Aeva Technologies, Inc. (NYSE:AEVA) Q4 2022 Earnings Call Transcript

Aeva Technologies, Inc. (NYSE:AEVA) Q4 2022 Earnings Call Transcript March 22, 2023

Operator: Good day. My name is Doug and I’ll be your conference facilitator. I’d like to welcome everyone to Aeva Technologies’ Fourth Quarter and Full Year 2022 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: Thank you, and welcome, everyone to Aeva’s fourth quarter and full year 2022 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 fourth quarter and full year 2022 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. 2022 was a significant year at Aeva, that was marked by a number of milestones that moved us forward on the path towards production. I would like to summarize our key achievements on Slide five. First, we introduced Aeries II, the world’s first commercially available 4D LiDAR offering high performance and a smaller form factor. Over the course of 2022, we shipped to more than 40 customers. Importantly, this has enabled us to progress on a growing number of vehicle programs to the advanced or RFQ stage with leading OEMs. Second, our commercial progress was possible because of our ability to bring up our initial manufacturing line; launching a new product is not trivial, and I am very proud of the work the Aeva team accomplished to increase the pace of production by approximately three times by yearend, and enable us to meet more of the growing demand for our unique products.

Third, we solidified our accelerator expansion into the established and growing industrial automation markets, with the addition of our collaboration with SICK AG. We also completed core development of our LiDAR-on-Chip perception platform for industrial automation, which we are using for our existing customers, including Nikon, as well as to grow our opportunities in industrial automation and fourth, all of this was accomplished while maintaining a sharp focus on spend. OpEx came in below the outlook we provided for 2022 by more than 10% without limiting our ability to execute. We ended the year with $324 million in cash and marketable securities, which positions us well to continue investing strategically to bring Aeva 4D LiDAR to market.

Turning now to Slide seven, I would like to provide more color on recent business developments. The Aeva team has been laser-focused on advancing our growing commercial momentum and our efforts are beginning to show meaningful progress. In particular, I’m excited to share that Aeva has been selected by top 10 global OEM for their vehicle development program. We are starting to deploy Aeva 4D LiDAR as the long range LiDAR on this OEM on-road development fleet, where valuable re-enrol data with a new dimension of velocity will be used to define the specifications for production vehicles with a targeted 2025 start of production. We have been engaged for some time with this OEM and now they can start to incorporate Aeva’s unique velocity data and the perception software to achieve their high standards for safety.

Because FMCW can instantly measure velocity for every pixel and is immune to interference from other LiDARs or the sun, it can provide unique advantages over time of flight or 3D LiDAR in detection and classification of critical objects on the road. We believe this helps OEMs with a better margin of safety and to achieve the performance needed for broad deployment of advanced ADAS and autonomous capabilities. We hope to share more details on this collaboration over the course of this year. Moving to Slide eight, I would like to discuss our progress in industrial automation. In Q4, we completed the core development of our LiDAR-on-Chip perception platform for industrial automation, which utilizes the same chip architecture we are using for automotive, but with different software to pursue the large and growing precision distance measurement market, which is a subset of the large industrial automation sector.

Precision distance measurement is used across many industries for manufacturing, inspection and quality control. While the market is already multi-billion dollars in size, broader adoption has unlimited by current solutions that are typically challenged in meeting the right balance of performance, cost and size all in one solution, often resulting in multiple product architecture skews for each application to achieve; for example, short, mid or long range distance measurements. Through adaptable software, Aeva’s LiDAR-on-Chip can achieve the needed level of precision across multiple applications from short to longer ranges, all on the same scalable, silicone photonics architecture at affordable costs in a compact form factor. We think this performance flexibility can bring immense value to the end user and allows us to pursue multiple opportunities with the same platform.

We’re using this platform starting with our collaboration with Nikon, leveraging Aeva’s ability to achieve micron-level precision for industrial metrology applications. Additionally, our plan this year is to leverage our LiDAR-on-Chip perception platform to respond to a growing pool from the market and distance measurements for large scale opportunities. Let’s turn to Slide nine. After successfully bringing up our initial manufacturing line last year, I am pleased to share that we are expanding to a new manufacturing line in 2023 to support our growing commercial momentum. This line simplifies the overall manufacturing process and is where we complete our LiDAR system assembly, calibration and test. We expect this new added capacity to sufficiently support our product deployment needs to existing customers and new opportunities until mass production.

Earlier this year, we began manufacturing on this new line and expect process optimizations to continue over the next few months. Along with the higher capacity, our new line will allow us to also implement increasing levels of automation as we progress towards production. Turning now to Slide 11, I would like to share more about our key goals for this year. Our priority is to convert more of our commercial progress to program wins and focus on the following objectives in 2023. First, we target winning two additional programs towards production. We’re progressing on a growing number of vehicle programs to the advanced or RFQ stage with leading OEMs. In addition, this year we are looking to further our engagements within major industrial sensing opportunities where we can leverage our LiDAR-on-Chip perception platform.

We do not expect to win all of our engagements, but do believe we are in a position to secure additional programs towards production this year. Second, we plan to complete key product development in automotive and industrial. In automotive, this includes completing the final form factor that will be used for serious production. For industrial automation, we will continue to iterate on our platform this year to prepare for market release and expand additional opportunities for deployment at scale. Third, complete the expansion of our new manufacturing line, which we expect to provide sufficient capacity to support our existing customers until production and secure additional production programs. And fourth, we are focused on maintaining strong financial discipline as we work to bring Aeva 40 LiDAR to market.

