Casey Ryan

Casey Ryan (WestPark Capital) questioned the expected trajectory for gross margin recovery and what a normalized rate might look like. He also asked about Data I/O's sensitivity to the size and geographical location (e.g., U.S.-based services) of potential acquisition targets.

Answer

VP and CFO Charlie DiBona stated that gross margin recovery would occur throughout the year, not necessarily linearly, and could bounce back faster than expected, driven by volumes and higher-margin new products in the latter half. President and CEO Bill Wentworth added that increasing the attach rate of highly profitable software on equipment, aiming to double the current 20-30%, would significantly boost margins. Regarding M&A, Bill Wentworth noted that geography is strategically relevant, aiming to strengthen presence in Asia and considering U.S. transactions. Both executives confirmed that services is a fragmented industry with opportunities, and they are comfortable with international transactions despite complications.

Casey Ryan asked about the expected recovery trajectory of Data I/O's gross margin after its recent dip, and if a 51-52% rate is a reasonable normalized target.

Answer

CFO Charlie DiBona indicated that gross margin recovery would occur throughout 2026, potentially faster than linearly, driven by increased volumes and higher-margin new products in the second half. President and CEO Bill Wentworth added that increasing the attach rate of their highly profitable software on equipment, aiming to double it from 20-30%, would significantly boost margins and recurring revenue.

Asked for an update on efforts to expand beyond the automotive sector, whether the recent strong bookings growth is sustainable, and the typical spread of gross margins across the company's various product lines.

Answer

Expansion beyond automotive is a key focus, with new customer acquisition expected to accelerate following new product launches at six upcoming trade shows. Bookings are expected to remain strong and grow, driven by these new products. The company is implementing better cost accounting to get a clearer picture of product-level margins, but noted that manual systems and sockets have higher margins, and future simplified automation designs should also improve profitability.

Casey Ryan of West Park Capital inquired about progress in diversifying beyond the automotive sector, the sustainability of recent bookings growth, and the margin spread across different product lines.

Answer

President & CEO Bill Wentworth acknowledged the need to diversify away from the automotive sector, which grew to 66% of bookings. He outlined that new product launches and a revamped sales strategy, including adopting Salesforce Service Cloud, are key to generating new leads. Wentworth expressed confidence that bookings will continue to rise with new product rollouts. Regarding margins, he noted that while a detailed analysis is ongoing, manual systems and sockets typically have higher margins, and future automation systems are being designed for lower cost and higher throughput.

Casey Ryan of WestPark Capital sought clarification on Arbe's 2026 revenue guidance, specifically if the $4M-$6M is entirely non-automotive. He also inquired about the trajectory of OpEx, the potential for Arbe's product in retrofit applications for existing military vehicles, the expansion to other defense forces beyond the U.S. and Israel, and the impact of EV slowdowns and losses on L3/L4 automotive development pacing.

Answer

Karine Pinto-Flomenboim, CFO, confirmed that the 2026 revenue guidance is mainly non-automotive, including HiRain. She indicated that adjusted EBITDA guidance reflects cost reduction measures, and OpEx is expected to go down slightly. Kobi Marenko, Co-founder and CEO, affirmed that Arbe's product is suitable for retrofit applications, such as upgrading existing military vehicles and providing drone detection in tactical pulses. He confirmed interest in Western European armies for defense applications. Kobi explained that the EV slowdown and associated multi-billion dollar write-offs by OEMs have forced them to cut expenses and reduce headcount, thereby delaying R&D for Level 3 autonomous driving.

Casey Ryan asked for clarification on the 2026 revenue guidance (automotive vs. non-automotive), the expected trend for OpEx numbers, the potential for Arbe's product in retrofit applications for existing military vehicles, the interest in such retrofits, the possibility of engaging with other defense forces (e.g., Western Europe), and the connection between the pacing of EV adoption and the slowdown in L3/L4 automotive development.

