AEye, Inc. Class A Common Stock 2026 Q2 Earnings Call

Thank you for joining AEye's second quarter 2026 earnings call. I'm Keaton Olsen, investor relations manager for AEye, and with me today are Matt Fisch, Chief Executive Officer, and Conor Tierney, Chief Financial Officer. Earlier today, AEye announced its financial results for the second quarter ended June 30th, 2026. A copy of the press release is available in the investor relations section of the company's website. Before we begin, 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 performance and are based on our current expectations and assumptions. Any forward-looking statements are subject to inherent risks, uncertainties and changes in circumstances. Our actual results may differ materially from those contemplated by 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 our most recent periodic report. The statements to be made are as of today only. 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. 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. With that, I'll hand the call over to Matt.

Thank you, Keaton. Thank you all for joining us. I'm excited to report that our overall momentum continued in the second quarter, including the ongoing development of our sales pipeline, having grown to our highest level of engagement yet. Most importantly, I'm pleased to announce that we have been selected as the preferred lidar vendor for a groundbreaking sports analytics provider. As a company, we're hitting our stride. We extended AEye's reach into an entirely new market category. Q2 revenue grew approximately 9 times year-over-year and roughly 100% quarter-over-quarter, marking our fourth consecutive quarter of growth. Further evidence of the accelerating commercial interest in our technology. Beyond revenue, our sales funnel continues to be the best barometer of our progress.

Proof of concept programs from revenue-generating customers grew to 25 from 21 since our last earnings call, and both engagements and quote activity increased approximately 25% and 40% quarter-over-quarter, respectively. Commercial momentum is accelerating across the board. New accounts continue to enter and move through the funnel, and existing customers are scaling up the scope of their engagement. AEye sits at the center of the Physical AI opportunity, a market Barclays sizes at up to $1 trillion by 2035. Lidar is what gives machines sight, and our software-defined architecture positions Apollo and STRATOS as core perception platforms across automotive, trucking, aerospace and defense, rail, infrastructure, ITS, and now sports analytics. Defense continues to be our most active vertical, with engagements doubling quarter-over-quarter.

Our lead defense customer placed its third consecutive paid order this quarter. Repeat business is emerging as Apollo is evaluated across UAV, UGV, and Counter-UAS applications. Additionally, our partnership with SynTech, a leading international defense systems company, continues to actively promote and ship Apollo to its customers, expanding our addressable pipeline into global markets, where Apollo's configurability and long-range performance make it purpose-built for mission-critical and unmanned systems. Increasingly, our customers are finding us rather than the reverse, and often for novel applications that continue to expand our TAM. What makes this possible is our software-defined architecture. Because Apollo's behavior is defined in software rather than fixed in hardware, we can quickly reconfigure it to meet a new application without redesigning the sensor. Customers come to us with a problem. We can adapt the same platform to solve it. Sports analytics this quarter is a great example.

A new use case addressed with our same underlying product. For our customers, that flexibility is what turns lidar-based perception into a practical tool for improving safety, lowering total cost of ownership, and opening new revenue streams. For AEye, it means each new application expands our addressable market without the need to make physical changes to our hardware. Alive3D recently selected Apollo as its lidar solution for next generation sports analytics. Apollo's software-defined technology will enable Alive3D to deliver 3D spatial sports visualization, precise measurement, and advanced data analytics. We are able to attune Apollo to meet the needs of our customers, in this case, elite sports. This is another clear example of where our software-defined architecture allows us to tailor our solution to deliver for our customers.

Apollo was recently validated on NVIDIA DRIVE AGX Thor, NVIDIA's next generation automotive and Physical AI compute platform, deepening a relationship that spans our participation in the NVIDIA Halos AI Systems Inspection Lab and our existing validation on NVIDIA DRIVE AGX Orin. With sensor-to-compute interoperability confirmed against NVIDIA DriveOS, placing AI as a sensor partner in the NVIDIA Drive Hyperion ecosystem, OEMs and tier one suppliers building on the NVIDIA DRIVE platform can source Apollo as a pre-qualified sensor, reducing integration risk and shortening the path from system design to deployment. Automotive and trucking OEMs continue to treat long-range lidar as essential, not optional, for Highway ADAS and autonomy. We remain active in multiple OEM level 3 and level 4 evaluation projects. In parallel, we signed an MOU to explore combining Apollo's long-range 3D object detection with MoveAWheeL's acoustic road surface friction sensing.

