Aeva Technologies Inc

NYSE:AEVA

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Good day. My name is [ Chloe ], and I will be your conference facilitator. I would like to welcome everyone to the Aeva Technologies Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded and simultaneously webcast.

I would now like to turn the call over to Andrew Fung, Senior Director of Investor Relations and Corporate Development. Andrew, please go ahead.

[Andrew Fung, executive]

Thank you, and welcome, everyone, to Aeva's second quarter 2024 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 second quarter 2024 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 and 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 risks 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, executive]

Thank you, Andrew, and good afternoon, everyone. In Q2, we achieved key milestones on our existing production program, while also meaningfully advancing on a number of additional opportunities. Importantly, we secured wins with new customers, highlighting the broadening interest for Aeva's unique 4D LiDAR. I'd also like to share our key accomplishments in Q2.

We continue to strengthen our partnership with Daimler Truck. We remain on track with Daimler Truck's Program Milestones, including continued sensor shipments to build out the OEM's fleet of on-road vehicles.

Daimler Truck also publicly unveiled the autonomous Freightliner vehicle, a technology demonstrator, which incorporates Aeva's 4D LiDAR as the exclusive long-range and ultra long-range LiDAR and highlights the OEM's progress and commitment to deploying autonomous vehicles at scale.

In automotive, we have made significant progress on opportunities with multiple global top 10 passenger vehicle OEMs. With one top passenger OEM, we continue to expect their award decision later this year. And with another top passenger OEM, we began a new collaboration around 4D LiDAR vehicle integration.

In industrial, we completed the final validation of our LiDAR-on-Chip and Nikon's product ahead of our first industrial launch in Q4 of this year. And lastly, Aeva continued to broaden the reach of 4D LiDAR with our expansion into security. We are proud that a top U.S. national defense security organization selected Aeva 4D LiDAR as a primary detection sensor to help protect some of the nation's critical energy infrastructure.

Let's now discuss in more detail about our recent business developments. With Daimler Truck, we continue to work closely together and remain on track with the OEM's milestones and the start of production time line. In Q2, we continued scaling sensor shipments to Daimler Truck and Torc for deployment on additional vehicles for on-road data collection and development.

The Aeva team is working very closely together with Torc and Daimler Truck on important use cases for safe operation of trucks at highway speeds. In the last quarter, Daimler Truck also publicly unveiled its battery electric autonomous Freightliner eCascadia technology demonstrator, which incorporates multiple Aeva 4D LiDAR as the exclusive long-range and ultra long-range LiDAR.

This vehicle highlights the significant progress Daimler Truck is making to commercialize autonomous trucks on U.S. highways and as part of the OEM's broader strategy to deploy a propulsion agnostic autonomous truck platform for scaling automotive trucks to significant volume.

Looking ahead, our focus is on supporting the rollout of additional Daimler Truck vehicles and related on road development as well as preparing for Aeva's start-up production in 2026 in time for Daimler Truck's market entry.

Beyond Daimler Truck, our engagements for additional automotive programs continue to solidify in Q2, as we advance on a number of opportunities expected to be decided in the coming months and expanded other ones. In particular, we made significant strides with multiple global top 10 passenger OEMs. This includes one we have discussed in the last quarter. The Aeva team continues to advance in close collaboration with this OEM, and we continue to expect the OEM to make an award decision for this production program later this year.

With another global top 10 passenger OEM, we have started on a collaboration for 4D LiDAR vehicle integration. This OEM is experienced with time-of-flight LiDAR and increasingly appreciate the benefits of FMCW for next-generation capabilities. We look forward to further demonstrating the perception and integration capabilities of our differentiated 4D LiDAR technology.

More broadly, we are highly encouraged by the industry's growing recognition that FMCW can help enable more advanced capabilities, including automated driving at highway speeds. Following our production program win with Daimler Truck, Aeva is experiencing this in exciting and tangible ways across a broad range of applications from passenger vehicles, commercial vehicles to mobility. Our focus is on meeting the growing interest for Aeva 4D LiDAR and the multiple opportunities to convert production wins in the near term.

