Q3 2023 Aeva Technologies Inc Earnings Call

Participants

Andrew Fung; IR; Aeva Technologies, Inc.

Soroush Salehian; CEO & Co-Founder; Aeva Technologies, Inc.

Saurabh Sinha; CFO; Aeva Technologies, Inc.

Joseph Moore; Analyst; Morgan Stanley

Colin Rusch; Analyst; Oppenheimer & Co. Inc.

Suji Desilva; Analyst; Roth Capital Partners LLC.

Richard Shannon; Analyst; Craig-Hallum Capital Group LLC.

Presentation

Operator

Mike, good day. My name is MJ, and I will be your conference facilitator. I would like to welcome everyone to Aeva Technology's third quarter 2023 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, 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 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 Suresh.

Soroush Salehian

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 Aeva's leading this trend, delivering production winds in both automotive and industrial. And with growing interest for Aeva's 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 wins.
I would like to highlight key accomplishments, which are summarized on slide 4. 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 vehicles. This is a multiyear production agreements for Aeva's 4D LiDAR will replace conventional time of flight long-range LiDAR and was selected to help May Mobility further scaled 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 LiDER on chip technology with micron level of precision to advance to the production phase and opened new opportunities in the established and growing industrial automation market.
Third, we continued to make strong progress with a top 10 OEM and are now in the final phase with this OEM. This quarter, we received the OEM 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 programs. We expect OEM to make the production program award decision over the next quarter.
And fourth, we further strengthen Aeva's positioned for success. We are pleased to welcome Dr. Stefan Sommer, former CEO of ZF group and board member of the Volkswagen Group, responsible for procurement to Aeva's board to help further advance our automotive OEM opportunities.
And last as we move to the production phase on the heels of our two multiyear production winds in automotive and industrial, and our continued momentum with top global OEMs, including a top 10 OEMs, we're making a strategic decision to further bolster our already strong balance sheet with a rate of new capital of $145 million through an approximately $20 million private placement and other $125million preferred shares facility with existing long term stock holders.
This strengthens Aeva's position to win additional OEM program 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 developments, which begin on Slide 6. Let's start with our production win 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 plans 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 data differentiates stationary from dynamic points, we offer near camera level resolution. Bringing more revival perception, it provides the confidence to expand.
We believe other inherent benefits of FMCW also bring value to May Mobility AV stack to provide some real world examples retroreflector blooming and road signs and affairs others source of light such as sun can challenge some refined level performance. FMCW is inherently immune retroflector blooming and ambient LiDAR. Handling Aeva's LiDAR to deck critical objects, but no degradation in these scenarios and with clearly defined objects segmentation.
These are just some of the differentiated capabilities that we hope to bring to our partner May Mobility. As part of our production program when Aeva 4D LiDAR will be the exclusive long-range LiDAR on May Mobility, autonomous vehicles, globally and replaces the conventional time-of-flight long-range LiDAR. The agreement includes a five-year volume commitments 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 infection products. This suite of product is used for industrial metrology and quality control during high volume, manufacturing.
And Nikon current generation is already deployed to customers across the automotive, aerospace and renewable energy industries, including some of the largest OEMs such as BMW, Atlantis and other automakers. 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 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 need Nikon stringent performance requirements.
Aeva's sort 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 multi-billion dollar opportunity and high precision measurement is a growing field within industrial automation, what we are seeing strong interest for Aeva's unique capability.
Because of this pull from the market, we developed a perception platform for high precision measurements a utilizes software to adapt performance for different requirements across multiple nonautomotive applications. Nikon 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 OEMs. I'm incredibly proud to say that Aeva received OEM. highest rating category for manufacturing readiness. Which the OEMs 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 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 large global automotive programs.
Over the quarter this OEM continues to expand their vehicle fleet with Aeva 4D LiDAR to support their milestone 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 with 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. The Sommer brings an extraordinary breadth of experience as an automotive industry veteran with a history of leadership career in automotive.
The past leadership roles include some of the largest global automotive car makers, including member of the Board of Volkswagen Group and head of components and procurement at the VW Group, as well as leading some of the most renowned automotive Tier 1 suppliers, including as a CEO of ZF group, where he led and executed the strategy that helped grows that has 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 toward winning additional options. Given his deep knowledge of the automotive industry, Dr. Sommer interest to join Aeva's Board points to the significant potential of tables differentiated technology. We look forward to working together to accelerate adoption of Aava�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 our 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 startup 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 objective 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 programs.
Because of this, we continue to see growing interest for our 4D LiDAR and are near the final decision stage on a number of opportunity. We believe that additional capital strategically put Aeva in a stronger position to win additional program. 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 added [ancillary growth]. Demonstrating the 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 nonvoting 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 capital deployment. And with that, I will hand the call back to Soroush for closing remarks.

Soroush Salehian

Thank you, Saurabh. When we started Aeva, we set out to bring the unique perception solution to a broad range of applications from automated driving the industrial automation and beyond. While the macro environment has been challenging, I can say that I've never been more convinced enables 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 us being 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 opportunity, 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 strength to secure additional production win and support OEMs beyond their startup production.
I would like to thank our talented and dedicated team at Aeva for 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 question.