Answer

CFO Karine Pinto-Flomenboim clarified that the 2026 revenue guidance is mainly non-automotive, with some contribution from automotive (e.g., HiRain). She also indicated that Adjusted EBITDA reflects new expense courses and will slightly decrease. Co-founder and CEO Kobi Marenko confirmed that Arbe's product is suitable for retrofit applications, including existing military vehicles, and there is significant interest, particularly for drone detection. He noted that Arbe is pursuing defense opportunities beyond the U.S. and Israel, including Western European armies. Marenko explained that the slowdown in L3/L4 development is linked to OEMs' substantial investments and subsequent write-offs in the EV sector, which has led to expense cuts and R&D delays.

Casey Ryan, Director of Research at WestPark Capital, asked about Innoviz's OpEx run rates for 2026, inquiring if they would remain consistent or see significant changes. He also questioned whether the drivetrain type (EV vs. ICE) impacts Level 3/4 automotive and trucking opportunities, and sought clarification on the projected production increase for 2026. Additionally, Mr. Ryan asked for the number of customers contributing to the $111 million NREs and if new NRE opportunities might arise from non-automotive Physical AI applications.

Answer

CFO Eldar Cegla stated that Innoviz expects to maintain its efficient and modest operational approach, anticipating no dramatic changes to OpEx run rates in 2026. CEO Omer Keilaf clarified that drivetrain type has no technological correlation with LiDAR; while past EV transition challenges delayed Level 3 programs, the market has settled, and Level 3 is now back on track. Mr. Keilaf confirmed that production is expected to increase 3x to 4x in 2026, driven by SOPs for Volkswagen and Mobileye, boosting LiDAR sales across automotive and non-automotive sectors. He noted that Innoviz is currently supporting 4-5 parallel programs for NREs (Volkswagen, Mobileye, Daimler Truck) and expects new NRE opportunities to primarily originate from the automotive market.

Casey Ryan asked about the expected OpEx run rates for 2026, whether drivetrain type (EV vs. ICE) impacts automotive and trucking opportunities for L3/L4 robotaxis, the projected production increase for 2026, and if any new NRE opportunities are expected outside of automotive or trucking.

Answer

Eldar Cegla, CFO, Innoviz Technologies, stated that the company will continue its efficient and modest operational approach, not expecting dramatic changes in OpEx. Omer Keilaf, CEO, Co-Founder, and Director, explained that while Level 3 programs were previously delayed by EV transition challenges, the drivetrain type no longer correlates with LiDAR adoption, as autonomous driving can operate on any vehicle. He confirmed production is expected to increase 3 to 4 times, driven by VW and Mobileye SOPs. He also stated that new NRE opportunities are currently assumed to come from the automotive market.

Casey Ryan sought clarification on commercial revenue, asking if Q2 was a high point and confirming the outlook for 10x growth in Q3. He also asked about the timing of unit shipments to VW for the ID.Buzz relative to its deployment and questioned the pricing and margin profile for non-automotive opportunities compared to automotive.

Answer

CEO Omer David Keilaf confirmed that Q3 unit shipments would represent a peak to date as production ramps. CFO Eldar Cegla added that, per industry 'just-in-time' methodology, shipments to an OEM like VW would typically occur about one quarter before vehicle deployment. Keilaf concluded by stating that ASPs and margins in the non-automotive sector are 'significantly higher,' with prices in the thousands of dollars compared to several hundred for automotive, making it a very compelling market.

Asked for confirmation on the growth of commercial unit revenues, the timing of shipments to VW for the ID.Buzz program relative to its deployment, and the expected pricing and margin profile for non-automotive opportunities compared to automotive.

Answer

The company confirmed that unit shipments are ramping significantly, with Q3 expected to be a peak to date. For large programs like the ID.Buzz, they typically ship units about one quarter ahead of vehicle deployment, following a just-in-time model. They also stated that non-automotive ASPs and margins are significantly higher, in the thousands of dollars per unit versus hundreds for automotive.

Casey Ryan of Westpark Capital sought clarification on the process of booking NREs, the potential sources for new NREs, the exclusivity of Innoviz's partnership with Mobileye, and whether the positive gross margin guidance for 2025 is on an annual or quarterly basis.

