Aeva Technologies Inc

NYSE:AEVA

Earnings Call Transcript 2023-Q1

[Operator]

Good day, Ladies and gentlemen, and welcome. My name is Judith and I'll be your conference facilitator. I'd like to welcome everyone to Aeva Technologies' First Quarter of 2023 Earnings Conference Call.

During the opening remarks, all participants will be in a listen-only mode. Following the opening remarks, we will conduct a question-and-answer session. As a reminder, today's conference call is being recorded and simultaneously webcast.

I'd now like to turn the call over to Andrew Fung, Director of Investor Relations. Andrew, please go ahead.

[Andrew Fung, Director, IR]

Thank you, and welcome, everyone to Aeva's first quarter 2023 earnings conference call. Joining on the call today are Soroush Salehian, Aeva's Co-Founder and CEO, and Saurabh Sinha, Aeva's CFO. Ahead of this call, we issued our first quarter 2023 press release and presentation, which we will refer to today and can be found on our Investor Relations website at investors.aeva.com.

Please note that on this call, we will be making forward-looking statements, based on current expectations assumptions, which are subject to risks and uncertainties. These statements reflect our views only as of today, and should not be relied upon as representative of our views as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a further discussion of the material risk and other important factors that could affect our financial results, please refer to our filings with the SEC, including our most recent Form 10-Q and Form 10-K.

In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Aeva's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. The webcast replay of this call will be available on our company website under the Investor Relations link.

And with that, let me turn the call over to Soroush.

[Soroush Dardashti, Co-Founder, CEO & Director]

Thank you, Andrew, and good afternoon everyone. In Q1, the Aeva team was focused on advancing the commercial momentum for Aeva's unique 4D LiDAR-on-Chip technology and I'm happy to share that we made significant progress in a number of notable areas. I would like to highlight our key accomplishments this quarter, which are summarized on Slide 4. First, progress with the Top-10 OEM is going well.

We have recently received feedback that Aeva 4D LiDAR is enabling a key safety use case that was previously unattainable by the OEM. I am excited to share that we are also in discussion to deepen our relationship to include joint perception software development. leveraging Aeva's unique combination of high resolution, long-range and instant velocity.

Second, we are seeing encouraging progress with other opportunities in automotive. This includes a joint development engagement with a passenger vehicle OEM, looking to switch from 3D Time of Flight LiDAR as well as advancing to a growing number of RFQs. And third, reception for our perception platform for precision distance measurement has been quite positive. We are engaged with multiple leaders in industrial sensing to use Aeva's perception platform and hope to share more later this year.

I would now like to provide more color on recent business developments. Starting on Slide 6. As mentioned earlier, we are off to a strong start with the Top-10 OEM on providing a perception solution that meets their high standards of performance, safety and scalability. The first vehicles integrating Aeva 4D LiDAR have been built and we have already achieved important development milestones including feedback from the OEM that we successfully enabled a key safety use case for highway driving that was previously unachievable with 3D ToF LiDAR for this customer. This was possible because of Aeva's unique FMCW technology that simultaneously offers high resolution, long-range, and instant velocity capability.

Together with our perception software, Aeva's 4D LiDAR reliably detected and classified critical object on the road far away. This is a particularly important capability in use cases such as highway automation, where faster speeds require greater reaction time and higher sensing fidelity. I'm excited to share that we are also in discussion with the OEM around the use of Aeva's perception software and looking at ways to help to accelerate the autonomous stack developments. This gives us further confidence around our perception software capabilities and highlights the importance of leveraging direct velocity measurements in an automated driving system.

Let's move now to Slide 7. As we have shared, we have been making significant progress on our engagements and wanted to provide more color on our ongoing opportunities. Our focus remains on programs for large-scale deployment and we are seeing strong interest from leading automotive and industrial companies looking to bring next-generation perception to market.

This includes progressing from the RFI to RFQ stage with some of the top global passenger vehicle and commercial vehicle OEMs. And in industrial automation, we are currently in multiple discussions to deploy our perception platform for precision distance measurement applications. Many of our opportunities are with companies who have experience with LiDAR or even selected 3D time-of-flight LiDAR for initial pilot deployments in the past and are now increasingly interested in Aeva for the next generation due to the advantages of our FMCW approach.

