Aeva Technologies, Inc. (NYSE:AEVA) Q3 2023 Earnings Call Transcript

Aeva Technologies, Inc. (NYSE:AEVA) Q3 2023 Earnings Call Transcript November 8, 2023

Aeva Technologies, Inc. misses on earnings expectations. Reported EPS is $-0.15 EPS, expectations were $-0.14.

Operator: Good day. My name is MJ [ph] and I will be your conference facilitator. I would like to welcome everyone to Aeva Technologies Third Quarter 2023 Earnings Conference Call. During the opening remarks, all participants will be 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 would now like to turn the call over to Andrew Fung, Director of Investor Relations. Andrew, please go ahead.

Andrew Fung: Thank you, and welcome, everyone, to Aeva’s Third 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 third 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. And with that, let me turn the call over to Soroush.

Soroush Dardashti: Thank you, Andrew, and good afternoon, everyone. It’s been an incredibly exciting time at Aeva as the adoption of FMCW, LiDAR continues to build, AVA is leading this trend, delivering production wins in both automotive and industrial. And with growing interest for Aeva unique 4D LiDAR-on-Chip technology, and continued advancement of a number of large opportunities, we have strategically positioned Aeva to be in the strongest position for success and to secure additional win. I would like to highlight key accomplishments that are summarized on slide four. First, I’m thrilled to share that Aeva was selected by May Mobility to be the exclusive production supplier of long-range LiDAR for their autonomous vehicle.

This is a multiyear reduction agreement where Aeva 4D LiDAR will replace conventional time-of-flight long-range LiDAR and was selected to help May Mobility further scale by enabling a broader operational design domain. Second, Aeva was also awarded a multiyear production program with Nikon for their high precision industrial inspection products. We have been working with Nikon for some time now and we’re excited to leverage our LiDAR on chip technology with micron able precision to advance to the production phase and open new opportunities in the established and growing industrial automation market. Third, we continue to make strong progress with the top 10 OEM and are now in the final phase with this OEM. This quarter, we received the OEM’s highest available rating for manufacturing readiness.

This paves the way to be a potential direct supplier to the OEM and is a clear indication of Aeva’s ability to support major global automotive program. We expect the OEM to make the production program award decision over the next quarter. And fourth, we further strengthen Aeva’s position for success. We are pleased to welcome Dr. Stefan Sommer, former CEO of ZF Group and Board member at the Volkswagen Group, responsible for procurement to Aeva’s Board to help further advance our automotive OEM opportunity. And last, as we move to the production phase on the heels of our two multiyear production wins in automotive and industrial, and our continued momentum with top global OEMs, including a top 10 OEM we’re making a strategic decision to further bolster our already strong balance sheet with the rate of new capital of $145 million through an approximately $20 million private placement and $125 million preferred share facility with existing long-term stockholders.

This strengthens Aeva’s position to win additional OEM programs and support them beyond their start-up production in a way that minimizes near-term dilution. I would now like to provide more color on our recent business development, which begins on Slide 6. Let’s start with our production wins in auto with May Mobility, a leader in the development and deployment of AV technology. The company has strategic partnerships with some of the largest automotive and transportation companies in the world including with Toyota, where they currently provide paid autonomous rides on the Toyota Sienna, autonomous vehicle platform. Through long-term contracts with transit agencies, municipalities and other businesses, May Mobility operates transit services across a growing number of markets in the US, including Michigan, Texas, Minnesota, Arizona and upcoming in California.

To date, May Mobility has provided more than 350,000 rides using its proprietary multi-policy decision-making, autonomous vehicle technology with additional deployments planned to begin in 2024. To further scale, May Mobility has been looking for next-generation sensors that can enable expansion of the operational design domain. They selected Aeva 4D LiDAR because they believe in the unique capabilities of FMCW technology and want to leverage Aeva to scale their operations. Compared to time-of-flight LiDAR Aeva’s combination of long-range and direct velocity measurement for every pixel detect and classify small hazardous objects faster and more accurately to provide the necessary reaction time across a broader range of conditions. And together with Aeva’s Ultra resolution, which utilizes our proprietary velocity of data differentiates patiently from dynamic points, we offer near camera level resolution bringing more reliable perception that provides the confidence to expand.

We believe other inherent benefits of FMCW also bring value to name Mobility’s AV stack to provide some real-world examples, retro reflector blooming and road time and interference from other sources of life, such as the sun and challenge with LiDAR performance. FMCW is inherently immune to retro reflector booming and ambient light, ambling able LiDAR to predict critical objects with no degradation in these scenarios and will clearly define object implementation. These are just some of the differentiated capabilities that we hope to bring to our partner May Mobility. As part of our production program win, Aeva 4D LiDAR will be the exclusive long-range LiDAR on main mobility, autonomous vehicles, global and replaces the conventional time flight long-range LiDAR.