Answer

CEO Omer Keilaf and CFO Eldar Cegla clarified that NREs are milestone-based payments for pre-production development, recognized as revenue upon customer acceptance. New NREs could come from existing customers for expanded scopes or from new program wins. Keilaf confirmed that while not exclusive, the Mobileye Drive platform currently uses only InnovizTwo sensors. Eldar Cegla specified the positive gross margin guidance is on an annualized basis for 2025, acknowledging potential quarterly fluctuations.

Sought clarification on the process of booking NREs, the source of potential future NREs, the exclusivity of Innoviz's partnership with Mobileye, and the nature of the positive gross margin guidance for 2025.

Answer

NREs are booked and recognized as revenue upon meeting specific, pre-agreed milestones with customers. Future NREs could come from both existing and new customers. The Mobileye Drive platform currently uses only InnovizTwo sensors, and this is expected to continue for future customers on that platform. The positive gross margin guidance for 2025 is on an annualized basis, with quarterly fluctuations possible.

Casey Ryan from WestPark Capital inquired about the impressive growth in Annual Recurring Revenue (ARR) per customer, noting the increase from $25,000 to $33,000, and the average ARR for new customers. He sought clarification on how these strong ARR trends translate into overall revenue growth and whether the expanding average package size impacts the total addressable market. Additionally, Ryan asked about the competitive landscape, the sustainability of ARR growth rates, the effectiveness of sales and marketing spend, and the expected stability of gross margins.

Answer

President and CEO Ari Kahn clarified that new customer ARR increased by 12% to $28,000 this quarter, with the overall average subscription per customer reaching $33,000, up from $25,000 in Q1 FY2025. He noted a Net Revenue Retention (NRR) of 107% for core products, indicating strong customer satisfaction and adoption of new products, despite being down from 116% last quarter. Kahn affirmed that the total addressable market remains unchanged, with increased initial adoption of AI add-ons by new customers and continued upsells to existing clients. He stated that top competitors remain consistent, with Bridgeline differentiating through its unique data lake and AI agent approach for automated HawkSearch tuning. Kahn anticipates continued HawkSearch growth, targeting 20% this year, driven by a robust new customer pipeline and add-on opportunities within the existing customer base, particularly in the B2B manufacturing and distribution sector. He confirmed that marketing efforts are effective with consistent cost per lead, and the company seeks to invest more efficiently. Regarding gross margins, Kahn expects the combined services and subscriptions margin to remain in the mid-60s (65%-67%), with services gross margin in the low 50s (around 53%) and subscription gross margin around 70% going forward.

Casey Ryan from WestPark Capital inquired about the impressive growth in Annual Recurring Revenue (ARR) figures, specifically the increase in average ARR per customer and per new customer, and how these trends translate into future revenue. He also asked if the expanding product offerings and higher average package size were impacting the total addressable market, the competitive landscape, and the expected growth trajectory for ARR. Additionally, Ryan questioned the effectiveness of marketing spend and the outlook for gross margins.

Answer

President and CEO Ari Kahn clarified that average ARR for new customers increased by 12% to $28,000 this quarter, while the overall average ARR per customer reached $33,000, up from $25,000 in Q1 FY25. He noted a Net Revenue Retention (NRR) of 107%, indicating strong customer satisfaction and adoption of new AI add-ons. Kahn stated that the total addressable market remains unchanged, with AI product adoption driving initial purchases and add-on growth. He confirmed that the competitive landscape is stable, with Bridgeline differentiating through its analytics-driven "data lake" for AI agents. Kahn projected continued growth for HawkSearch, aiming for a 20% growth rate this year, fueled by a robust new customer pipeline and upsells to existing customers, particularly in the B2B manufacturing and distribution sectors. He also mentioned effective marketing spend with consistent cost per lead and successful industry conferences. Regarding gross margins, Kahn expects the combined gross margin to remain in the mid-60s (65-67%), with services gross margin in the low 50s and subscription gross margin around 70%.

