Good day, and thank you for standing by. Welcome to the AEye Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Leigh Bannister. Please go ahead.

Good afternoon, and thank you for joining AEye's fourth quarter 2023 earnings call. With me today are Matt Fisch, Chief Executive Officer; and Conor Tierney, Chief Financial Officer. Earlier today, we announced our financial results for the fourth quarter 2023. A copy of our press release can be found on our website at investors.aeye.ai. Before we begin, I would like to remind participants that today's discussion may include forward-looking statements as defined in the securities laws and regulations of the United States with reference to future events, future operating results or financial performance. 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. Our actual results may differ materially from those contemplated by these 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 most recent periodic report. All information discussed today is as of March 26, 2024, 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 be references to certain non-GAAP financial measures. These non-GAAP measures are presented for supplemental information purposes only and should not be considered as a substitute for financial information presented in accordance with GAAP. A reconciliation of the 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 measures in our earnings release. Now let me pass the call over to Matt.

Thanks, Leigh, and thank you all for joining us for the AEye fourth quarter and 2023 year-end conference call. On today's call, I will provide a high-level review of 2023 and also speak to the trends we are seeing in the LiDAR marketplace. Before delving into our review of 2023, I'm pleased to share that we have recently signed a letter of intent with a global Tier 1 automotive ADAS sensor supplier to begin a collaboration focused on OEM ADAS opportunities. These opportunities have already begun to materialize. The LOI aligns with the heightened OEM engagement we are observing as evidenced by a recent influx of RFI and RFQ activity. Additionally, we are excited to announce the inaugural member of our 4Sight Flex family, which we call Apollo. You may recall that we announced the 4Sight Flex automotive reference design in November of last year. With Apollo, we present OEMs with a compact ultra-long-range LiDAR sensor that also facilitates diverse mounting options, including unparalleled performance when mounted behind the windshield. Apollo demonstrates the power of 1550 nanometer LiDAR technology and is capable of a 50% range improvement and a 10x resolution increase compared to our first-generation product. Our plan is to unveil the first samples of Apollo to automotive OEMs in Q2. These achievements underscore the scalability of our software-defined architecture. Overall, 2023 was a year of product maturation and strategic realignment for AEye. Emerging from the Consumer Electronics Show and the interest we saw in our technology, it is evident that LiDAR remains a cornerstone for enhancing safety and autonomy in the future of mobility. Despite its undeniable potential, broader market conditions have precipitated delays for LiDAR adoption within OEM vehicle programs. However, we remain optimistic and are encouraged by the increased interest in ongoing discussions we are having…

Thanks, Matt. Welcome, everyone. I would like to reiterate that despite the recent Continental announcement, AEye remains firmly committed to its capital-light partnership model with established Tier 1s. We believe that the recipe for success in this industry is to leverage the established manufacturing infrastructure of Tier 1 partners to scale production and keep costs low, which allows us to focus on designing great technology. The road safety crisis continues to worsen worldwide. In the U.S. alone, pedestrian fatalities increased by nearly 80% from 2010 to 2021 to reach a 40-year high according to the Governors Highway Safety Association. The current technology does not appear to be working, which is why LiDAR needs to be deployed quickly and at scale. Established Tier 1s have the capabilities to do this and have done this in the past with radar, cameras and other ADAS components. In turn, AEye's technology is differentiated in terms of size, reliability, ultra-long range and software-defined performance at a highly competitive price point. I'll repeat again, we believe commercializing LiDAR at scale requires an established Tier 1 plus AEye's technology. In the current tough macro environment with high cost of capital, AEye's capital-light model positions us to weather the storm. Our cash burn is expected to be up to 10x lower than our peers who will require tremendous amounts of capital to industrialize their products and cover product warranty obligations. Despite all the bluster out there, to date, we are aware of no high-volume LiDAR program awards that have ramped to mass production. The industry is still arguably in the research and development phase. The next one to two years will be a challenging time for the industry given the scarcity of capital and resources needed to bridge to commercialization. This is where AEye has the advantage. Before…

Since joining AEye, I continue to be impressed with the technical depths and relentless commitment of our employees and remain confident that our technology and products provide meaningful differentiation for the automotive industry. Together, we were able to evolve AEye from a research-focused company to a product-driven organization. While the road ahead will present its share of challenges, we approach the future with confidence and a commitment to driving our product entry into the automotive industry. We look forward to continuing to update you as we progress with our go-to-market efforts. I would like to thank the whole AEye team and our Board of Directors for their continued support. With that, we'll open up the call for questions. Operator?

[Operator Instructions] Our first question will be coming from John Roy of Water Tower Research. Your line is open.

So Matt, I was curious, you announced 4Sight Flex back in November. It's been four months. Can you walk us through how you guys were able to turn that around into a product in just four months?

