Good day, and thank you for standing by. Welcome to the AEye Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, [ Jeremy Apple ]. Please go ahead.

Good afternoon, and thank you for joining AEye's Second Quarter 2025 Earnings Call. With me today are Matt Fisch, Chief Executive Officer and Chairman; and Conor Tierney, Chief Financial and Business Officer. Earlier today, AEye announced its financial results for the second quarter. A copy of this press release can be found on the Investor Relations section of the company's website. 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, operating results or financial performance, and such 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 the reports AEye files from time to time with the Securities and Exchange Commission, including in the most recent periodic report. The statements to be made are as of today only, and AEye does not intend to update any forward-looking statements regardless of any new information, future developments or otherwise, except as may be required by law. In addition, we will be discussing non-GAAP financial measures on this call, which we believe are relevant in assessing the financial performance of the business. These measures are presented as supplemental information only and should not be considered a substitute for financial information presented in accordance with GAAP. You can find reconciliations of these metrics to the most directly comparable GAAP measures within the press release. Now I'll pass the call over to Matt.

Thanks, Jeremy, and thank you all for joining our second quarter 2025 earnings call. It's an exciting time for AEye. Over the past few weeks, we've delivered a wave of new wins that signal an inflection point for our company. First, we were certified as an NVIDIA DRIVE AGX partner and selected for the GM-backed WinTOR project, both of which could open the door to major new commercial channels. Second, a top global transportation OEM chose Apollo for a critical autonomous safety program, providing us with a potential $30 million opportunity, which we expect to begin contributing to revenue this year. And third, we launched OPTIS, our next-generation platform that has now been deployed to multiple customers. OPTIS is a clear proof point of our ability to scale efficiently into a range of high-value markets with its open architecture, AI-driven analytics and adaptability across use cases. Our dedicated focus on business development is delivering results. Our sales funnel has grown exponentially, leading to 30 new potentially high-value customer engagements. We signed 6 revenue-generating contracts and have a clear line of sight into additional orders totaling thousands of units. Further, our supply chain is ready today and our manufacturing line with LITEON is primed to scale production to meet growing customer demand. Now I'd like to take a moment to share how thrilled we are that Apollo is now officially certified as an NVIDIA DRIVE AGX partner. NVIDIA's DRIVE AGX is positioned to become one of the most widely adopted compute platforms in the automotive industry and certification is viewed by OEMs as a critical validation of Apollo's performance as well as its readiness for integration into OEM vehicle programs. This milestone takes our partnership with NVIDIA to the next level, potentially unlocking new OEM engagements and creating a powerful channel…

Thanks, Matt. I'll start by addressing the commercial momentum we've achieved this quarter. As Matt mentioned, this quarter marks a clear inflection point in our shift towards sustained revenue generation. Apollo's unmatched range, resolution and adaptability are driving increased customer engagements and contract wins across a diverse set of global markets. We believe that Apollo is the only long-range solution capable of behind the windshield deployment, further extending our competitive edge. While our roots are in automotive, Apollo's versatility is rapidly unlocking opportunities in new verticals. We're seeing strong traction in defense, smart infrastructure, rail, trucking, aviation and security, each presenting challenges that our technology is uniquely positioned to solve. This flexibility is a key differentiator, enabling us to quickly scale across industries and geographies. Advancing our partnership with NVIDIA is another major milestone. By integrating with their DRIVE AGX ecosystem, we're opening the door to OEM collaborations at scale, accelerating our path to commercialization and expanding our reach into embedded platforms. Finally, with the launch of OPTIS, we're moving beyond sensing to deliver actionable intelligence to our customers. OPTIS opens our platform to software partners, allowing them to build tailored AI solutions that extend our technology into new use cases, enhance our ecosystem and grow our market opportunity. I'm pleased to report that our pipeline is stronger than ever with over 100 potential customers actively engaged and 30 of those already in advanced negotiations, as Matt mentioned. This momentum is translating into real results. We tripled our contract wins this quarter, growing from 2 to 6 and have visibility to nonautomotive orders totaling thousands of units, driven by strong customer engagement and POCs already underway. The strength of our pipeline, combined with a proven manufacturing partnership gives us confidence in our ability to quickly scale with rising demand. While…

Thanks, Conor. In closing, we're incredibly proud of the breakthroughs the AI team has made so far in 2025. Our technology is proving itself in the field, and our entire team is excited and aligned around our path forward. We look forward to building on our momentum and sharing updates on our continued progress in the quarters ahead. We will now open the call for questions.