Casey Ryan inquired about Bridgeline Digital's Annual Recurring Revenue (ARR) reporting, specifically if the disclosed $8.9 million ARR was solely HawkSearch-focused and if the company plans to consistently share this metric quarterly. He also asked about trends in HawkSearch contract lengths, the stability of non-HawkSearch revenue, the impact of the Salesforce AppExchange partnership, and the comfort level with the current sales and marketing spend for Fiscal Year 2026.

Answer

Ari Kahn, President and CEO of Bridgeline Digital, clarified that the $8.9 million ARR is indeed HawkSearch-specific and confirmed the company's intention to report this core product growth quarterly, expecting it to dominate overall financials. He noted that HawkSearch contract lengths remain consistent (2-3 years average), but sales cycles have significantly shortened from 160 to 92 days, and average ARR per sale increased by 35%. Kahn expressed confidence in the stability of the HawkSearch customer base (under 4% churn) and the expected reduction in legacy product decline in FY26. He stated that the Salesforce AppExchange partnership is just beginning to impact revenue, with more expected in the December quarter, and highlighted the strategic importance of the Unilog partnership. Regarding sales and marketing, Kahn confirmed the $1.1 million quarterly spend, including $500,000 in ad spend, as the appropriate level for FY26, detailing the team structure and goals.

Casey Ryan asked about Bridgeline Digital's Annual Recurring Revenue (ARR) metric, specifically if it covers all products and customers or is HawkSearch-focused, and if the company plans to continue sharing this metric quarterly. He also inquired about trends in HawkSearch contract lengths and initial investment levels, the stability of non-HawkSearch legacy revenue, the live status and impact of the Salesforce AppExchange partnership, and the comfort level with the increased sales and marketing spend for fiscal year 2026.

Answer

Ari Kahn (President and CEO, Bridgeline Digital) clarified that the $8.9 million ARR is HawkSearch-focused and confirmed the company's intention to share this core product growth quarterly, expecting it to dominate overall financials in 2026. He noted that contract lengths for HawkSearch remained consistent (2-3 years), but sales cycles significantly reduced from 160 to 92 days, and average ARR per sale increased by 35% due to higher initial investment and more product components purchased. Kahn expressed confidence in the stability of the remaining non-HawkSearch legacy revenue. He stated that the Salesforce AppExchange partnership was just beginning to impact revenue, with more expected in the December quarter and beyond, highlighting the strategic importance of the Unilog partnership for the B2B manufacturing/distribution space. Regarding sales and marketing spend, Kahn confirmed the $1.1 million quarterly level for 2026, including $500,000 in ad spend, aiming to saturate salespeople with leads, and detailed the sales and customer success team structure, while acknowledging the desire for more investment without dilution.

Asked about the future trend of sales and marketing expenses, competitive responses to Hawk Search's success, the expected trajectory of digital engagement services revenue, and customer concentration within the Hawk Search product line.

Answer

The company plans to maintain its increased marketing spend of $500,000 per quarter, noting it is producing good results. Competitors are responding by offering free professional services to compensate for technology gaps, a tactic Bridgeline views as unsustainable. Digital engagement services revenue is expected to stabilize around $750,000 per quarter, shrinking as a percentage of total revenue as the core license business grows. There are no customers representing 5% or more of Hawk Search revenue, ensuring no significant customer concentration.

Casey Ryan of West Park Capital asked about the sustainability of increased sales and marketing spend, the competitive response to Hawk Search's success, the future trajectory of services revenue, and the level of customer concentration for the Hawk Search product.

Answer

President & CEO Ari Kahn confirmed the marketing lead-generation budget has doubled to $500,000 per quarter and is expected to remain at that level, funded by a recent capital raise. He noted competitors often offer free professional services to compensate for product gaps, a tactic Bridgeline counters by highlighting the long-term costs of custom solutions. Kahn projected services revenue to stabilize around $750,000 per quarter with a 50% gross margin, shrinking as a percentage of total revenue. He also stated there are no 5% customers for Hawk Search, though key partners like Hewlett Packard are significant.

Casey Ryan inquired about several operational and financial metrics, including the expected increase in sales and marketing spend, the payback multiple on this investment, standard customer contract lengths, and the international language capabilities of the HawkSearch product. He also asked about the potential for Average Order Value (AOV) based pricing and sought clarification on the updated total share count following the recent capital raise.