The agreement includes a five-year volume commitment through 2028 with deliveries already starting this quarter and production ramping in 2025. Moving now to slide 7. We achieved an important milestone in industrial automation with the award of our first production program with Nikon to use Aeva’s LiDAR-on-chip technology to power the next-generation high-precision industrial inspection products. This suite of products is used for industrial metrology and quality control during high-volume manufacturing, and Nikon’s current generation is already deployed to customers across the automotive, aerospace and renewable energy industry, including some of the largest OEMs such as BMW, Savantis and other automations. Being the same silicon photonics chip architecture used for our automotive applications, but with different algorithms to achieve micron level precision.

Aeva’s technology will enable Nikon to offer a faster and smaller solution than is currently available, bringing added value to Nikon’s current customers as well as opening new opportunities for additional applications. The production award comes after two years of close collaboration with Nikon, develop and validate our LiDAR-on-chip technology, meats Nikon’s stringent performance requirements. Aeva’s start of production is on track to the target we set two years ago and is planned for late 2024. This production agreement includes minimum volume commitments from Nikon over the multiyear program. Beyond this, we continue to be engaged on additional opportunities in the industrial space. As we have previously discussed, the industrial automation market is an established and growing multibillion dollar opportunity and high precision measurement is a growing field within industrial automation where we are seeing strong interest for Avea’s unique capability.

Because of this pull from the market, we developed a perception platform for high precision measurements that utilize software to adapt performance for different requirements across multiple non-automotive applications. Nicon will be the first to use this perception platform, and we look forward to bringing additional applications to the market. Let’s turn to slide 8 to discuss the latest in our collaboration with a top 10 OEM. This quarter, we continued to make strong progress with the OEM, most notably, the approval of Aeva’s manufacturing processes and ability for Aeva to be a potential direct supplier to the OEM. I’m incredibly proud to say that Aeva received OEM highest rating category for manufacturing readiness, which the OEM indicated is only given to a small percentage of their supplier base.

The rating is based on a comprehensive audit of Aeva’s manufacturing team and processes and an on-site assessment of Aeva manufacturing partners automated production facility. This is a clear validation of Aeva’s maturity and ability to operate as a direct Tier 1 supplier for a large global automotive program. Over the quarter, this OEM continues to expand their vehicle fleet with Aeva 4D LiDAR to support their milestones and overall AV stack. We remain highly encouraged by our progress and ability to help the OEM achieve their stringent requirements and use cases. This has resulted in Aeva being further down-selected to the final phase of this OEM. We expect the OEM to award the production program in the next quarter and hope to have more to share soon.

Moving now to Slide 9. We are excited to have Dr. Stefan Sommer, joined Aeva’s Board of Directors. Stefan brings an extraordinary breadth of experience as an automotive industry veteran with a history, leadership career in automotive. Stefan’s past leadership roles include some of the largest global automotive car makers, including Member of the Board of Volkswagen Group and Head of Component and Procurement at VW Group as well as leading some of the most renowned automotive Tier 1 suppliers, including as the CEO of ZF Group, where he led and executed a strategy that helped to grow ZF to become one of the world’s largest Tier 1 suppliers. With Aeva’s commercial momentum in automotive, Dr. Sommer’s experience will be invaluable, as we work together to bring automotive programs to SOP and work towards winning additional opportunities.

Given his deep knowledge of the Automotive Industry, Dr. Sommer interest to join Aeva’s Board, point to the significant potential of Aeva’s differentiated technology. We look forward to working together to accelerate adoption of Aeva’s 4D LiDAR. And with that, let me turn the call over to Saurabh, to discuss the financials.

Saurabh Sinha: Thank you, Soroush, and good afternoon, everyone. Let’s turn to Slide 11, which summarizes Aeva’s financial results for Q3 2023. Revenue for Q3 was $0.8 million which continued to be driven by growing deliveries of Aeries II. Non-GAAP operating loss was $30.3 million, as we maintained a deliberate and strategic approach to R&D and other operating spend. Reflecting on our cash spend for the quarter, gross cash used which we define as operating cash flow, less capital expenditure was $29.1 million. Our balance sheet remains strong with $233.7 million of cash, cash equivalents and marketable securities at the end of Q3 and weighted average shares outstanding in the quarter was $222.8 million. To sum it up, Aeva is maintaining strong financial discipline, while making significant progress on our commercial momentum.