[Operator Instructions] Our first question is going to come from the line of Poe Fratt with Alliance Global Partners.

Really solid progress. Would you tell me more about the NVIDIA integration?

Sure. P, thanks for joining us this quarter. I'm happy. This is Matt. I'll take that one. Just a couple of key points here. First of all, if you go to NVIDIA's website today, their developer website for NVIDIA DRIVE, you'll see that AEye Apollo LiDAR is at the top of the list when it comes to performance, that's detection range and resolution. And one of the things that this really does -- look, NVIDIA has been great at defining objective standards and benchmarks for various things out there in the world of autonomous driving, and they're certainly doing that for LiDAR. We're happy to see we've risen to the top of that list in terms of capability. And it makes the conversation with OEMs, for example, very simple because now we have that objective stamp of approval that, wow, this device really performs and it's mature and it's ready for integration. I think the second piece that's really important about this partnership is, look, we have a special status here now with NVIDIA, and it's not just about being included in the ecosystem that has that credibility. But now we have support from their sales and marketing channels. This accelerates our conversation and expands our conversation to a greater pool of OEMs. It paves the path internally inside NVIDIA for direct integration of our sensor into their Hyperion platform. That's the brain behind the autonomous driving and really gets us connected through proactive resource assignment from NVIDIA. By the way, we also mentioned on the call about OPTIS because we are integrated into that NVIDIA ecosystem, we're also getting that same world-class support from marketing and sales channels from NVIDIA outside of the automotive space.

That's great. Because you sort of answered the second question I had is, could you give us a little more details on OPTIS? And how does it fit into your broader strategy? And if there's any color you could add there, that would be helpful, Matt.

Sure. I'm happy to do that. Look, as we hinted at during the last call, automotive is doing its thing and taking a bit of time, at least in the Western part of the world. And we felt that due to the strong demand that we had for Apollo and its applicability outside of the automotive space that we're driving more aggressively outside of automotive today due to the fact that Apollo is a great fit, okay? So think about this as automotive is ramping up more slowly, we're filling in the short term with a pretty aggressive ramp of nonautomotive business. Now in order to hunt appropriately in the nonautomotive space, you need to provide what I'm going to call a complete solution. It's not just the sensor, but the sensor and the thinking and the brain parts, okay? And OPTIS is about the combination of those 2 things. And it brings those 2 things together in such a way that look, we're doing something that we believe is very unique here, which is opening OPTIS and opening the platform to a host of third-party developers. The integration with NVIDIA is helping us to do that because people know the platform, they feel comfortable, developers feel comfortable integrating their software on top of NVIDIA. So this is driving tremendous scale, right? So we have this complete solution that's necessary to hunt, which is necessary to ramp our revenue and our business more aggressively in the short term. And then we're taking a very unique approach to this where we have basically a global network of developers that are allowing us to deploy OPTIS in different parts of the world at a very, very favorable investment cost for us. So we are in the market with OPTIS today. So this is just not -- we're not talking about a future product, but a product that's here today and is already deployed in multiple parts of the world because of this very fast scaling capability that's afforded by our global networks of developers.

If I may, Matt, if I could ask, could you give us a little more color on your customer pipeline, both on the OEM side and then also on the nonautomotive. You talked about 30 -- over 100 contact points or potential contact points, 30 advanced negotiations. And could you just give us a little more detail on the customer pipeline beyond those sort of 2 metrics?

I'm going to turn that one over to Conor.

Poe, yes, I'll address this one. So you sort of just alluded to it. We're feeling very confident about the pipeline. And you just got to bear in mind that we really only had a product to sell since February. So the traction that we've made there is amazing. We've got over 100- plus customers that we're engaged with. 30 of those are in advanced negotiation phase. And then, of course, we've tripled the number of wins from 2 to 6. And I think what we're seeing is really the versatility of Apollo as a sensor, right? So a lot of these opportunities are in a diverse set of industries, right? We talked about it on the script, right? This is everything from defense to aviation to rail, right? There's lots of opportunities that we're pursuing and global opportunities, too. This isn't just restricted to the North American market. These are opportunities in Asia and Europe. And I think what really gives us a distinct advantage is the performance of the sensor itself. It's a high-performance system, right? And part of the reason for that is it's 1550 nanometer, so that gives you more power. With more power, you got more range, you got more resolution. And then I think the other thing to take into consideration is the software definability, reconfigurability of the sensor, right? So we can optimize the sensor for the end customer's use case. If they want to optimize for range, we can optimize for range. If they want to optimize for resolution, we can optimize for resolution. And that's why we talked about it earlier, that initial phase where we're working with the customer and we're exploring that initial use case is critical. And that's where we spend some time, and it's a very hands-on phase. And so we're working through those deployments right now. I think the other thing that gives us an advantage there is just the design of the system. We have a bistatic system with a separate transmit receiver, and that really allows us to see far, but also to see with a high degree of precision. So you take all those things, you take the performance and then you match that with a very competitive price point. we have a distinct advantage in the marketplace, and we're seeing that. Customers are energized, engaged to work with us. And now we're bringing OPTIS to the market. So we're expanding our portfolio, right? We're using NVIDIA to power the system and also opening it up to developers to enhance the functionality so we can offer more to the end customers. So all in all, very excited about the potential here, and this is just the beginning.