Answer

President and CEO Ari Kahn confirmed that sales and marketing expenses are expected to rise by $250,000 to $500,000 per quarter. He detailed the company's 3:1 LTV-to-CAC ratio, explaining how a $1 million investment could generate approximately $800,000 in new ARR. Kahn stated that the average initial contract is 30 months, with customers typically doubling their software spend over their lifespan. He noted that HawkSearch supports 50 languages out-of-the-box at no extra cost to the customer, though AOV-based pricing is not yet standard. CFO Tom Windhausen clarified that the total share count increased to 11.9 million due to the 1.4 million shares issued in the March capital raise.

Casey Ryan inquired about Brightline Interactive's (BLI) primary market opportunities, specifically if they are predominantly defense-focused or if there's significant overlap with education and healthcare. He also asked about the business segments remaining with The Glimpse Group post-spin-off, the expected timeline for the BLI spin-off, customer readiness for technology integration in education and commercial markets, and whether the Brightline name would be retained.

Answer

Lyron Bentovim, President and CEO of The Glimpse Group, clarified that BLI's main focus is defense with growing enterprise opportunities, while education and healthcare are primarily for other Glimpse entities. He stated the spin-off process would take several months, aiming for early calendar year 2026, and confirmed no name change for Brightline Interactive.

Casey Ryan asked about Brightline Interactive's (BLI) market opportunities, specifically if they are primarily defense-focused or if there's overlap with education and healthcare, and what would remain with the core Glimpse Group business. He also inquired about the expected timeframe for the BLI spin-off, the maturity of technology integration in education/commercial markets, and potential name changes for BLI.

Answer

President and CEO Lyron Bentovim explained that BLI's primary focus is the Department of Defense, with exploration into enterprises for SpatialCore, which is expected to take longer for significant revenue. Education and healthcare are less for BLI and more for other Glimpse entities, integrating immersive AI for simulation and training. He stated that the spin-off process is expected to initiate in the coming weeks, take several months, and potentially conclude early in calendar year 2026, indicating that a 12-month timeframe is too long. Bentovim noted that customers in education markets are nearing a transition from experimental use to full integration, citing a beta partnership with a leading Florida university for an AI solution launching in early 2026. He confirmed no name changes are expected for Brightline Interactive due to its established brand.

Casey Ryan inquired about The Glimpse Group's revenue split between commercial and government contracts and its expected evolution. He also asked for a comparison of the clarity of use cases between the commercial and government sectors, the future trajectory of operating expenses, and an update on potential divestiture or acquisition activities.

Answer

Executive Lyron Bentovim stated the current revenue split is approximately 40% government and 60% commercial, with expectations to increase the government share in calendar year 2025. He noted that defense work should lead to larger commercial opportunities. CFO and COO Maydan Rothblum confirmed the monthly operating expense run rate of under $0.9 million should remain stable for the fiscal year. Bentovim also confirmed the company is actively exploring both divestitures and accretive acquisition opportunities.

Casey Ryan of West Park Capital asked about the scope of the Stellantis opportunity, including potential exposure across its brands and the total content value per vehicle. He also inquired about the size of the design win pipeline, customer preferences regarding silicon carbide versus B-TRAN, and the potential for integrating Ideal Power's technology into existing data center environments.

Answer

President and CEO R. Daniel Brdar explained that the Stellantis collaboration aims for commonality across multiple brands and vehicle applications, including both the drivetrain and EV contactors, creating a broad opportunity. He noted the industrial market, particularly for solid-state circuit breakers, has a larger sales funnel and will drive initial revenue. Brdar also highlighted B-TRAN's technical superiority over silicon carbide, citing a customer case where B-TRAN solved critical heat issues and tripled power density. CFO Tim Burns clarified that total EV power semiconductor content is estimated around $1,100 per vehicle. Brdar confirmed their technology can be integrated into existing data centers in a staged manner, offering significant advantages in reducing waste heat and electricity costs.