As Saurabh will discuss in more detail next, we target OpEx in 2023 to be similar to 2022. We have a strong balance sheet and will continue to strategically invest to meet the increasing demand for our unique 40 LiDAR technology. With that, let me turn the call over to Saurabh, who will discuss the financials.

Saurabh Sinha: Thank you, Soroush, and good afternoon, everyone. Let’s turn to Slide 13 to discuss our full year 2022 financial results and 2023 financial outlook. Revenue for full year 2022 was $4.2 million, which included revenue of $8.1 million, that was partially offset by an adjustment of $3.9 million due to an existing customer’s roadmap provision towards less customization. This aligns with our standard product line capabilities. We look forward to continuing our collaboration with this customer on their program. Non-GAAP operating loss for the full year 2022 was $127.7 million, which primarily consisted of R&D expenses. In addition, we continue to efficiently manage operating expenses and it came in below our annual outlook for 2022 by more than 10%.

Our gross cash use, which is operating cash flow less capital expenditure was $117.4 million for the full year 2022. This enabled us to end the year with a strong cash, cash equivalent and marketable securities position of $323.8 million. Weighted average shares outstanding for the fourth quarter was $218.4 million. Turning now to a financial outlook for 2023; as Soroush said, this year we are focused on increasing our wins and supporting our customers on product validation and development of their end products. We are targeting revenue in 2023 to grow by at least 50% year-over-year, driven by higher product deliveries to our key customers. As we are bringing up our new manufacturing line and optimizing processes in the first half of the year, we expect 2023 revenues to be backend loaded.

We are targeting non-GAAP operating expenses, which excludes stock-based compensation and other potential non-recurring charges to be similar to 2022. And lastly, Aeva’s balance sheet is strong and we continue to have significant capital to execute on our plan to ramp up product shipments, support our existing customers and convert additional programs toward production. I will now turn the call back to Soroush for closing remarks.

Soroush Dardashti: Thank you, Saurabh. In summary, we are really excited about our growing commercial momentum and the opportunities ahead in 2023. Over the past quarter, we have made substantial progress on multiple programs with global OEMs, thanks to the tremendous work by the Aeva team. Similarly, we are actively engaged on growing opportunities to use our LiDAR-on-Chip perception platform for large scale implementation and industrial automation. Our focus in 2023 is on winning these opportunities and continuing to work towards production with our existing partners. We are in a strong position with our unique technology and financial position to do so, and I look forward to sharing our progress over the course of this year. With that, we will now open up the line for questions.

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Q&A Session

Operator: Our first question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question.

Colin Rusch: Thanks so much, guys and congratulations on all the progress. With the increased availability of product, and having been able to get samples out, can you talk a little bit about the availability of samples and how it’s changing the scope and scale of the customer engagement that you’re able to work on at this point?

Soroush Dardashti: Sure, Colin, happy to answer that. This is Soroush. So, obviously as we set the goal last year to release Aeries II, this was a key milestone for us. We did achieve that goal. We really delivered on launching Aeries II and this has been a key factor for us, right? As I mentioned on the call, that launch resulted in us being able to shift over 40-plus customers. We have further expanded with that, our ability to secure new partners in the industrial as well including with the collaboration with SICK AG, of course, in addition to our existing collaboration with Nikon and, we’ve also made good progress in bring up our initial manufacturing in mind. So all of that has really resulted us to actually now continue our progress towards advancing to the late stage or our few stages with multiple customers, which obviously if we could not deliver Aeries II would’ve been a problem.

So that’s been a big win-win for us. I think also generally the feedback customers have been quite positive and we are making now meaningful progress and case in point is the top 10 OEM decision that I mentioned on the call to start implementing our LiDAR on their vehicle fleet, which is a significant milestone for us as well. So hopefully that answers your question.

Colin Rusch: Yes, that’s helpful. And then with the manufacturing process, can you talk a little bit about the key areas of maturation that you’re working on right now, this year, and then also the CapEx spend that you’re planning to put into that line this year as you work towards a larger scale?

Soroush Dardashti: Yeah, so as I mentioned on the call, this year we’re expanding our manufacturing to a new line, which really further increase our capacity and the importance here thing is that, our overall LiDAR system manufacturing is being simplified in terms the process. We are increasing automation. We will have with this new line, sufficient capacity to support our customers and new wins until production. So this now — this new line is really going to be setting us up for the next set of opportunities, engagements and getting to secure those wins, but the activity really is around continuing with process optimizations, which I mentioned on the call, we’re going to be doing the next few months and further increasing our automation level to really continue scaling our product deliveries throughout the rest of this year to our — to those key customers.

Operator: Our next question comes from the line of Antoine Chkaiban with New Street Research. Please proceed with your question.

Antoine Chkaiban: Hi, Andrew, Soroush. Thanks for the update and for taking my question. So yeah, maybe my main question is, recent news flow suggests that multiple LiDAR enabled L3-designs are getting pushed out by one to two years and can you maybe please give us your latest perspective on the situation what you are hearing in conversation with OEMs and in particular, has anything changed with regards to whether those L3 platforms will adapt LiDAR when they eventually ramp, and what their latest thoughts are on time of flight versus FMCW?