John, welcome back. Yes, absolutely. I think really, there's a couple of key points here. First and foremost, it's the power of our software-defined LiDAR architecture. When you're mostly focused on making software updates and changes, things go very quickly. And of course, we can't do that without an incredibly strong technical engineering products and operations teams. These guys have been outstanding and driving hard and committed since back then in November. So, what we have at the end of the day is, what we believe to be the most compact design now in this ultra-long range performance category, which allows us to do things like seamlessly integrate into -- behind the windshield type designs, get the bump out of the roof, get a nice quiet and compact solution inside the cabin and the performance delivered by our 1550 technology, in this case, is incredible.

Interesting. So, on a second element, I mean, obviously, the Tier 1 announcement is key for all of us here. Can you give us any more color around the announcement? Are they going to use Apollo? I mean any kind of information would be helpful.

Absolutely. We'll hit the last part first. I think that our partners committed to entire product range. And the key thing here is what we've been doing is looking outside what I'll call this traditional monolithic very large Tier 1 space. And instead turning our attention to more focused Tier 1 partners. And in this case, we really found great synergy with a partner that's focused on delivering ADAS solutions, okay? And the other part of their charter is to leverage heavily into innovation and new technology to grow their business is actually, we're seeing quite a few guys out there like that now that are hungry and moving ahead. We're already working with this particular partner on inbound RFI and RFQs. So, we're already jumped in and working together on that, they're really to hope to have a bit more information, so we expect to be sharing more information and details on that soon. The other thing I wanted to point out is that we do have multiple engagements in the space is this, I'll call it, technology-driven, more focused in growing their business through technology and innovation. We have multiple of these engagements ongoing right now and hope to talk more about those also in the not-too-distant future.

[Operator Instructions] And our next question will be coming from Kevin Garrigan of WestPark Capital. Your line is open.

Congrats on the LOI. A two-part question. Have you structured the LOI with the Tier 1 similar to Continental where you're going to get royalties and you'll receive collateral, if they decide to continue the program? And then for the second part, can you just explain a little bit the time line? So, you now have that commitment with the Tier 1 on what tests need to be done at the Tier 1 facility? How long does that take kind of things like that?

All right. So, a couple of things here on that, just maybe we'll kind of take it in reverse order. But in sort of testing and integration, those type of tasks, look, we actually did a lot through our work with Continental. And they've been -- even though the relationship has ended effectively, they've really been great at transitioning collateral and information over. So, this thing -- this aspect of things takes a lot of the start from ground zero type work over again. We're already jump in working very deeply together. We expect testing to happen very quickly. And again, we're using the work that we did with Continental as a baseline. So again, we expect that to happen very quickly here. I'm sorry, what was the first part of the question again?

It was just whether you -- first of all, was just whether you structured the LOI just similar to Continental where you're going to get royalties and receive collateral, which you pretty much answered.

Yes. Look, let me hit that real quick. Yes, we expect to see a similar type of structure, I'll call it, revenue sharing-based structure. It fits right into our capital-light model. I wouldn't say we're heading for it to be exactly the same as Conti, but it will be similar.

Okay. Perfect. Perfect. And then just as a follow-up, I'd love to get your thoughts on how you kind of see the LIDAR market playing out in 2024. I mean I'm sure you've heard a few of your competitors think this is kind of the year of series production awards, which I know we heard the same thing last year and things keep getting pushed out. So just kind of wondering what your thoughts are on the LIDAR market, series production agreements for 2024, whether you kind of think this might be the year where a lot get awarded?

Yes. Look, I want to be careful about the crystal ball here as we all know the market has been tricky. But the one thing that I can share with certainty is the activity that we're seeing in Q1. It was coming at Office EES and into the new year, given all the delays that we had from last year were going okay, is it going to be real quiet? Is it going to be noisy? And there's been quite a bit of activity. And I think that's one thing I can speak to definitively, I'm relieved to see through this activity that LiDAR is still very important and relevant when it comes to ADAS safety, first and foremost, and then also autonomous driving, which we know has been sort of part of the underpinnings of some of the delays that we've seen. I'm not going to say cautiously optimistic at this point based on the larger-than-expected RFI and RFQ activity we've already seen in Q1.

Kevin, just to add to that. I think the other thing to mention is just the progress we've made in general on the execution side. If you think about everything that we've delivered, and we alluded to this on the earnings call, if you think about the progress we've made on Apollo, the fact that we now have an LOI with a Tier 1, and we've all done that at a very cost-competitive cost structure. And I think we deserve some credit for that, the fact that we've been able to go out and execute, and we've done that while we're keeping our costs low.

Yes, absolutely. That makes a ton of sense. Yes. Congrats again.

Thank you. At this time, there are no more questions in the queue. Thank you all for joining the call. This does conclude today's conference call. You all have a great evening.