Casey Ryan of West Park Capital inquired about the scope of the Stellantis opportunity, including potential brand exposure and total content per vehicle. He also asked about the size of the design win pipeline, customer preference for silicon carbide versus B-TRAN, and the potential for integrating Ideal Power's technology into existing data centers as a hybrid solution.

Answer

President and CEO R. Daniel Brdar explained that the Stellantis collaboration aims for commonality across multiple brands and EV applications, such as the drivetrain and contactors. Brdar noted the industrial market has a larger pipeline and will see the first design wins, highlighting that B-TRAN's lower heat generation is a key advantage over Silicon Carbide. He also confirmed their products can be integrated into existing data centers in a staged manner. CFO Tim Burns clarified that total content per vehicle could be several hundred dollars, with the drivetrain inverter being the largest component.

Casey Ryan of West Park Capital inquired about the scale of the Stellantis partnership across its brands, the potential revenue content per electric vehicle, the volume of opportunities in the design win pipeline, customer technical preferences versus silicon carbide, and the feasibility of integrating B-TRAN into existing data centers.

Answer

President and CEO R. Daniel Brdar explained that the Stellantis collaboration aims for commonality across multiple brands and EV applications, creating a broad opportunity. He emphasized that B-TRAN's lower heat and higher power density are critical advantages over silicon carbide, not just cost. Brdar also confirmed their technology can be retrofitted into existing data centers. CFO Tim Burns added that total power semiconductor content per EV could be substantial, with the drivetrain inverter and contactors representing significant value.

Casey Ryan of West Park Capital inquired about the scope of the Stellantis opportunity across its brands, the potential content per vehicle, the volume of design win opportunities in the sales pipeline, customer considerations between B-TRAN and silicon carbide, and the integration of Ideal Power's technology into existing data centers.

Answer

President and CEO R. Daniel Brdar explained that Stellantis aims for commonality across its EV platforms and multiple brands, with a goal to use a common B-TRAN semiconductor design for both drivetrain and contactor programs. CFO Tim Burns noted the total power semiconductor content in an EV is about $1,100, with the drivetrain inverter and contactor being major components. Brdar added that the sales funnel is growing, with industrial applications expected to secure design wins sooner than automotive due to shorter design cycles. He also clarified that customers often find silicon carbide solutions generate too much heat, a problem B-TRAN solves. Finally, Brdar confirmed their products can be integrated into existing data centers in a staged manner, offering significant advantages in reducing waste heat and electricity costs.

Casey Ryan of West Park Capital inquired about the scope of the Stellantis opportunity, the potential revenue per vehicle, the breadth of the design win pipeline, the technical comparison with silicon carbide, and applications in data centers.

Answer

President and CEO R. Daniel Brdar explained that the Stellantis partnership aims for commonality across multiple brands and vehicle applications, including drivetrain and contactors. CFO Tim Burns noted the total power semiconductor content per EV is about $1,100. Brdar highlighted a broad industrial sales funnel, particularly for circuit breakers, and emphasized B-TRAN's technical superiority over silicon carbide due to lower heat and higher power density. He also confirmed B-TRAN's suitability for upgrading existing data centers.

Casey Ryan of WestPark Capital inquired about the shipment and revenue timing for the Sekorm order, the expected timeline for the Stellantis purchase order process, the long-term revenue potential of the Stellantis relationship, and opportunities with other automotive OEMs.

Answer

CFO Timothy Burns confirmed that shipments for the Sekorm order began in Q1 and will continue, viewing it as a potential design win. CEO Dan Brdar addressed the Stellantis questions, explaining that while the company is large, the EV contactor program is a high priority and the PO process should conclude in weeks, not quarters. Brdar clarified that a design win would mean Ideal Power's semiconductors would be used in platforms across multiple Stellantis brands. Burns also confirmed a second EV contactor opportunity with another large global automaker and engagements with a third automaker and several Tier 1 suppliers.

Casey Ryan of West Park Capital asked whether the definition of the industrial market needs to be broadened beyond distribution and warehousing, seeking clarity on the total addressable market.