Turning now to industrial. Aeva's on schedule for our first industrial launch in the fourth quarter. Over the quarter, we successfully completed the final validation of our LiDAR-on-Chip module in Nikon's product and are now preparing for our deliveries to Nikon in Q4. In support of this, we have also successfully scaled up our dedicated LiDAR chip manufacturing line in at Fabrinet.

This first collaboration with Nikon is for industrial metrology applications where Nikon's existing customers across automotive, aerospace and renewable energy already use Nikon's high-precision inspection products in the manufacturing processes, including some of the leading OEMs and automotive players in the space.

With Aeva's LiDAR-on-Chip module, we will together offer micron level accuracy in a faster, smaller and lower-cost solution that we believe will open new opportunities. This upcoming launch will mark a pivotal milestone for Aeva as we progress from the development stage to commercialization for the first time in industrial automation.

While we plan to scale our dedicated manufacturing and production line at Fabrinet over time, we believe this transition has the potential to accelerate our other ongoing engagements.

We continue to engage with industrial leaders on expanding into additional opportunities where we can leverage the same Aeva LiDAR-on-Chip module and our perception platform software for industrial metrology and automation across a broad range of applications.

Now speaking of new applications, we recently announced Aeva's first expansion into security. Our 4D LiDAR was selected by top U.S. national defense security organization to help protect critical U.S. energy infrastructure. Aeva sensors are expected to be a primary detection sensor to protect sensitive locations in various facilities from intrusion, such as water entries and exits and at perimeter fences. We expect to deliver the first set of sensors later this year.

This selection comes after evaluation of other technologies, including 3D time-of-flight LiDAR. Because of our instant velocity data, immediate interference and ultra-long range, Aeva 4D LiDAR was selected to enable faster and more reliable detection.

Aeva's mission is to bring the next wave of perception to a broad range of applications, and this one is another example of the increasing interest to adopt our technology across a diverse mix of end markets, including for some of the most demanding and high-stakes physical security applications. We look forward to supporting this important application and helping to protect some of our nation's critical infrastructure.

Lastly, I would like to share a bit more about our new collaboration in rail. Aeva 4D LiDAR was selected for Germany's automated train program. This program is funded by the Germany Federal Ministry of Economic Affairs and Climate Action and managed by Germany's national rail operator, Deutsche Bahn, in collaboration with other industry leaders such as Bosch and Siemens. The group is developing driverless, fully automated passenger train dispatch and parking functionality by 2026.

Aeva's 4D LiDAR was selected after evaluation of other sensors, including 3D time-of-flight LiDAR. Our ability to instantly detect velocity enables faster and more reliable detection of hazards, which can add critical reaction time to avoid obstacles surrounding train tracks.

In addition, Aeva's unique ability to offer precise real-time location state estimation without the use of GPS, means we can provide accurate positioning even where GPS can be compromised, such as tunnels, urban canyon and other areas where trains regularly operate.

We are excited to work with some of the rail industry leaders on this project and leverage 4D LiDAR's perception to bring new levels of automation to this end market.

With that, let me turn the call over to Saurabh to discuss the financials.

[Saurabh Sinha, executive]

Thank you, Soroush, and good afternoon, everyone. Let us now turn to Aeva's Q2 financial results. Revenue in Q2 was $2 million, driven by sensor shipments to multiple customers and NRE from Daimler Trucks. Non-GAAP operating loss was $32 million as we maintained a deliberate and disciplined approach to spend.

In Q2, gross cash use, which we define as operating cash flow less capital expenditure was $29.9 million. At the end of the quarter, our total liquidity stood at $285.2 million, of which $160.2 million was in cash, cash equivalents and marketable securities and $125 million in an undrawn facility.

We believe this capital position will continue to enable us to support our existing production partners, and together with our unique 4D LiDAR technology, convert more of our commercial momentum to additional production program wins in the coming months.

