is really the missing piece of the puzzle to enable safe, hands free, eyes of the autonomous driving both on the highways as well as in urban scenarios. And this technology is what we are selling together with AEye, both as a standalone sensor, as well as part of a full stack solution together with our short range Lidar’s radar, camera, ECU and software. 17:14 Let me show you, this is actually the product called HRL131 that we are delivering to the markets together with AEye. This is currently being produced as a B-sample in our continental facilities. And on the business side, we are already engaged with numerous customer acquisition processes, and we have actually shown this B-sample in a live demonstration a private customer event in our facilities in Auburn Hills and Michigan two weeks ago. On the collaboration side, I must say we're very happy and it feels like it's a seamless collaboration between the teams of AEye and Continental. And together I feel we are progressing to our shared vision of delivering cost effective, reliable, and safe solution both to aid us into autonomous driving.

18:05 Thanks, Gunnar. So let's talk about our third investment theme, our differentiated technology and how our adaptive software platform as unique value to our partners and customers. I would like to start with a simple diagram, and then show you three videos demonstrating some of the remarkable capabilities that have never been shown before. On the left of your screen, you can see an illustration of how many traditional passive Lidars work. They collect data in a fixed serial manner, which they then pass this detection data to a perception engine. It's a one way flow of data from a sensor into an application software layer. The idea being collect as much raw data as possible and turn it into information later. In high speed or complex environments this can be a challenge. 18:55 On the right, you will see that we took a very different path by building a software platform on the sensor, which gives us several unique capabilities. The first advantage is that we can now control hardware individually, using software to change the way the sensor works, depending on different environments, and our use cases. 19:19 Second, we've added [Indiscernible] between our perception and application software and the sensor software platform. This two way communication capability allows the applications to ask the sensor for the information they need, and ultimately enhances the quality of the information. Third, on the right side of this illustration, you can see how 4SightM doesn't silo itself from other sensors, we can use maps, cameras, radars, and I am use to trigger the Lidar so we can be more intelligent and efficient when collecting critical information. 19:56 Finally, this software defined architecture is natively compatible to enable OTA so we can change the way the hardware works through software updates,…

23:07 Thanks, Blair and good afternoon, everyone. As Blair mentioned, 2021 was an exciting year for our team. We achieved several significant milestones both in the fourth quarter and over the full year. I want to echo the feeling of encouragement with the progress we made during the year both from an operations and execution standpoint. We successfully completed the process of becoming a public company in August by listing on NASDAQ as LIDR and raising over $200 million net of fees. We also eliminated over $50 million of outstanding debt at the closing of the transaction. In addition, we announced a $125 million common stock purchase agreement in December, providing us with access to additional liquidity. 23:50 Turning to our products. Prior to our IPO, we established a goal to clearly and measurably demonstrate the performance advantages of AEye's Lidar technology in 2021. I'm pleased to share that we successfully achieved that target, and established Lidar performance standards for range, speed and resolution in third party tests. Importantly, we also validated our superior weather performance. We received initial automotive B samples from the Continental line and remain on schedule for startup production in 2024. Meanwhile, we began initial production of our 4SightM LIDAR sensor at Sanmina (ph), our contract manufacturing partner. The 4SightM will be sold into industrial markets. In the area of customers and partners, we demonstrated strong commercial traction with leading players in the market. We're pleased to have developed important relationships with key ecosystem players, including with Continental and ADAS, TuSimple and trucking, Nvidia and mobility, Komatsu and construction, Hitachi and rail, and Mitsubishi, Econolite, Intetra and Seoul Robotics all in support of our recent ITS launch. 25:03 With respect to governance, our goal was to establish a strong board of directors to represent our shareholders.…

29:13 Thanks, Bob. I'd like to touch briefly on our people and culture. Two things that the AEye success as a company. We've previously discussed the depth and breadth of our management team and board, and we continue to add world class governance, bringing on industry leaders with deep experience and success building and managing publicly traded companies. The latest addition to our board is former Apple Global Marketing Executive Sue Zeifman. Sue has led global marketing and communications for some of the world's best known technology consumer brands. She has been working with us on our advisory board for the last year, and I'd like to welcome her onto AEye's board of directors. 30:00 In addition to investing in our people, we are deeply committed to impacting our local and global community for good. With the devastation happening in Ukraine, we felt compelled to act. Many people are not aware that there are over 2000 high school, college and graduate students in the United States today from Ukraine who may not have a place to return over summer break. AEye's management team and employees are committed to making a difference by creating internships for these students. We are announcing today that we have launched a formal internship program and partner with UC Berkeley to provide two students with summer internships, one in business and the other in engineering to ensure their continued education and financial stability while they are unable to return home. We will also be challenging other companies to follow our lead and make a difference in student’s lives. 30:57 In addition, many are not aware as the security level threats have risen in the world today, many of our special operators have been deployed in both support and defensive positions around the world. This impacts not…