I just wanted to add one other point to that. One of the things you see happening in the market that is in particular on the LiDAR side is a lot of what I'll call variants, hardware variants of products that are coming out in order to optimize for these particular markets. We don't need to do that. We drop in a software upgrade, and we have a configuration of Apollo that's optimized for a particular use case. So in that case, we're a lot faster and our capital expenditure is a lot lower when you're just talking about a software upgrade versus having to build and release and announce a new hardware version of your product.

Our next question is going to come from the line of Scott Buck with H.C. Wainwright & Co.

Matt, I'm curious, the $30 million opportunity with the transportation OEM, are there additional deliverables? Or is there anything the customer is waiting on you guys for between now and the end of the year? Or are you on their time line at this point?

Scott, I think the simple answer is we're on the time line, right? This is with many larger deployments. It takes time to take the sensor to integrate it and ramp that deployment across -- repeatedly across a growing fleet of vehicles. So it's happening right now. We're on the customer time line. In fact, we're on the ground today doing that integration and deployment. We'll be ready to talk about a bit more details on that particular OEM contract here in the coming weeks. But right now, it's live. We have people on the ground and it's ramping today.

Perfect. That's helpful. And then on the tripling of the new business wins from 2 to 6, can you give any kind of incremental color on those additional 4, maybe size them versus the initial 2 or give us a little more info on what industry they're in? Or any kind of additional color would be helpful, I suppose.

You got that one, Conor.

Yes. So I'll start with the industry first. We're seeing a lot of traction in the smart infrastructure space. And I think that's because of the performance of the sensor itself, right? We've got a wide field of view, but also we can see long range as well. So that definitely seems to be an area where we're playing quite well in. We are seeing opportunities beyond that in the security side, also in the defense sector as well. It's difficult to talk about specific volumes at this point just because we have confidentiality agreements in place with those customers. But what I do say -- what I can say is we see line of sight to thousands of orders. And obviously, as I mentioned, there's a ramping phase there. Right now, we're focused on building the solution for those customers. And then over time, we start deploying that solution out on the field. And then we expect to see things ramp up probably over the next 6 to 12 months.

Great. That's exciting. One more. Sales and marketing expense stepped up this quarter. Could you give us a little information on maybe where those incremental dollars are being spent? And how we should think about sales and marketing expenses here moving forward?

Look, obviously, we live and breathe this light capital business model, and we talked about it quite a lot. So a lot of that spend isn't incremental spend. It's just reallocation, reallocating dollars from G&A and from R&D. And so this is like [ FTE ] tie on some of these deployments, some of my time on the biz dev side. So really, it's just a reallocation, I would say, of expenses from the G&A bucket and R&D buckets. There is a little bit of incremental spend there, but not a whole lot.

Our next question is going to come from the line of Glenn Mattson with Ladenburg Thalmann & Co.

Congrats on all the progress, lately. So just building on -- a lot of my questions have been asked already, but building on some of the stuff that was just talked about, pipeline, that 100 actively engaged customer set, that's growing nicely. Can you have a sense that you've hit an inflection point in terms of momentum where you're going to start closing multiple deals a quarter kind of like you did this quarter? Just maybe a little bit more about the maturity of that pipeline of those 100 customers. And is there any of them that are like outsized contracts that could be similar to the $30 million one you announced last quarter?

Do you want me to take that one, Matt?

Sounds great, Conor, why don't you get us started.