With that, let me turn the call back to Soroush for closing remarks.

[Soroush Dardashti, executive]

Thank you, Saurabh. To wrap up, in Q2, we continued to deliver on key milestones for our production partners, including Daimler Truck and Nikon and secured additional customers in new applications such as security and railway.

I'd like to thank the Aeva team for their determination to advance our commercial momentum in tangible ways in just 3 months. And I also like to express our appreciation to all of our stakeholders for their ongoing support.

Our increasing list of wins and the significant progress on new opportunities are further indication of the growing demand for our products across a diverse mix of markets and Aeva's leadership position to drive this adoption with our 4D LiDAR technology.

Aeva is in the final stages of a number of key opportunities and continue to advance on other engagements across automotive and beyond. We believe we remain in a strong position to continue converting portion of these opportunities to win this year and continue to further Aeva's mission to bring the next wave of perception to a broad range of applications from automotive to industrial automation and beyond.

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

[Operator]

[Operator Instructions] We'll move to Colin Rusch with Oppenheimer.

[Colin Rusch, analyst]

It's great to see you move into the security space, and I'm curious how leverageable that opportunity is for you? It seems like that's potentially relatively robust pricing and getting through the vetting process there could mean that there's other doors open. I just want to get a sense of total scope of that and the cadence at which you might be able to attack it.

[Soroush Dardashti, executive]

Colin, sure. This is Soroush. Happy to answer that. Look, you are absolutely -- we are actually very excited about this. This is our first expansion in security. We're excited to grow in the market here. First of all, a little bit of background. This top national security defense organization selected us after really going through a whole gamut of testing for a number of different technologies, including evaluating other time-of-flight LiDARs.

And really, I think what they realized, which we have been talking about for some time now is, this additional capability that 4D LiDAR and FMCW technology brings to the table do apply beyond automotive to other applications, including basically longer range detection, better resolution, and enabling faster and really comes down to faster and more reliable detection. So I think overall, as you mentioned, this is significantly higher ASPs than automotive.

We're talking at the beginning around order of magnitude higher. It is, obviously, near term. It's part of our plan. We've always talked about diversifying, bringing applications, including not just progressing automotive, which we really showed this quarter, not just the solid progress solidifying with our -- the one top 10 OEM, adding another top 10 OEM in the engagement process, but also now expanding this new application.

I think importantly, we think it's just a start of Aeva and Security. We are actually engaged in a number of other opportunities in defense, security, where we see that expanding. This win, I think, importantly provides a vote of confidence in our technology for others to also start adopting that, and we really hope to capitalize on this and work with additional opportunities that we can convert over time.

And again, this is consistent with our mission to bring really next level perception across broad applications. And the key focus here is being able to do so means we are really using the same investment we've made on our 4D LiDAR-on-Chip module and technology in automotive. And then taking that expanding it may be with different algorithms, but the same core technology we're certainly happy to now then make significant additional investments or spend to go tackle those other applications.

And I think as we are going towards production as we scale, we see our ability to expand these opportunities to, I think, meaningfully further increase as well.

[Colin Rusch, analyst]

Great. And then with the scale-up of the dedicated line and getting full validation for the Nikon products, can you talk about any sort of surprises, whether positive or negative, in terms of performance, efficiency of that production and anything within that validation process that maybe we want to be thinking about as a tailwind or a headwind here for you guys?

[Soroush Dardashti, executive]

Yes. I think we have been working, obviously, with our manufacturing line at Fabrinet for some time out of Thailand. And I think we said at the beginning of the year that we're going to be working on creating this dedicated manufacturing line for our LiDAR-on-Chip module. I think this is one of the advantages of having everything integrated at the chip level, right? We're not using any fiber, reducing the BOM cost, making the process as automated as possible.

And so, what we see here now is actually we were able to deliver on getting the dedicated line up and running a bit ahead of schedule. So that's actually important. We're planning for this around Q3, ahead of Q4 time frame. Now our Q2 already have completed this, which means really things may go actually pretty smoothly.

