Aeva Technologies - Q1 2023

Transcript

Operator (participant)

Good day, ladies and gentlemen, and welcome. My name is Judith, and I will be your conference facilitator. I would like to welcome everyone to Aeva Technologies 1st quarter of 2023 earnings conference call. During the opening remarks, all participants will be in listen-only mode. Following the opening remarks, we will conduct a question and answer session. As a reminder, today's conference is being recorded and simultaneously webcast. I would now like to turn the call over to Andrew Fung, Director of Investor Relations. Andrew Fung, please go ahead.

Andrew Fung (Senior Director, Investor Relations and Corporate Development)

Thank you. 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 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. With that, let me turn the call over to Soroush Salehian.

Soroush Salehian (Co-Founder and CEO)

Thank you, Andrew Fung. 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 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. 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 Time of Flight LiDAR for this customer. This was possible because of Aeva's unique FMCW technology that simultaneously offers high resolution, long range, and instant velocity capabilities. Together with our perception software, Aeva's 4D LiDAR reliably detected and classified critical objects 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 am excited to share that we're also in discussions with the OEM around the use of Aeva's perception software and looking at ways to help 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.

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 well over 100,000 units per year at steady state production. These programs have targets that are production between 2025 and 2027, and we expect award decisions approximately over the next 6-12 months. Turning now to slide 8.

Following the successful bring up of our new final assembly manufacturing line, 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 100% of the LiDAR-on-chip module assembly steps. This will enable higher throughput that will further bring down costs on the path towards production. We expect to complete bring up of the new line by year-end. Let me turn the call over to Saurabh Sinha, who will discuss the financials in more detail.

Saurabh Sinha (CFO)

Thank you, Soroush Salehian, 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 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 equivalents, and marketable securities. 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. We will continue to take a disciplined and strategic approach to execute on our plan. I will now turn the call back to Soroush Salehian for closing remarks.

Soroush Salehian (Co-Founder and CEO)

In summary, I am excited by the progress and feedback from both existing and prospective customers on Aeva's 4D LiDAR. Our differentiated FMCW technology is increasingly resonating with leaders in the markets we are pursuing. 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 4D LiDAR to market. With that, we will now open the line up for questions.

Operator (participant)

Thank you, sir. Ladies and gentlemen, we will now be conducting the question and answer session. If you would like to ask a question, please press star then 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 to leave the question queue. We ask that you please limit your questions to 1 question each. For participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Colin Rusch of Oppenheimer.

Colin Rusch (Managing Director and Senior Research Analyst)

Thanks so much, guys. Appreciate you taking the time today. You know, with the process with Fabrinet and the automation, can you talk a little bit about what your sampling capacity is right now and how that's gonna change over the balance of the year and what do you think the impact might be with some of these customer relationships?

Soroush Salehian (Co-Founder and CEO)

Yeah, Colin Rusch. Hey, happy to answer that question. Look, we're obviously working closely now with Fabrinet to build up our further automation on the line. This is important, of course, because we're gonna 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 Aeries II production ramp. This also allows us to further really simplify the system assembly process as we have talked about before. At the end of the day, gives us ability to really provide the scale that's needed to support the customers.

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 engagements we have, we are seeing this demand that we are now responding to it so that we can build up the additional capacity. This line will also increase our throughput. What I can say is it will sufficiently satisfy our demand quantity needs as we go towards production. Also gives us further confidence and ability to really keep us on track towards achieving our targets for the cost.

Colin Rusch (Managing Director and Senior Research Analyst)

All right. That's super helpful. Then just shifting gears around the software development, you know, can you talk a little bit about the level of activity that you've got in terms of building out the ecosystem and the different software pieces that you're gonna need to develop for each of the different end markets? I'll take the rest of it offline after that. Thanks, guys.

Soroush Salehian (Co-Founder and CEO)

Sure. Yeah. Look, first of all, as I mentioned on the call, we're excited that we're seeing increasingly OEMs, such as the top 10 OEM, start to see significant value in not just our 4D LiDAR, but also the perception software. As our software gets embedded into the AV stack or the 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 of the use of our capabilities. That's why with, for example, the top 10 OEM, we're talking further to strengthen our relationship there. They're looking to leverage our perception software to help them accelerate the AV stack.

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 that's really tuned for their specific applications. What we are hearing is that this is gonna also help them differentiate some of their capabilities compared to their competition. We are really encouraged by that. I think over time, we're gonna 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 (participant)

Thank you. The next question comes from Joseph Moore of Morgan Stanley.