33:37 We will now begin the question and answer session. [Operator Instructions] Our first question comes from Joseph Osha with Guggenheim Partners, please go ahead.

34:15 So, this is actually Hilary on for Joe, and I just wanted to first touch on the mobility and industrial side of the business. And we've obviously seen quite a few exciting announcements there, and it was really great to hear from Seoul Robotics this evening. I was just wondering if you could provide any comments in regards to conversations you're having with other players in those markets, perhaps highlight any areas that are particularly of interest and any guidance in terms of when we might see additional announcements there?

34:48 Sure, in the industrial mobility markets, you can see from our highlight of HanBin that the ITS market has picked up in the US and actually globally, smart cities and ITS applications. In fact, there's a tremendous record breaking amount of funding, actually in the next federal budget, the transportation bill. So that's one area we see that's moving very, very quickly. Another is trucking where the highway based hub to hub applications are ROI driven and that they're actually accelerating in time and speed. The third is in aerospace and defense. More now, a lot of these technologies that came from aerospace are actually coming back. They're extremely excited to have a commercial off-the-shelf product that they can buy, that they can also adapt and expand on given that the sensor is actually a platform for software programs. So, those are the -- those are the big areas. Now, we have been dealing with pilots beyond that, but I'd say that's our emphasis for this year.

36:02 Okay, great. And then second, I just wanted to touch on the equity financing that you guys announced and just wondering if you can kind of share strategically how you're thinking about drawing that down? And if we'll see it kind of evenly over the next couple of years or perhaps will you kind of manage to a cash number. And that's it for me. Thank you.

36:25 Yes, hi, Hilary, it is Bob. So as we mentioned in the prepared remarks, we've got about $289 million of total liquidity at 12/31. So that includes about $164 million of cash and marketable securities, and then an access to $125 million as you noted through the common stock purchase agreement we announced in December. So, we feel like we've got a very strong partner with that facility with Tumim Stone, which is the counterparty there, and we have a strategy for accessing that facility at the appropriate time. We don't have specifics that we want to lay out in terms of timing today, but we do have three years to use that facility and we feel comfortable that we'll be able to access it when and if we decide to do so.

37:15 Great. Thank you

37:20 Our next question comes from Suji DeSilva with ROTH Capital. Please go ahead.

37:25 Hi, Blair. Hi, Bob, congrats on the progress here. So, I want to get a sense on the automotive of Continental, the B-sample, and I appreciate having a speaker on the call. Whether the B-sample is customer specific or it's Continental still, and then B-sample that comes next goes to more customer specific programs and what is the timing of the transition toward that versus the current B-sampling?

37:49 Sure. Thank you, Suji. It's actually a great question and goes to the heart of our business model with Tier ones. The product, the technology that they've licensed, as you know, the 4Sight platform -- software platform and hardware designs are specifically combined to be one product for Continental so that it can run it on a high volume line for multiple customers to actually drive down both the component cost and the manufacturing costs. So, they have the capability using the platform to both integrate it after the fact which they've already done with custom system configurations like radar and camera and ADCUs. They also have the capability to open up the software and to make custom adjustments for the OEMs specifically. So what we heard from them is, look we want to -- we want one system, but we need to open the system up so that the hardware manufacturing can be done on one line and with your software definable hardware components, we can go back in after the fact customer by customer and tweak how we want either the hardware to perform or what features or integrations we want, to actually add after the fact. Does that answer your question?

39:11 Yes, it gives some color, insight in there. Thank you. And then perhaps for Bob, on the revenue guidance, just help understand, are there production on auto units in the second half -- the prototype units versus the NRE (ph)? Any -- any color on kind of one click down from what you gave would be helpful? Bob?