While we may not win every opportunity, each program offers meaningful revenue potential. As an example, the passenger vehicle program opportunities we are working on target volumes will over a hundred thousand units per year at steady state production. These programs have target starter production between 2025 and 2027, and we expect award decisions approximately over the next six to 12 months.

Turning now to Slide 8, following the successful bring-up of our new final assembly manufacturing mine, we are working with Fabrinet to similarly expand our LiDAR-on-chip module manufacturing. This expansion will add capacity to support the growing interest in both automotive and our perception platform for industrial automation with the ability to ramp further for mass production.

As part of this, we will automate hundred percent of the LiDAR-on-chip module assembly steps. This will enable higher throughput that will further bring down costs on the path toward production. We expect to complete bring-up of the new line by year-end.

With that, let me turn the call over to Saurabh, who will discuss the financials in more detail.

[Saurabh Sinha, CFO]

Thank you, Soroush, and good afternoon everyone. Let's turn to Slide 10, to discuss our Q1 2023 financial results. Revenue for the first quarter was $1.1 million, driven by Aeries II deliveries to existing partners as well as to new customers for our unique 4D LiDAR capabilities.

Non-GAAP operating loss was $31.3 million, as we continue to strategically invest in product and other research and development initiatives consistent with our work plan. Gross cash use, which we define as operating cash flow less capital expenditure was $37.3 million, reflecting operating expenses and timing of working capital. As such, we ended Q1 with $288.4 million in cash, cash equivalence, and marketable securities. The weighted average shares outstanding was $219.6 million in Q1.

To sum it up, Aeva is in a solid financial position to support our commercial momentum. We are making good progress on the key objectives we laid out for 2023 and we will continue to take a disciplined and strategic approach to execute on our plan.

I will now turn the call back to Soroush for closing remarks.

[Soroush Dardashti, Co-Founder, CEO & Director]

In summary, I am excited by the progress and feedback from both existing and prospective customers on Aeva 40 LiDAR. Our differentiated FMCW technology is increasingly resonating with leaders in the markets we are pursuing and our priority remains on converting more of our commercial traction to program wins.

I want to especially acknowledge the dedication of the Aeva team that is making all of this possible, as well as the ongoing support of all of our stakeholders. Aeva is laser-focused on delivering on our objectives and is well-positioned with our unique technology and our balance sheet to continue to execute on our mission to bring 40 LiDAR to markets.

With that, we will now open the line-up for questions.

[Operator]

Thank you, sir. [Operator Instructions]. Our first question comes from Colin Rusch of Oppenheimer.

[Colin Rusch, Oppenheimer]

Thanks, so much guys and appreciate you taking the time today. With the process with Fabrinet Thailand and the automation, can you talk a little bit about what your sampling capacity is right now and how it's going to change over the balance of the year, and when think the impact might be with some of these customer relationships?

[Soroush Dardashti, Co-Founder, CEO & Director]

Yes, Colin. Happy to answer the question. Look, we are obviously working closely now with Fabrinet to build up our further automation on the line. This is important, of course, because we are going to be working to automate 100% of the assembly steps as I mentioned inside the LiDAR chip.

This has a couple of different effects, right? First of all, this line is going to help us to support our series production ramp. This also allows us further really simplify the system assembly process as we have talked about before. And at the end of the day, gives us ability to really provide the scale that's needed to support the customers. And it's important because increasingly both on the automotive, as we have talked about with the Top-10 OEM, the advancements from RFI to RFQ as well as on the industrial side with the multiple engagement we have, we are seeing this demand that we are now responding to it so that we can build up additional capacity.

This time we will also increase our throughput. So, what I can say is, we will sufficiently satisfy our demand quantity needs as we go towards production. And also gives us further confidence in our ability to really keep us on track towards achieving our targets for the cost.

[Colin Rusch, Oppenheimer]

All right. That's super helpful. And then just shifting gears around the software development. Can you talk a little bit about the level of activity that you have got in terms of building out the ecosystem and the different software pieces that you are going to need to develop for each of the different end markets, and I'll take the rest of it off the line after that? Thanks guys.