Joseph Moore (Managing Director and Head of U.S. Semiconductors Research)

Great. Thank you. I 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 in 2024. Is that still the case?

Soroush Salehian (Co-Founder and CEO)

Joseph Moore. Happy to answer that. Look, as we have talked about, you know, 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, 2020, 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. You know, we are on track with the engagements that we have and, you know, obviously provide some more color around these new opportunities.

Joseph Moore (Managing Director and Head of U.S. Semiconductors Research)

Great. That's helpful. Thank you for clarifying. In terms of the cash balance, obviously you have a pretty healthy balance sheet, but the burn rate of $37 million in Q1, you know, I guess what over the next, say, eight quarters or so before you start to really ramp revenue, can you just give us a guide to what happens to the, to the cash balance?

Saurabh Sinha (CFO)

Hey, Joseph Moore, this is Saurabh Sinha. I can answer that for you. 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. What we mentioned at the last call, that we expect our OpEx, non-GAAP OpEx, to be similar to 2022 levels, which was around $124 million. We are on track for that. Non-GAAP OpEx is a good indicator of the cash burn for the year.

Joseph Moore (Managing Director and Head of U.S. Semiconductors Research)

Great. Thank you.

Moderator (participant)

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

Pierre Ferragu (Managing Partner and Head of Global Technology Infrastructure Research)

Hey, guys. Thanks for taking my question. A quick follow-up on your outlook for cash burn. If you have, like, an OpEx burn rate around the 120 in the low 120s today for OpEx, what happens when you start ramping production? Is there, like, an additional element of cash consumption because starting production means additional CapEx, like any bad initial yield that could drive, like, cash burn, additional cash burn on top of your OpEx? Should we expect actually an almost instant, immediate, slowly ramping contribution, like cash contribution?

Saurabh Sinha (CFO)

Hey, Pierre Ferragu, this is Saurabh Sinha. I think your latter is true. We expect that the OpEx as well as the CapEx to be steady 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 (Managing Partner and Head of Global Technology Infrastructure Research)

Yeah. Okay. That makes sense. Thanks for that.

Operator (participant)

Thank you. The next question comes from Sujit De Silva of Roth MKM.

Suji DeSilva (Managing Director and Senior Research Analyst)

Hi, Saurabh Sinha. Hi, Soroush Salehian. Congrats on the progress here. Question on the top ten OEM. I'm just trying to understand, you know, a lot of LiDAR companies, competitors of yours have announced partnerships. I just wanna understand how this one feels different to you guys, so you can differentiate it. It sounds like a deeper relationship. I just wanna really kinda get that nuance. It should be good. Just, you know, what was the key safety feature that 3D TOF 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'd be great.

Soroush Salehian (Co-Founder and CEO)

Sure,Suji DeSilva. Let me answer your second one first. Obviously, you know, with this OEM, we've been working actually for quite some time. 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. What sets us apart. What sets us apart is our ability to, one, simultaneously deliver high resolution and long ranges. Two, add in that dimension of velocity to really help us consistently detect objects across ranges. As I mentioned before, for example, when you have at a long distances with, let's say, a 3D Time of Flight LiDAR, only a few points.

Let's say you get a few points, 5 points on an object. When you look at that object and you only have the dimension of distance, you have to. You're not sure exactly what you're looking at those really far distances. All you can do is keep looking. Over time, at highway speeds, that is a critical time, is a critical aspect. If you add the added dimension of velocity, those same 5 points in start to have now velocity contribution. If they have all the same velocity, they're all moving towards you at 75 miles per hour, you better know that that's a vehicle and it's not a flying object or something like that on the road. That's something that is, I think, unique, provided by us.

I think, for this OEM, it contributed also in a significant way, this added dimension of velocity, to help them achieve this near the level of confidence to address this safety use case, also, just to be clear to your point from before, this OEM had worked, has worked in the past with other 3D LiDARs before. From the OEM feedback and us continuing to deepen this relationship, we're now the first provider that can actually enable the safety use cases. That's, I think is really encouraging for us. To your point, we are working to further strengthen our relationship.

To add in the capabilities of our perception software and collaborate there around the use of our perception software there. That's what I can say for now. Of course, as we have able to, we'll be able to share more, we will do that in the future.

Suji DeSilva (Managing Director and Senior Research Analyst)

I just have one quick follow-up, and this may be a trivial point. I mean, the having a test vehicle mentioned relatively quickly in my mind, is that because of the Aeries II product and something specific about it, or can any LiDAR vendor just equally, easily get a test vehicle up and running the way you did?