39:28 Yeah, you bet. As we mentioned in the prepared remarks, we're expecting to really get into more of the volume production in mid-year with the 4SightM, which is targeted at the industrial side of it. So we think the -- the development contract revenue will probably be a third to maybe a half of the revenue in 2022 and then the rest will be 4SightM products that we'd be selling. So that's how we're thinking about it right now in terms of the balance between those two.

39:55 And Suji, there was a very subtle nod in the presentation, to the fact that we made a very big strategic decision. And that was to actually drive the convergence of the industrial platform and the automotive platform faster to actually reduce costs a year and a half, faster than we thought we could. And what I mean by that is, in our original plans, we were going to come up with a product from Sanmina. Continental was going to come out -- for a product on their manufacturing line. And then we were going to merge the best of breed from both those products into the hardware design in the next cycle. What we found in working with Continental was that we could accelerate some of the things that we were doing together and actually integrate them into our industrial products increasing performance and reducing costs, because now we're sharing the exact same component supply chains. So for us, it did push us back above -- our timing about when we get that industrial product out, we lose a quarter or so. But we -- as I said before, we accelerate our cost reduction capabilities by over a year and a half. And what we're finding in the marketplace today is that the original plan of driving down hardware costs to increase adoption, the market has pushed that even faster than we thought it would. You can see it in many of the presentations from our peers that the average ASP is coming down.

41:38 Okay, appreciate all the color player. Thanks, guys.

41:40 Thanks Suji.

41:41 Thanks, Suji.

41:46 Our next question comes from Hans Chung with D.A. Davidson. Please go ahead.

41:51 Hi, Blair. Bob, thank you for taking my questions. So as a follow up question on the industrial mobility side of business, so I just want to know, like, is there any potential risk about the supply chain risk? I mean, we have industry wide supply chain, semi supply chain constraints, right. And I know if that could be a potential risk about the production of our 4SightM product, or it's already embedded into guidance, or it's probably not at all. And then -- and then second question, I just want to follow up that -- last question about the effort you have done to actually bring the cost reduction that get one half year ahead. And can you elaborate more, maybe from a technology perspective? What have you done to really achieve that? The Milestone? Thank you.

42:59 You bet. So this is Bob. So I'll take the first part of that question, then Blair can take the second part. So relative to the supply chain risks and the overall geopolitical risks that we're all seeing in the world today. Yes, we are taking that into account as we reflect on the ramp of the 4SightM production for this year. So you can assume that that has been baked into our guidance. So we did think very carefully about that, and we've tried to err on the side of caution in this environment basically relative to the guidance that we gave.

43:29 So Blair, you want to take care of technology…

43:32 Sure, Hans. A great question. So when you know part of our plan if you've heard us speak in the past, which you have as to thank you for your report. Has been to drive costs down and three specific areas. One is in system design. The second is in innovation in new materials through a large global series, a large global supply chain. And the third is in converged architecture where we drive volumes up by combining the same components that we use in automotive with the industrial components, and therefore have bigger runs and lower prices. So the advantage we have in coming to a converged architecture earlier is that the majority of the components in both products are exactly the same, are already qualified and will be functionally tested together. So that the industrial markets will benefit from the higher volumes in automotive, and the automotive markets will benefit from the fact that there has been more customization done in the software in the other -- in the industrial market. So we really see -- we thought this would be a serial fact as serial basis, we get one done, we get the other done and we pick the best of breed. We're basically bringing the two products together, although they're produced on different manufacturing lines, they're sourcing from the same components. Does that make sense?

44:58 Yes, yes, that's totally makes sense and powerful. And one more question, if I may, just, I think you guys have partnership with TuSimple? And can you give more color about that? What kind of partnership will that be the in – in the -- in trucking business or in still in the automotive business? And -- and they also recently, they have shuffle in -- in the top management teams. So that even could be a potential impact to AEye, [Indiscernible]?

45:38 Sure, we have two different initiatives with TuSimple, one is on the development side, which is across everything that they're doing on the base level and base architecture, the second is specifically trucking, given that our products are high performance long range, and can see the highest level of density. When you take a look at hub to hub trucking, it looks a lot like automotive, highway autopilot. So we're very focused with them on that application. Today, I think that what TuSimple has said, and I believe from my experiences that they've decided to make some changes in their management team. But they're on track with the exact customer base that they had before and that their production schedules and their engineering teams are stayed intact. So we don't assume we haven't seen any changes from the customer side, the TuSimple customer side, which is we partner with TuSimple to actually provide technology for them to integrate for their OEMs.