[Soroush Dardashti, Co-Founder, CEO & Director]

Sure. Yes. Look, first of all, as I mentioned on the call, we are excited that, we are seeing increasingly OEMs such as the Top-10 OEMs start to see significant value. And not just our 4D LiDAR but also the perception software. And as our software gets embedded into the AV Stack or ADAS Stack as well as some of the industrial applications, on the automotive side, it provides added value for the OEMs and we see it to start creating this flywheel effect for deeper engagement and the use of our capabilities. And that's why with, for example, the Top-10 OEM, we are talking further to strengthen our relationship there, and we're looking to -- they're looking to leverage our perception software to help them accelerate the AV Stack.

And this is important, because for us, obviously, we have the added dimension of velocity, the unique data products that we have, and the OEM is able to use those and working with us together jointly to really tune it. Building effectively a system that consists of the hardware and the software on top of that's really tuned for their specific applications. And what we are hearing is that this is going to also help them differentiate some of their capabilities compared to their competition.

So, we are really encouraged by that and I think over time, we're going to start seeing more of these types of engagements hopefully that we can continue to engage on a deeper level with the perception software side.

[Operator]

The next question comes from Joseph Moore of Morgan Stanley.

[Joseph Moore, Morgan Stanley]

Great. Thank you. Wonder if you could talk about when you start going to production, there's a mention in the slide deck of 2025 through 2027. I had thought there was some industrial stuff going into production 2024. Is that still the case?

[Soroush Dardashti, Co-Founder, CEO & Director]

Look, as we've talked about, we're on track with our customers on the industrial and automotive side. We continue to be engaging multiple customers on the industrial side in addition to automotive. What we talked about on the call today, 2025 and 2027 are really some of those opportunities, especially on the automotive side that are new opportunities that we are targeting and opportunities that we are advancing from RFI to further stages, including RFQ. So, we are on track with the engagements that we have and obviously provide some more color around these new opportunities.

[Joseph Moore, Morgan Stanley]

And then in terms of the cash balance, obviously you have a pretty healthy balance sheet, but the burn rate of $37 million in Q1. I guess what over the next, say eight quarters or so before you start to really ramp revenue, can you just kind of give us a guide to what happens to the cash balance?

[Saurabh Sinha, CFO]

Hey Joe, this is Saurabh. I can answer that for you. So, we have a strong balance sheet, as I mentioned in the prepared remarks, $290 million of cash, and marketable securities. That gives us a lot of strength as we execute on our plan. In terms we only provide FY 2023 guidance and what we mentioned at the last call that we expect our OpEx, non-GAAP OpEx to similar to 2022 levels, which was around $124 million. And we are on track for that. And non-GAAP OpEx is a good indicator of the cash burn for the year.

[Operator]

The next question comes from Pierre Ferragu of New Street Research.

[Pierre Ferragu, New Street Research]

Hi, guys. Thanks for taking my question. A quick follow-up on your outlook for cash burn. So, if you have like a notebooks burn rate around 120 in the low 120 s to the for OpEx, what -- when you start ramping production, is there like an additional element of cash consumption? Because starting production means additional CapEx, like any bad additional yield that could drive like cash burn, additional cash burn on top of your bags? Or should we expect actually an almost instant, immediate slowly ramping contribution like cash contribution?

[Saurabh Sinha, CFO]

Hey, Pierre. This is Saurabh. Yes, I think your latter is true. We expect that the OpEx as well as the CapEx to be steady and -- because certain R&D activities are already completed and there will be -- CapEx needs will be light given that we are leveraging the CMs.

[Pierre Ferragu, New Street Research]

Okay. That makes sense. Thanks for that.

[Operator]

Thank you. The next question comes from Suji Desilva of Roth MKM.

[Suji Desilva, ROTH Capital Partners]

Hi, Soroush. Hi, Saurabh on the progress here. Question on the Top-10 OEM. I'm just trying to understand, a lot of lidar companies’ competitors have announced partnerships. I'm just wondering how this one feels different to you guys so you can differentiate it. It sounds like a deeper relationship. I just want to really kind of get that nuance so it should be good. And just what was the key safety feature that 3D LiDAR couldn't handle? It sounds like identifying a low-lying object in the road that's at a distance, but if you can clarify that, they have be great.