So we are starting to turn up the production on here with the dedicated line. This is going to, of course, support all of our production programs. We are already scaling shipments for Daimler Truck in which the on-road vehicle is ongoing. We're going to be using that also for Nikon shipment starting in Q4 and then hopefully others as go along that we talked about. But I think having that is obviously a critical milestone for us. So that allows us to have the production readiness on time.

I think beyond manufacturing also, we have been able in the past quarter continue our automotive Tier 1 readiness as a direct supplier. We achieved this ISO 27001 certification, which is an information security. That builds further confidence for not just our existing production customers but others to work with us on additional programs.

One more thing I want to highlight on Nikon specifically, this is just the beginning of our collaboration with Nikon. Obviously, this is a multiyear program. Again, as you mentioned, similar to security, this is a program where ASPs are higher, similar or maybe order of magnitude higher in automotive. It's also near term. And we're working together with Nikon that over time as we ramp up for potential to grow in additional new opportunities.

And more broadly in industrial automation, we also see that the ability for sensing technology really to use the same core chip module with different algorithms, different software achieve micron level of accuracy and precision. That is something that's not really possible really with any other LiDAR technology. So this is a market that we see is, in some ways, pretty interesting and ripe for Aeva to go after. We have been executing on this. And the fact that we have been able to now complete this validation, the final Nikon product gives us further confidence to then go after expanding in this market as well.

So we're doing all of this, just to be clear, while we are making significant progress and not letting up on the traction that we see in automotive and actually increasing that as well.

[Operator]

We'll move next to Joe Moore with Morgan Stanley.

[Joseph Moore, analyst]

I wonder in terms of the top 10 passenger OEM that you're talking about. Do you know if the opportunity there is kind of an OEM option? Is it more standard? And then you mentioned other progress with other top 10 OEMs. Maybe if you could talk about how much energy you're putting into customers beyond the sort of big 2 that you've sort of talked about the Daimler as well as the big passenger opportunity?

[Soroush Dardashti, executive]

Yes. Sure, Joe. Happy to answer that. So obviously, as you know, we have been focused on, of course, delivering on Daimler for first OEM, SOP and automotive. We're, of course, working on Nikon, as mentioned. I think with this top 10 OEM that we talked about last quarter, we have continued to solidify our position and our progress together.

We've completed -- of course, that completed the valuation of our product. We completed the audit, which contributed to continuous maturity gain of our company as a Tier 1 status. We finished ISO 27001, information security as well, further commitment to our readiness.

I think at this point, I would say it's important because we have continued in close collaboration with them, aligning on the technical perception requirements. We're actually starting the commercial discussions and negotiations as well. And this is kind of the second time that we've been doing this, right? So first time with Daimler Truck and now a passenger car with this OEM.

To your question about the option or not. What I can say is that there is an OEM that has experience already with time-of-flight LiDAR, they have done that and understand what they can and probably what they cannot do. And they're looking at a mass production volume across multiple vehicle lines, which we see as significant production volume opportunities for enabling highway speed automation.

So the way you think about this is not that it's like some very niche full, only Level 4 autonomy that is on some portion of vehicles. It is that next-generation ADAS capability. This is driving capability where it extends it to highway autonomy for higher speed. And we're really encouraged in our collaboration that we see their interest around using FMCW to enable that higher speed automation. Which they're also seeing that's not quite -- really that quite there yet with the ADAS technology they're working with. So that's what I can say.

So we're encouraged with that and their appreciation of our technology and continue to obviously work with them with expectation that the decision will be made later this year.

[Operator]

We'll move next to Richard Shannon with Craig-Hallum.