I'll let you chime in if you want to add some color, too. So what I would say, we have 100, 30 of those are in the advanced negotiation stage. So I think there's definitely an opportunity to move those 30 into wins. And at this point, we're in advanced technical conversations with these customers. We're on-site doing demos. And like I said earlier, it's basically a vast array of industries that we're targeting, right? It's not just one industry. That said, we're seeing a lot of pull on the smart infrastructure side, and that definitely seems to be an easier lift for us. But that said, there's opportunities on the aviation side that we're pursuing, defense, security, rail, you name it. And like I said earlier, that goes back to the versatility of the sensor. What I would say is, yes, there are a few opportunities that are similar to that $30 million opportunity that we talked about. But definitely is the opportunity to scale some of these contracts into high-volume awards. What I'm pleased about is, I'll give you one example. We've just started working with the customer, and we worked on a very specific use case, and we're now working on that use case building it out and pretty soon, we'll be deploying it across multiple sites. But as we've been doing that, they've brought an entirely new use case to us. So we're not even done with the initial deployment, and they're also bringing us other work as well. So I think that's an indication that they're pleased with the results. They're pleased with the product that we're obviously delivering. So it's good to see that kind of traction with individual customers.

I'd just add a couple of things to that, just to maybe give some insight to what's happening inside the company right now. So Conor and I run this deal desk where when one of these discussions, the 30, for example, that we talked about early, gets to the point where the customer says, okay, give me a proposal. These are filling up my calendar and Conor's calendar, multiple per week. And if you look at by the numbers and the conversion rate we've seen with the first 6, we're definitely going to see more coming in the short term.

Great. That's great color. I should know this probably everyone else does but me, but the $30 million opportunity, is that in aggregate? Or is that an annual potential once it gets up and running?

Well, I'll take this one. No problem. Probably about -- if you add up those volumes, again, starting this year, we're seeing -- we expect to see revenue come in over the next 2 to 3 years. That's the duration of the opportunity. So it's not annual. It's the subtle size, but we expect that to play out over the next 2 to 3 years.

And our next question is going to come from the line of Casey Ryan with WestPark Capital.

You guys are using the term physical AI as well. I think we're seeing that across the public company sector. Is that sort of euphemistic or just tell me for framing purposes, does physical AI just mean nonautomotive? Or how do you think about it? Because I think there's a lot of spaces to drill down into that. But in terms of understanding what you're signaling to us and painting as opportunities, it would be helpful to just kind of figure out what you mean by painting things with this physical AI kind of moniker that like a lot of people are using, it seems like.

Right. That's a really good question, and thanks again for joining us this quarter, Casey. I think, look, physical AI loosely put is this artificial intelligence and sensing interacting with the real world, okay? So clearly, autonomous driving is physical in that sense. But we refer to that as autonomous driving automotive, for example. So I think for the purposes of our conversation here and interacting with the world, if you will, we're using it most often to refer to interaction outside the scope of autonomous driving.

Okay. Great. Well, that's actually really helpful. So I do want to join -- I am drawn to the sort of OPTIS product and the opportunity there. And I'm curious about 2 things. It feels like there's a lot of incoming as well as maybe some outreach on your part around sort of physical AI opportunities. Is NVIDIA specifically helping you with that? Or has something happened where maybe the market has shifted, consumers in defense and security and all these things have suddenly realized that they need LiDAR at a much bigger scale. What has sort of happened to sort of create what feels like a lot more activity around the whole space and particularly with you guys, but broadly, it feels like the activity has picked up substantially in 2025.

Yes, absolutely. There's been a very strong inflection point. To answer your first question, NVIDIA is definitely very active in the physical AI space as we just described it. Their Jetson Orin project product, for example, NVIDIA has the same kind of marketing channels, business development channels and resources that are dedicated to their physical AI products that includes customer outreach as well as deployment support and promotion and sales. This is a very significant investment that we're seeing on NVIDIA's part and very proactive with us in that space. At the same time, we are getting inbound requests and outreach simply from the headline that Apollo is capable of doing high- resolution detection at 1 kilometer that headline has really brought us also a lot of business independently and in fact, was instrumental in the large OEM win that we talked about earlier, the high-value one, that was a matter of connection because nobody else can do the kind of distance that we can. So we're definitely seeing some independent outreach and inbound on our own because -- simply because Apollo's capabilities are unmatched out there.

Right. Okay. Well, I mean, well, that's terrific. And so kind of my next -- my other question around sort of physical AI and these other new opportunities outside automotive. Do you -- is it a goal of the company? Do you think you need like with defense, maybe some kind of defense contractor, right, which is about access and opportunity set to sort of be allowed to bid on things or broader corporate sort of integrators. Does the company want to partner with those people? Are you already partnering with them and not announcing them? Or how do you think about going to market, I guess, with people who have access to these purchasers ultimately?