This partnership seeks to provide real-time predictive friction coefficients of road surfaces to improve ADAS and autonomous driving in adverse weather. Evaluations are underway across select geographies, and we are already having discussions with automotive OEMs about potential applications. In other markets, our OPTIS platform continues to move into deployment. Our live smart intersection in the Bay Area remains operational, as do our multiple OPTIS installations in and around Detroit. In APAC, Apollo received the Smart Sensing Technology Innovation Award at the EAC 2026 Zhiyao Awards in Shanghai, validating its role in intelligent sensing for ADAS, autonomous driving, and Physical AI applications. Additionally, we are now shipping units to an ITS customer we met during our Q1 roadshow in Korea. Our China partnership with ATI remains actively quoting today. Our manufacturing footprint and capital light model underpin all of this.

As a U.S. company with a globally diversified supply chain, we're positioned to navigate geopolitical risk and shifting trade policy better than peers. Through LITEON, we have a dedicated production line capable of up to 60,000 Apollo units annually, derived from off-the-shelf telecom components for mass manufacturability at competitive cost. We have begun ramping our output to match our forecast of increased customer demand in the second half of the year. Finally, for those customers that require end-to-end perception solutions, our OPTIS system is underpinned by a partner-led model spanning NVIDIA, Flasheye, Blue-Band, Black Sesame, Vueron, and now MoveAWheeL. This lets us deliver those solutions across market segments without absorbing the cost and balance sheet impact of building every capability in-house, a structural advantage peers with internally developed software stacks can't easily scale.

With that, I'll turn the call over to Conor to walk through our financial results and the conversion metrics behind this momentum.

Thank you, Matt. Our active customer base reached a new level of diversification this quarter. Repeat business is now a pattern rather than an exception, which is the strongest indicator we have of product market fit and a direct validation of the performance advantages of our software-defined architecture. Before I turn to the numbers, it is worth framing what we believe is happening in our market because it explains where our revenue is now coming from. The first wave of lidar adoption competed largely on cost and packaging. A second wave is now forming, and it is being decided on something different. Performance and sophistication are the gates to winning the deal. The customers driving this wave and creating novel demand in the Physical AI space were absent from the first one because their use cases were simply too demanding for first generation sensors.

Detection at extreme range, maximum ruggedness, centimeter level capture across an entire playing field. Apollo's ultra-long range performance and software configurability, paired with our highly scalable partnership and production models, put us in a uniquely strong position to capitalize on precisely this class of Physical AI customer. We now have commercial proof that this is more than a thesis. During the quarter, we secured a commercial program with Alive3D in a new vertical that was not contemplated a year ago. One on capability rather than price. Behind this program, a growing number of engagements are moving out of proof of concept and into commercial closure. Turning to the financials, second quarter revenue was $202,000, roughly double the $101,000 we reported in the first quarter, at approximately nine times the $22,000 in the second quarter of 2025.

First half revenue of $303,000 already exceeds our full year 2025 revenue of $233,000. Two components drove the quarter. The first is product revenue, with an increasing share coming from repeat orders rather than first-time evaluations. Repeat orders from our lead defense customer continued to grow in size quarter over quarter, and we started shipping units to Alive3D. The second component, and new this quarter, is $30,000 of contract development revenue from customer-funded engineering work. That line matters more than its size suggests. It is a second distinct source of revenue that did not exist for us six months ago, and we expect it to become a more regular contributor in subsequent quarters as programs advance into their engineering phases. GAAP operating expenses were $10.6 million versus $8.9 million in the first quarter. More than half of that increase was non-cash stock-based compensation, primarily from performance-based equity awards.