As we move to the important stage of preparing for start of production, we will continue to be thoughtful in managing our capital with a focus on positioning Aeva to support our existing customers as well as winning additional programs. As part of this focus, we made a strategic decision to further bolster our already strong balance sheet with additional capital, as summarized on Slide 13. I would like to share more about what drove this decision. This year, we have been making significant progress on our objectives, from multiple production program wins to advancing on other engagements, such as with the top 10 OEM and demonstrating the maturity of Aeva’s manufacturing and ability to support production program. Because of this, we continue to see growing interest for our 4D LiDAR and are near the final decision stage on a number of opportunities.

We believe the additional capital strategically put Aeva in a stronger position to win additional programs. By building OEM confidence in our ability to support multiple programs, including with other major automotive OEMs looking to select few suppliers who can support their high-volume production program beyond SOP. In total, we reached agreements for additional capital of 145 million with some of our largest and longest stockholders, Adage and Sylebra, demonstrating their continued strong conviction in Aeva’s unique technology and potential. Importantly, the financing structure minimizes near-term dilution with approximately $20 million of the total through a private placement of common stock. The remaining $125 million is a non-voting preferred shares facility that is currently undrawn and can be drawn at Aeva’s discretion upon a new automotive OEM production win.

This flexibility will enable us to be strategic in how and when we may utilize the additional capital, demonstrating our continued focus on taking a prudent approach to capital deployment. And with that, I will hand the call back to Soroush for closing remarks.

Soroush Dardashti: Thank you, Saurabh. When we started Aeva, we set out to bring a unique perception solution to a broad range of applications from automated driving to industrial automation and beyond. While the macro environment has been challenging, I can say that I’ve never been more convinced in Aeva’s potential and future outlook. Our transition from development phase to production phase is gaining momentum with our latest production program wins with May Mobility and Nikon highlighting both the broad applications for 4D LiDAR and up bring on track for production deployments by 2025. And we believe this is only the beginning. We continue to advance on a number of other large near-term opportunities such as with a top 10 OEM, expanding our board with leading automotive executive experience, and strategically bolstering our balance sheet to put Aeva in a further position of strain to secure additional production wins and support OEMs beyond their start of production.

I would like to thank our talented and dedicated team at Aeva, who are enabling us to achieve these milestones. Together with our stakeholders, I am excited to continue executing on our mission and bring 4D LiDAR to market. With that, we will now open the line up for questions

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Q&A Session

Operator: [Operator Instructions] Today’s first question comes from Joe Moore with Morgan Stanley. Please go ahead.

Joe Moore: Great. Thank you. Wonder if you could talk about the progress with the Tier 1 win that you talked about, I guess, if you’re going to be able to make the announcement in the next quarter, does that mean that their business has already won and that the announcement is kind of more of a formality. And I guess, will you be able to disclose what the customer is at that — in this next quarter time frame?

Soroush Dardashti: Hey, Joe, yes, happy to answer the question. Look, what I can say is as we talked on the call and as we have talked throughout the past few months, we have continued to make step-by-step progress in a stronger and stronger way with this OEM. In the past few months of the past quarter, they have deployed additional vehicles using our LiDARs with our technology on the road. And what we are now is really in that final phase of the discussions, the negotiation, the commercial topics as it goes towards the production award. It has not been awarded yet. But as mentioned, we’re feeling strong about that, and we intend to receive the nomination award decision from the OEM in the next quarter. And of course, we fully hope that we can also talk about and name the OEM at that time.

So — and obviously, this is the top 10 OEMs. So we think this is definitely a very important program that we’ve been working towards for some time. And on the heels of some of these wins and all the announcement we talked about today, we continue to make progress with this OEM, but also other top global OEMs that we’re progressing and advancing with across automotive as well as industrial applications.

Joe Moore: Yeah. I wanted to ask them about that. I mean to the extent that you’re just close to making an announcement with one top 10 OEM. When you look at the kind of capability your technology brings, I would think that would start to create that enthusiasm. What kind of timeframe — how long should we expect it to take if you get interest from other OEMs? How long would it take to kind of move that to something that could drive revenue down the road?

Soroush Dardashti: Yeah. So as we have talked about, the programs we’re talking about here, first of all, the two wins that we actually announced this week are both for mid-decade SOPs, right? So May Mobility in 2025, Nikon in 2025different industries. We have been talking about this for some time. We said we’re going to go to production 2025. Now we are showing a validation, and these are, I think, two big points that are showing then. Additionally, this other re-en programs, including top 10 OEM also has similar mid-decade type SOPs we have not shared that yet. And at the right time, once we can talk about it, we will. But that’s when things are going to also start transitioning as we go along as we’re moving now from this kind of development phase towards the production phase, we believe that’s going to start to translate towards those increasing revenues and also actual shipments and with multiple of these customers.

So that’s what I can say right now. But I think from a timing standpoint, those time lines remain as we have discussed before.

Joe Moore: Great. Thank you very much.

Operator: Thank you. The next question is from Colin Rusch with Oppenheimer. Please go ahead.