The Rundown (8/04/21)

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AEye:  Pushing Autonomous Mobility Forward

AEye develops high performance, AI-driven LiDAR systems for vehicle autonomy, Advanced Driver Assistance Systems and Robotic vision applications. In February, the company announced its plans to go public through a SPAC merger with CF Finance Acquisition Corp III, with the deal valuing the company at $1.52 Billion. 

The Future of Autonomous Mobility 

Autonomy is expected to be a major mega-trend over the next decade, with a wide variety of use case scenarios in Traffic Systems, Delivery, Mining, Aviation and Drones. A key challenge to solve for every autonomous vehicles is to precisely track its surroundings in 3D to avoid obstacles. While there is great progress in terms of advancing tech for autonomous driving, there is even greater hype surrounding the whole industry. Consumers currently have unrealistic expectations about full autonomy, believing that it is just a couple of years away.

But this is far from the truth. In fact, even though autonomous tech is advancing at a rapid pace, realistically full autonomy isn’t expected to be attained at least for the next 10-15 years. In order to accelerate the trajectory and adoption of autonomy, breakthrough technologies need to be leveraged in a way that enhance the safety, comfort and efficiency of drivers. 

LiDAR (Light Detection and Ranging) has emerged as a breakthrough solution, which could significantly improve autonomous driving over the next decade. LiDAR is essentially a sonar that uses pulsed laser waves to map the distance to surrounding activities. LiDAR’s primary advantage is its accurate depth perception, which allows the sensor to know the distance to an object within a few centimeters, up to a few hundred meters away.

This makes it highly suitable for 3D mapping, which means that vehicles can navigate the environment predictably. Furthermore, LiDAR sensors perform better when compared to traditional cameras in common driving conditions like rain, fog and under direct sunlight. 

Building a Next Generation Sensor 

AEye’s adaptive LiDAR is an example of the next generation technology that overcomes the pitfalls of conventional LiDAR which the company dubs as iDAR (Intelligent Detection and Ranging). iDAR is based on a Bi-Static architecture which incorporates deterministic artificial intelligence into the sensing process.

This enables the sensor to offer greater reliability, safety and performance at a longer range and lower cost. In fact, iDAR outperforms other sensors, with a maximum range of 1,000m. 

Furthermore, the company’s technology is the only LiDAR that has been validated by a third party to show range, detection and classification, even through poor weather conditions and behind a windshield.

The company’s AI enabled iDAR platform combines solid-state active LiDAR, an optionally fused low-light HD camera and integrated deterministic artificial intelligence to capture more information with less data, enabling more reliable perception. The company’s sensor is so capable that it can even trace a 45 caliber bullet traveling at 800fps, which is an industry first. 

AEye also has the expertise to commercialize its iDAR, with industry leaders from other LiDAR companies having joined AEye to build their shared vision of the future. This includes Bernd Reichert from Valeo, Former Chief Operating Officer of Velodyne Rick Tewell, Bob Brown from Cepton and Hod Finkelstein as Chief Research and Design officers from Sense Photonics.

These industry veterans should help boost the company’s credentials in the short term, while driving advancements in the technology with their industry expertise over the long term. 

Driving Mass Adoption through Partnerships  

By making their sensors modular and software configurable, AEye has partnered with several Automotive Tier 1 Suppliers such as Continental, Hella, Aisin and LG to develop full stack Advanced Driver Assistance Systems (ADAS), that consumers will embrace in the future.

AEye’s partners have huge manufacturing scale. For instance, Continental is the ADAS supplier to 25 OEMs, 50 brands and over 300 models of automobiles. 

This represents a large and rapidly growing projected market opportunity, with the ADAS market for passenger and commercial automobiles expected to grow to $18 Billion by 2023.

In addition, the company’s LiDAR solutions are configurable to meet different needs, which opens up other use case scenarios including Industrial applications like Mining and Aerospace and Mobility applications like Logistics and Delivery. 

High Growth Market Opportunity 

AEye expects to commence commercial production of its LiDAR by the fourth quarter this year. The company expects to generate licensing revenues from its partnerships starting in 2024, which will significantly ramp up revenues. Management projects that revenues will grow from $3 million in 2022 to over $600 million by 2026. AEye expects to scale revenues through diverse revenue streams including the Industrial, Mobility and Automotive markets.  

Management believes that the company will have industry leading gross and EBITDA margins, with margins standing at 85% and 55% respectively in 2026. This suggests that the company would achieve EBITDA of $334 million. Based on the SPAC merger, the company’s Enterprise Value is $1.19 Billion, valuing the company at a forward EV/EBITDA (FY26) off 3.56x. While this is cheaper compared to other comparable LiDAR firms, there are significant assumptions including high growth rates and the eventual increase in margins as a result of a reduction in the Bill of Materials. 

The company projects over $225 million in losses between now and 2024 as it ramps up R&D Spending and Production, but investors shouldn’t worry about dilution as the company has ample liquidity including $390 million from the SPAC transaction. Furthermore, as production synergies improve, the company expects costs to go down significantly and believes that it can be EBITDA positive by 2024. 

Bottom Line 

LiDAR sensors have emerged as the breakthrough solution for autonomous driving and outperform camera sensors in adverse weather conditions. AEye’s iDAR is the next generation LiDAR sensor, which offers greater performance and range at a lower cost.

AEye has strong industry leadership, wide use case scenarios and a high growth opportunity. Despite the it’s breakthrough tech, the company’s valuation will primarily depend on its execution. AEye is the LiDAR company to watch out for in the future. 

If you’re interested in more Deep Dives every week… Read The Yeet!

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