Answer

CEO Sumit Sharma responded that the key is not redefining the segment but developing the right sales channels. He explained that MicroVision's current strategy is to target high-volume projects, even if initial volumes are small (e.g., 1,500 units), to build trust and momentum. He stated that factory automation and warehousing remain the dominant focus, and the approach to developing channels within these segments will dictate future investment and sales team expansion.

Casey Ryan of WestPark Capital inquired about the source of Q1 revenue, the factors pacing the projected $30-$50 million revenue pipeline, the number of industrial customers, the scope of military opportunities including work with primes, and the rationale behind potential capacity expansion.

Answer

CFO Anubhav Verma confirmed that Q1 revenue, like Q4, included commercial sales. CEO Sumit Sharma and CFO Anubhav Verma explained that the industrial revenue timeline is dictated by end-customer deployment schedules for automation and productivity. Sharma stated they are engaged with 'less than 10' industrial OEMs. He detailed the military strategy as being a technology partner to primes, including newer tech companies, with a recent focus on drones. Sharma clarified that capacity has not yet been expanded but is planned for later in the year if agreements necessitate it, which Verma confirmed would correlate with hitting the upper end of the revenue outlook.

Casey Ryan inquired about the composition of the $1.7 million Q4 revenue, asking to distinguish between commercial shipments and NRE. He also asked if the revenue came from single or multiple customers, the nature of the new defense opportunities, and the competitive dynamics in recent industrial wins.

Answer

Chief Financial Officer Anubhav Verma clarified that the $1.7 million in Q4 revenue was primarily from sensor sales to multiple customers (fewer than ten), with minimal NRE. Chief Executive Officer Sumit Sharma explained that the defense opportunities are mainly for ground-based vehicles, leveraging existing lidar and perception technology, and will be pursued through partners. He added that being a U.S.-based company with unique, low-power, software-integrated solutions provides a competitive advantage in the industrial space.

Casey Ryan of WestPark Capital inquired about the industrial market strategy, asking about average selling prices (ASPs), the potential unit TAM for 2025, revenue pacing, and what inventory levels indicate about near-term demand. He also sought clarity on the competitive landscape and MicroVision's production capacity.

Answer

CFO Anubhav Verma stated that industrial ASPs are expected to be in the $1,000-$2,000 range and confirmed the 10,000-30,000 unit volume for 2025 is a reasonable estimate, with a revenue ramp expected mid-year. CEO Sumit Sharma detailed the customer landscape in volume-based tranches and confirmed current production capacity is approximately 45,000 units annually on a single shift, which can be scaled without issue.

Casey Ryan from West Park Capital asked for AEye's definition of 'physical AI,' questioned the drivers behind the recent surge in non-automotive activity, and inquired about the company's go-to-market strategy for specialized verticals like defense, including the role of partnerships with integrators.

Answer

CEO and Chairman Matt Fisch defined 'physical AI' as AI and sensing interacting with the real world, using the term to refer to opportunities outside of traditional automotive. He attributed the increased activity to both proactive support from NVIDIA's sales channels and strong independent inbound interest driven by Apollo's unique 1-kilometer detection range. CFO Conor Tierney added that their strategy is adaptable, working with integrators for DOTs or going direct with the full-stack Optus solution, and employing a multi-pronged approach in defense by engaging with primes, smaller players, and the DOD directly.

Casey Ryan asked for a definition of the term 'physical AI', questioned the role of NVIDIA in driving non-automotive opportunities, and inquired about the company's go-to-market strategy for sectors like defense, specifically regarding partnerships with integrators.

Answer

CEO Matt Fisch defined 'physical AI' as AI and sensing interacting with the real world, which the company uses to refer to its non-automotive business. He confirmed NVIDIA provides significant sales and deployment support in this area, but also noted that Apollo's 1km detection range generates substantial independent inbound interest. CFO Conor Tierney added that the go-to-market strategy is adaptable, utilizing both direct sales and integrators. For defense, he described a multi-pronged approach targeting large primes, smaller players, and direct work with the DOD.