[Soroush Dardashti, Co-Founder, CEO & Director]

Sure, Suji. Let me answer your second one first. So Obviously, with this OEM we have been working actually for quite some time, right? And so, I can't go into specifics of the use case, but they obviously have multiple safety use cases including those on the highway driving applications to really reliably detect and classify safety critical objects on the road, especially from a long distance.

So, what sets us apart, right? Our sets us apart is our ability to, one, simultaneously deliver high-resolution and long ranges. And two, added that dimension of velocity to really help us consistently detect objects across ranges. So, as I've mentioned before, for example, when you have at long distances with, let's say, 3D LiDAR only a few points, let's say you get a few points, five points on an object.

When you look at that object and you only have the dimension of distance, you have to – you are not sure exactly what you are looking at those really far distances. So, all you can do is keep looking. And overtime at highway speeds, that is a critical time as a critical aspect. But, then you have added the measurement of velocity, those same five points start to have now velocity contribution.

So, if you have all the same velocity, they're all moving towards you at 75 miles per hour. You better know that that's a vehicle on a flying object or something like that on the road. So that's something that is I think unique provided by us. And I think for this OEM contributed also in a significant way, this added the mission of velocity to help them achieve it near the low confidence to address the safety use case.

And also, just to be clear to your point from before, this OEM has worked in the past with other 3D LiDAR before. And from the OEM feedback and us continue to deepen this relationship, are now the first provider that can actually enable the safety use cases, right? So that's I think is really encouraging for us.

At your point, we are working to further strengthen our relationship, right, to add in the capabilities of our perception software and collaborate there around the use of our perception software there. So that's what I can say for now. And of course, as we have able to -- were we able to share more, we will do that in the future.

[Suji Desilva, ROTH Capital Partners]

Just have one quick follow-up. And this may be a trivial point. I mean having a test vehicle mentioned elatively quickly in my mind, is that because of Aeva's two product and something specific about or can LiDAR vendor just equally easily get a test vehicle up and running the way you did?

[Soroush Dardashti, Co-Founder, CEO & Director]

Yeah. Look, I think we have made significant progress around our maturity over the past couple years here and even months. And I think that's -- our ability to scale and provide at two product in a way that works out of the box for the OEMs and our ability to support those, the OEMs directly where we put our attention and focus, I think has been a direct contributor to enabling the OEM to move quickly.

And this is kind of our model, right? We're looking to help them to accelerate their development. So, with that obviously they have also experience working with hardware stack and implementing sensors on the road. So, we've been working pretty closely to support this and looking forward to continue supporting them as they build up the rest.

[Operator]

The next question comes from Tristan Gerra of Baird.

[Tristan Gerra, Baird]

Hi, good afternoon. Just a follow-up question on the customer engagement that you've for which you provided an update what are the pending thresholds for existing engagements to ramp in volume production with the timing of those thresholds? And how many engagements, if any, are actual signed deals with the OEM for a volume ramp?

[Saurabh Sinha, CFO]

Yeah, so, Tristan, happy to answer that. So obviously, on these specific programs, we're talking about that we're advancing through our -- there's multiple programs across each end market includes passenger and commercial vehicle application. The programs are for level three and higher automation. You talked about scale and timing. So, as I mentioned on the call, these are programs that we see there as meaningful scale and for example, on the passenger car side, we see some of the target volumes to be over a hundred thousand vehicles per year.

So, this is something that is important and also from a timing standpoint where we see the decisions happening is in the next six months to 12 months. That's what we see and timing of production really is around these 25 timeframes to 27 timeframes. So that's what we've been working on. And especially some of these engagements, as I mentioned before, a number of these OEMs have had experience with time of flight or previously selected maybe time of five for initial deployment, but are continued to now engage with us because they increase in the CFMCW as that potential end state and a scalable solution to really enable their next generation capability. So, we're encouraged by that. We're going to continue our activities with those folks.

[Operator]

The next question comes from Richard Shannon of Craig Hallum.