[Richard Shannon, analyst]

Firstly, maybe touching on Nikon here. Obviously, interesting to see first of all customer getting just some nice volume here. I wonder if you can kind of discuss what you have from them, whether it's forecast or even orders so far here. And how do we think about a kind of revenue run rate as you get into production presumably sometime next year? I'm not sure if we have a good way of understanding the scale here. Clearly, it's smaller than what you might look for a larger automotive program. But I think really sure I have a good sense of scale here, so maybe you can kind of couch that in some terms, I think that would be helpful.

[Soroush Dardashti, executive]

Sure. Let me answer that question, and of course, Saurabh can add. So obviously, this is a multi-year program with long commitments with Nikon. As I mentioned, the strong ASPs, the way you think about that is multiples in order of magnitude higher than automotive.

From a volume standpoint, obviously, what we can share and be careful there, but think of it as similar to maybe a mobility program, right? So when you look at the net benefit, things balance out from volume versus ASP, obviously.

And as I mentioned, we're starting at the end of this year with the launch and then ramp up over time. I think the way we think about this is, this is again a first program opportunity with Nikon. We are working across other opportunities, and we see that potential to grow over time. And beyond the industrial automation, this is being vetted as the first product that actually can deploy into industrial automation. We see the similar need with a number of other customers and others from an industrial automation and metrology standpoint. I believe to get to kind of micron-level precision that we think can actually further expand on that.

So that's kind of what I can share about kind of the size, of course, and the opportunity. We're pretty excited about that. And obviously, having dedicated line to help us manufacture for everybody, including Nikon, Daimler and others at Fabrinet helps us to expand on this growth and capitalize on it. But that's what I can say.

[Richard Shannon, analyst]

Okay. That's helpful. Maybe a quick follow-on question here regarding your top 10 OEM that you talked about here for the last few quarters. It seems you've been seeing some delays in terms of decision-making on LiDAR and broader autonomy programs here. I know you repeated the language you expected a decision sometime this year. Has there been any delays there? Is there any risk of that moving into 2025 at all?

[Soroush Dardashti, executive]

Yes. Good question. I think what's interesting that we see in the market is that in, I would say, an environment where we see some of the maybe others in the space, either reducing some of their activities around RFQs or some of the time lines pushing out. We've always maintained and talked about that the industry is transitioning from kind of time-of-flight towards FMCW and 4D LiDAR.

We think this actually has been helpful for us as evidenced by the fact that, one, we are on track with Daimler Truck. We talked about our SOP timeline remaining with 2026. We're continue hitting milestones. We're strengthening our partnership there.

Two, with this top 10 OEM we talked about last quarter, we are continuing on track, as I mentioned, with further engagement with the technical team, completion of the audit and now starting the commercial negotiation discussions there. And that we've maintained that what we believe is the timing for the decision still remains to be this year.

Of course, we don't control their timeline, but this is all the indications and the feedback we have, and we're very encouraged by our progress so far. We are continuing working with them around how we actually integrate and our technology also in the vehicle level.

Now importantly, also, we have now added a new engagement from another top 10 passenger OEM. This is another OEM that's working with a time-of-flight solution and is also looking to potentially transition to 4D LiDAR. So there's another major program, major volumes globally, timelines are similar in line with the other top 10 passenger OEM. And we are, I think, importantly, very encouraged by the OEM's desire to only work with Aeva on this kind of deep level of vehicle integration concept.

So that's something that gives us some indication around where there's maybe some reduction activities, we're seeing an increase in activities. And obviously, some of these are transitions from other technologies. And this is consistent with what we have talked about in the past and the broader trend that we're seeing in the industry. Obviously, look, we're not expecting we're going to win everything, but we are seeing increasing interest in technology. We're progressing on the right track. We have maintained our time lines as we have talked about it. And that's something that we see as important.

So overall, I would say, while maybe some of those others may have pushed out with what we are involved and active with, we are seeing our current programs on time and other programs coming up, giving us multiple shots on goal that we feel good about securing at least one program in the next months.

[Operator]

And it does appear there are no further questions at this time. This does conclude today's program. Thank you for your participation. You may disconnect at any time. And have a wonderful evening.