Casey Ryan of WestPark Capital asked for clarification on the definition of 'high volume' production, the autonomous driving level (e.g., L2+, L3+) OEMs are targeting, opportunities in non-consumer auto markets like trucking, the expected number of lidar units per vehicle, details on R&D spending, and AEye's geographic strategy across the U.S., Europe, and China.

Answer

CEO Matthew Fisch defined 'high volume' as moving from development programs in the thousands of units to mass production contracts starting at tens of thousands and ramping above 100,000 units annually, highlighting their Tier 1 partner's expertise as a key advantage. He identified Level 3 as the 'sweet spot' for OEM roadmaps. Fisch confirmed AEye is open to all markets, including trucking and robotaxis, where Apollo's software-adjustability is a benefit. For passenger cars, he noted a typical Level 3 system might use 1-2 lidars, and emphasized the simplicity and cost benefits of their in-cabin solution. Executive Conor Tierney stated R&D is about half of their cash spend, while Fisch added the focus is shifting from core development to customer integration. Finally, Fisch attributed their global reach to their partnership-led model, utilizing a global Tier 1 manufacturer and local partners in China.

Casey Ryan of WestPark Capital, Inc. explored Ouster's opportunities in robotaxis and warehouse automation, and also asked about pricing trends. He sought color on the geographic focus for robotaxis and the scope of applications in warehouses, including humanoids. He also inquired about the current sensor pricing environment.

Answer

CEO Angus Pacala and Interim CFO Chen Geng clarified that Ouster's robotaxi focus is primarily on North America with partners like Motional and May Mobility. In warehousing, Pacala confirmed Ouster targets a wide range of applications, from AGVs to driver-assist systems, viewing humanoids as a longer-term opportunity. On pricing, they explained that while new technology can support higher ASPs, the general trend is for prices to decline over time, which helps drive volume adoption. Pacala noted that for most customers, price is not the primary barrier to adoption.

Casey Ryan inquired about the gross margin profile by business vertical, the reasoning for maintaining the 35-40% guidance despite a strong quarter, and the role of price in competitive bids for smart city projects.

Answer

CEO Angus Pacala declined to break out margins by vertical for competitive reasons but confirmed all are margin-positive. Interim CFO Chen Geng noted that while accretive software growth provides upside, the 35-40% range remains the company's commitment to shareholders amidst market uncertainty. Pacala added that in smart infrastructure, Ouster wins tenders by meeting price requirements while offering superior performance and features that legacy technologies lack.

Asked about the impact of higher messaging costs on gross margins and whether these costs are passed to clients. He also inquired about changes in billing practices, such as moving to prepaid models, the assumptions behind the 2024 revenue guidance regarding new customers, and the progress and financial profile of the non-cannabis business segment.

Answer

The executive confirmed that increased messaging costs have been absorbed but may be partially passed on in the future, while also promoting cheaper alternatives like push notifications. The company has largely completed a shift to prepaid models for smaller clients to manage credit risk. The 2024 guidance assumes continued new client growth. The non-cannabis segment is generating revenue and is expected to grow, though the average revenue per client may be slightly lower than in the cannabis sector.

Inquired about the geographic concentration of customer weakness, performance in newer markets, the size and strategy for the non-cannabis market opportunity, and the expected timeline for growth in that adjacent vertical.

Answer

The company clarified that customer weakness is more concentrated in mature western markets like California and Colorado, while newer states like Missouri and New Mexico are performing well. The non-cannabis opportunity (liquor, smoke, vape, CBD) is estimated at over 100,000 locations. Growth is expected to accelerate in Q2 2024, driven by a new integration with the Lightspeed POS system and a subsequent co-marketing push.

Asked for clarification on the company's policy for non-paying accounts, the economic behavior of retailers after being removed from the platform, account growth in newly legal states, and the future trajectory of bad debt expense.

Answer

The company has tightened its collections process for non-paying accounts to under 60 days. They believe many churned retailers eventually return and are developing win-back offers. Strong growth is being seen in new markets like Maryland. Bad debt expense is expected to level off and decline into next year as tighter management processes take effect and the customer base becomes healthier.