46:52 Got it. That's all I have. Thank you.

47:00 Our next question comes from John Roy with Water Tower Research. Please go ahead.

47:08 Thank you. So Blair, you were talking a lot about software driven cars and things like that. And certainly, electric vehicles are definitely making a big push. Is there some kind of special connection between those two? Or is it just a type of company that's doing that?

47:24 No, it's actually a very strong connection. I mean, one of the reasons that, that many of the car companies in the world are moving to EV, one reason is the environment. The second reason is, is that when you move to an EV, you limit the number of moving parts. And you allow, rather than try to build intelligence from an existing system, which has many ADC use around the car, to a much simpler system. One of the things that Tesla has benefited from his being able to build top software on -- on top of a system that was designed on top of a battery and was designed to be controlled by software. So the EV trend itself is also a software development suffered a defined car trend. 48:13 Given that we have a software definable sensor, what we've been finding in discussions is that we can accelerate that new set of features by being able to apply hardware today. But over the period a car is owned, to actually add new features using the same hardware using that diagram I showed you where we can change the way the hardware works. So I think the – the EV cycle is actually very, very correlated with how many new features you're going to actually see in your car. I remember at Autodesk, we were a software company in the CAD business in the old days back in the early 90s, we used to do an architectural release which would take us 18 months and then we do a feature release, right, which would take us 18 months. So we change the architecture, and we'd be able to add new features on top of it. What you're seeing today, 20, 30 years later, is the ability to actually do an architectural release that will enable multiple feature releases into the smart assets. That's why we actually use the term smart assets and industrial and software definable vehicle. At the end of the day, the analogy could be made, when you took a look at your flip phone, you'd have to buy a new flip phone, before he got new features. It was beautiful, I loved it. But when you took a look at your iPhone, in between iPhone hardware upgrades, you can bring down apps anytime you want, and use your phone differently. I think we're already at we've already entered that cycle, I think it's going to be a very exciting cycle for consumers.

49:48 Yes, as a follow up, you're excused experience in writing software for military applications that give you a little bit of a leg up on the competition, because certainly, the software is pretty critical to the safe operation of the vehicle. So do you guys go through extra steps? Is there a verification process for certification?

50:08 I would say that, you know, the word software is -- is means many different things to many different people, which is why we've kind of took that simple diagram, I would say that maybe, as my dad would say, where you have been always informs where you will go and how you define the problem to find the solution. And so the way we define the problem, having worked on complex, fast moving systems, was that you had to actually put the complexity in the software, because you never knew what the use case you were going to go after was. And as you saw in the Lidar industry, the Aerospace, Telecom, and the GIS industries are actually large spatial networks of information. It's really about aggregating, integrating, and transferring information. And so I think the advantage that we may have, and by the way, there'll be a lot of different models. And I'm not saying ours is the only one, is we looked at making the sensor, a software platform, i.e. and biomimicry, you call that edge processing, you process 80% of your vision in your visual cortex, not in your executive function, right? So we focused on building that software, and then feeding information from that software into say, perception software or application software. So when you talk to someone about software, you have to decide, which piece are you talking about? Signal Processing embedded software, a software platform that's embedded like ours? Are you talking about perception? Or are you talking about application, all of the pieces are important, our philosophy, and I think what we did gain from our military experience was that if you can collect information, more intelligently, you will actually make the decisions happen faster, and with more fidelity. And I think that's the that's the difference. I will end with saying that there will be different types of cameras, radar, and Lidar is out there. Our focus is on high performance, high value, Lidar that can both collect spatial data, but also can integrate and target with orthogonal data from other sensors. So we really have a point of view that we are in the information business and that two years from now, you're going to find that the winners in this marketplace, build a platform that collects information intelligently and that's where the value is going to end up.

52:40 Great. Thanks, Blair.

52:44 Thanks. So Bob, Bob, was very unhappy with that question, because it gave me a chance to be philosophical, but that thank you for everyone for jumping on today and investing your time. I know that everyone is very busy. And there's also a lot of companies and in our peer group, so thank you for making the investment.

53:00 Yes. Thanks, everybody. Operator, that concludes the call. Thanks, everybody for joining us.

53:08 The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.