Yes. If I'm understanding the question correctly, let's just take defense as an example because of the way that the Apollo LiDAR is scanning, we have a unique advantage there, okay? So LiDARs that have spinning mirrors is kind of like a lighthouse. It's broadcasting a beam of light in a circular pattern out there in the universe. And defense is really thinking about that because that's a target in defense language. So Apollo does have some unique abilities because of our ability to randomize scanning, it becomes much less visible than, say, a spinning mirror. So look, if we can take Apollo and through our software-defined model, upgrade it or configure it for that type of application, we're all over it. And that's what I'd say where we're drawing the line right now to maintain our capital-light focus, which allows us to go fast and work on a lot of things at once. We kind of set the boundary of like, okay, can we address this with a software upgrade. And if the answer is yes, chances are, we're going to go for it. And we're incredibly busy just doing that alone. So the answer is yes, we're over.

Just one thing to add, Casey, I think the point you were getting about -- you talked about integrators. Like what I would say is our go-to-market strategy is adaptable. Sometimes when you're working with DoDs, they want you to go through an integrator, right, because they have those relationships with a set of integrators that they've worked with for 30 or 40 years. And so we are working with integrators. We have the ability to do that. But we're also chatting with the DoDs directly. And we can do that because of OPTIS, right, because we have a solution that's fully bundled, right, that has all the attributes and components that you need to go to market.

Yes. Well, that's helpful. So both answers from both of you are helpful. And so Conor, on defense, is it similar? I mean, do you guys feel the need to get with an existing defense contractor? Mostly, that's about access, not about functionality, right? It's just about being pulled into opportunities, I guess?

Yes. I mean, look, obviously, you have the big defense primes. So just landing one of those deals is a tremendous opportunity, right? You don't have to probably worry about volumes ever again. But also, there's also the smaller defense players out there as well that are more receptive to new technologies and emerging technologies. So there's 2 angles there. And then there's obviously working directly with the DoDs themselves, and we've done that. We have a number of SBIRs that are in the works with the DoD that we're pushing through. So yes, we have a multipronged approach there.

And our next question is going to be a follow-up question from the line of Poe Fratt with Alliance Global Partners.

Just 2 quick ones more on the financial side. Conor, you talked about $126 million is sort of your overall liquidity, including cash, your ATM and your ELOC. Can you break that down between those 3 different buckets right now? Or should we wait until the Q is out?

I would wait for the Q on that one, Poe. What I would say is I can talk to cash specifically because we discussed that in the script. So we finished the quarter with about $19.2 million in cash. And I would say, thanks to the growth capital that we've raised since then, we've been able to more than triple that number. But I think the most important thing about that capital that we raised is that, that's really going to help us convert some of those customer opportunities into wins. And like I talked about earlier, right, we need capital to deploy the sensors across multiple sites, and this is going to help us accelerate that and do that. And so that's why I think this is perfect timing for us. We're at an inflection point here. The business is about to scale. So this is going to help us scale even faster. Now that said, this doesn't mean we're going to change anything in terms of our capital-light strategy. We're still going to do things in a very fiscally prudent and methodical way. So that's not going to change. But we're pleased to be able to take advantage of the market.

Okay. And then maybe on the contract pipeline, backtrack on that. You talked about -- you got the $30 million OEM contract. I thought I heard you said you also have in the contract pipeline a top 5 OEM that you're in advanced discussions with. Is that accurate? Or did I hear that accurately?

Yes, I'll take that one. I did mention as part of the script that because of our work with NVIDIA and the fact that we're now certified with them, this has really enabled us to take a big step forward with a top 5 global OEM. Absolutely. And that's about all I can say.

Just to clarify, Matt, though, that's exclusive of the $30 million contract that was signed at the end of the quarter?

Absolutely. Remember, the context for that one also was that we're talking about passenger vehicle OEM. So in addition to the $30 million. Yes.

And I'm showing no further questions at this time. And I would like to hand the conference back over to Matt Fisch for closing remarks.

Thank you all for your time today. We will be attending several investor and industry events during the quarter, including the JPMorgan Automotive Conference in New York, the KPMG Automotive Innovation Summit in Santa Clara and the ITS World Congress in Atlanta. We look forward to seeing you there, and we appreciate your continued support and confidence in our vision. Have a great day.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.