[Richard Shannon, Craig Hallum]

Well, thanks guys for taking my question. I think my first one's going to be based on slide seven in your deck here, talking about your advancing the opportunities in the automotive industrial, talking about programs starting SOP in 2025 to 2027 specifically, are any of these auto programs that you're targeting looking at SOP in 2025 or would they be later than that?

[Soroush Dardashti, Co-Founder, CEO & Director]

Yeah, Richard, absolutely. Yeah, they are the auto sum auto programs fit in the same timeframe starting from ‘25 to ‘27 timeframe.

[Richard Shannon, Craig Hallum]

Okay. And in any way that you'd kind of count the number in the automotive space specifically?

[Soroush Dardashti, Co-Founder, CEO & Director]

I can provide exact numbers, but it's multiple programs, right? It's not one so -- that's obvious. And again, as I mentioned, I cross different segments, automotive, passenger, commercial, and industrial. We see programs that are offering meaningful potential with production scale once they reach those.

[Richard Shannon, Craig Hallum]

Okay. Fair enough. And my quick follow-up question here is just kind of taking big picture here. And looking at the landscape of automotive OEMs out there, the one that you are not engaged with. What do you think the reasons are for that? Is it something having to do with sufficient levels of maturity or any way you could kind of -- not with certain months? And what are the ways that you can lever your way into them?

[Soroush Dardashti, Co-Founder, CEO & Director]

Yes. Actually, it's a good question. I think with across all the engagements that we have had so far, we actually have it tense now from RFI to the RPQ stages. I'm not aware of any engagement now currently that we are on that we are not advancing on. So that's really encouraging. I think, obviously, if you look at our -- if you want to look at the way in the past and the time I think it really had been around maturity, which we have been working towards, building up on our maturization of the product, building up the capabilities in house, strengthening the team around manufacturing, supply chain and also bringing the product to level like Aeva Dew that can deployed on the road.

So, a lot of that work has happened and from here release focuses around working with the OEMs to qualify our product towards the sea samples and the production scale. And also, obviously, the whole reason that folks that even selected sometimes at the time of flight or dabbled in time of flight initially are working with us increasingly is that they believe in the fact that what they have today is not quite sufficient and really looking at FMCW as filling some of those gaps with the potential that it has in terms of technology. So that's what we continue to be encouraged by.

[Richard Shannon, Craig Hallum]

Okay. Fair enough. Thanks for taking my questions guys.

[Operator]

Thank you. The final question comes from Kevin Garrigan of WestPark Capital.

[Kevin Garrigan, WestPark Capital]

Hey, guys. Thanks for letting me ask a question. So, at the beginning of the year, some LiDAR companies were expecting automotive OEM award decisions in the first three months to six months. I think on the last call you guys had said, you we are expecting some award decisions in the next number of months and now it's six months to 12 months. Kind of seems like there might be a little bit of a delay in OEM decisions, but can you kind of give us any color on what's going on there? Is this timeline kind of inline with your expectations or the macro environment kind of playing a role with OEM decisions where they are kind of shifting their focus a little bit?

[Soroush Dardashti, Co-Founder, CEO & Director]

Yes. I think Kevin, I can answer that. So, I know, I think for us the timeline is in line with what we are expecting. Now that we have some more clarity from the OEMs, as we are advancing our five stages onwards. We see more clarity on the timing of the decisions. Some I think will happen earlier and some is going to happen later. Obviously, we do not control the timing of the OEM is making the decisions, right?

But based on our experience, based on knowing kind of what the OEM says and there may be some buffer in that, that's how we estimate the expectations on those decisions. I think generally though we are seeing actually increasing activity around the OEMs for deploying sensors and products in ADAS. I think, yes, it's is taking time for some folks to really define what they are going to do. But I think increasingly we are feeling that the next -- as I mentioned, yes, six months to 12 months is going to be critical for some of these folks to, in order for them to hit their timelines, they need to make some of these decisions.

And that's also a contributing factor to doing that. And on the other, I think maybe relevant topic, all the aims that we obviously engage with are really looking and planning to deploy LiDAR on their vehicles. And that's something that's also important in terms of the capabilities.

[Operator]

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session, and this also concludes today's conference. Thank you for attending. And you may now disconnect your lines.