Soroush Salehian (Co-Founder and CEO)

Yeah, look, I think we have made significant progress around our maturity over the past, couple of years here and even months. I think that's, our ability to scale and provide Aeries II 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. This is kind of our model. We're looking to help them to accelerate their development. With that, obviously they have also experience working with hardware stack and implementing sensors on the road. We've been working pretty closely to support this and looking forward to continue supporting them as they build up the rest.

Suji DeSilva (Managing Director and Senior Research Analyst)

Okay. Thanks, Soroush Salehian.

Moderator (participant)

Thank you. The next question comes from Tristan Gerra of Baird.

Tristan Gerra (Managing Director and Senior Research Analyst)

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? What's the timing of those thresholds? How many engagement, if any, are actual signed deals with the OEM for a volume ramp?

Soroush Salehian (Co-Founder and CEO)

Yeah. Tristan Gerra, happy to answer that. Obviously we're, you know, on these specific programs we're talking about that we're advancing through RFQs, there's multiple programs across each end market, includes passenger and commercial vehicle application. You know, the programs are for, you know, Level 3 and higher automation. You talked about scale and timing. As I mentioned on the call, you know, these are programs that we see there as meaningful scale. You know, for example, on the passenger car side, we see some of the target volumes to be over 100,000 vehicles per year. This is something that is important.

Also, from a timing standpoint, you know, where we see the decisions happening is in the next 6-12 months. That's what we se timing of production really is around this 25 to 27 timeframe. That's what we've been working on. especially on 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-flight for initial deployment, but are continuing to now engage with us because they increasingly see FMCW as that potential end state and a scalable solution to really enable their next generation capability. we're, you know, encouraged by that. We're gonna continue our activities with those folks.

Moderator (participant)

Thank you. The next question comes from Richard Shannon of Craig-Hallum.

Richard Shannon (Senior Research Analyst)

Thanks guys for taking my question. I think my first one's gonna be based on slide seven in your deck here, talking about your advancing the opportunities in automotive and 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 Salehian (Co-Founder and CEO)

Yeah, Richard Shannon, absolutely. Yeah, they are. Some of the auto programs fit in the same timeframe, starting from 2025-2027 timeframe. Yeah.

Richard Shannon (Senior Research Analyst)

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

Soroush Salehian (Co-Founder and CEO)

Yeah. I can't provide exact numbers, but it's multiple programs. It's not one. That's, that's obvious. Again, as I mentioned across the different segments, automotive, passenger, commercial, and industrial, we see programs that are offering meaningful potential with production scale once they reach those.

Richard Shannon (Senior Research Analyst)

Okay. Fair enough. My quick follow-up question here is just kinda thinking big picture here, and looking at the landscape of automotive OEMs out there. Of the ones that you're 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, any way you could kinda couch why you're not with certain ones, and when, you know what are the ways that you can lever your way into them?

Soroush Salehian (Co-Founder and CEO)

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

That's a lot of that work has happened, and from here really focuses around working with the OEMs to qualify our product towards the C samples and production scale. Obviously, the whole reason that folks that even selected sometimes 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. That's what we continue to be encouraged by.

Richard Shannon (Senior Research Analyst)

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

Moderator (participant)

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

Kevin Garrigan (Senior Research Analyst)

Yeah. Hey, guys. Thanks for letting me ask a question. At the beginning of the year, some LiDAR companies were expecting automotive OEM award decisions in the first, you know, 3-6 months. I think on the last call, you guys had said you were expecting some award decisions in the next number of months, and now it's, you know, 6-12 months. Kinda seems like there might be a little bit of a delay in OEM decisions, but can you kinda give us any color on what's going on there? Is the timeline kind of in line with your expectations, or is the macro environment kinda playing a role with OEM decisions where they're kinda shifting their focus a little bit?

Soroush Salehian (Co-Founder and CEO)

I think, Kevin, I can answer that. I think for us, the timeline is in line with what we are expecting. you know, now that we have some more clarity from the OEMs as we're advancing from the RFI stages onwards, we see more clarity on the timing of the decisions. Some I think will happen earlier, and some is going happen later. Obviously, we do not control the timing of the OEMs making the decisions, based on our experience, based on knowing what the OEM says, and there may be some buffer in 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, yeah it's taking time for some folks to really define what they're going to do. But I think increasingly we're feeling that in the next, as I mentioned, yeah, 6-12 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. On the other, I think, maybe relevant topic, you know, all the OEMs that we always 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.

Kevin Garrigan (Senior Research Analyst)

Okay. Got it. That makes sense. I appreciate the call.

Operator (participant)

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