Question and Answer Session

Operator

(Operator Instructions) Joe Moore with Morgan Stanley. Please go ahead with.

Joseph 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 the business has already won and met the announcement this kind of more of a formality, I guess will you be able to disclose with the customer is at that in this next quarter timeframe?

Soroush Salehian

And Joe, happy to answer the question. 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 and a stronger way this OEM. In the past few month, the past quarter, they have deployed additional vehicles using our LiDAR�s with our technology on the road.
And then what we are now is really in that final phase of the discussions, the negotiations, the commercial topics as it goes towards the production onwards. 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 a name the OEM at that time.
So and obviously this is the top 10 OEMs. So we think this is a definitely a very important program that we working towards for some time and on the heels of some of these things and all the announced 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.

Joseph Moore

Yes, I wanted to ask about that I mean, you said extent that you're this close to making an announcement with one top 10 OEM. How would you look at the kind of capability your technology brings? I would think that would start to create that enthusiasm. What kind of time frame -- how long should we expect it to take if you get interest from other OEMs, how long would it take -- take to kind of move that into something that could drive revenue down the road?

Soroush Salehian

Yes. So as we have talked about the programs we're talking about here, first of all, on the two wins that we actually announced this week are both for Medicaid SOPs, right? So May Mobility in 2025, Nikon ion 2025 different industries. We have been talking about this for some time. We said we're going to go to production '25. Now we are showing a validation, and these are the two big points that are shown there.
Additionally, there's other OEM programs including top 10 OEM also has similar mid-decade type SOPs. We have not shared that yet. And at the right time, let's 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 it started to translate towards those increasing revenues and also growth in actual shipments and sales revenues, with multiple these customers. So that's what I can say right now. But I think from a timing standpoint, those timelines remain as we have discussed before.

Joseph Moore

Great. Thank you very much.

Operator

Colin Rusch, Oppenheimer.

Colin Rusch

Thanks so much guys. Hence you've gotten OEMs during the work or some of this velocity data a little bit more detail. Can you talk about what you're seeing in terms of how they're using it and what it's allowing them to do in terms of differentiating between different types of objects as well as some types of navigation system.

Soroush Salehian

Yes, Colin, happy to answer that. So I think we have been talking about kind of the general transition from perception and sensing standpoint over time, which is not overnight, but over time from more time of flight especially in long rates sensing towards FMCW. And this is in automotive, but also in other application industrial that's also we're seeing.
I think with an analysis we've been talking about this week with the validation that we see with the production here with May Mobility, for example, and with Nikon. And we are seeing some of those actually form and really good place. But in automotive, for example there is a number of reasons that OEMs go and look at actually switching over to Aeva for really expanding with it, we don't have the necessarily see always about switching.
It's actually also more about being able to do what they normally do before, which really enabling and how they actually can expand they're operating zone domains. So you go from lower speeds to higher speeds -- the highway speed. As you are able to do that, there are a number of use cases that need to be met, especially working with a number of OEM the customers we have so far and they have always had challenges and investors regardless of the technology they used before.
And when they started using Aeva and our company FMCW approach, that's when it starts to create the using the velocity dimension, having the advantages of no immediate hearing, no interference, the long range sensing and all resolution features, it starts to actually it's not about the specs and the seeds, it stars actually help them solve actual revolve use cases to deploy safe, highway autonomy type applications.
And that's where I think is far from what's very exciting for us is seeing that actually happen on the road with real-world testing. So and that's the case. For example, the top 10 OEMs and main mobility case as we previously mentioned, they are looking to also scale their offering design domain, right? And with the existing solutions they had that was challenging our position with our approach they see the potential with the velocity and FMCW opposed to be able to actually do that and scale their operations for it.
So that's an automotive and industrial separately. We also see the opportunity, which really highlights the flexibility of the technology and to continue to expand in industrial applications where performance, size and cost all have to be continuously improved. And that's where we see some of that potential and the momentum we've gained, for example, Nikon now validating and doing moving towards the production phase. So it's about enabling new use phases. It's about helping the customer solve what they cannot before. And that's I think what we're all about. So if that helps answer your question.

Colin Rusch

Yes, it's incredibly helpful. And then on the manufacturing side, as you ramp up and with Fabrinet, can you talk about where the real meaningful challenges are for you guys right now between now and when you start delivering a Nikon it would seem that you guys have to regain awfully closed. So I want to understand what sort of hurdles are remaining before you are really confident on scaling up?

Soroush Salehian

Yeah. So we said, so maybe just talking briefly about the opportunity with Nikon and the answer your question in that. So we've working with Nikon of course for a couple of years now. And even about two years ago, we set out a target to go to production by 2025. This week, we announced that we are not only on track.
We have completed the validation and meeting the stringent requirements for Nikon to the micron level precision, which by the way, is also unique feature to FMCW to our understanding versus [time] acquired. And I think from a timing standpoint, obviously, as we said, that means that we need to go start our production ramping for a Nikon late next year. So that Nikon part of that ability can happen by 2025. And we have been working on this for some time.
So as we said earlier in the year, we set out to extend our manufacturing on the system side. We are continuing now to bring in additional automation on the manufacturing of our later on chip module, which is really the core and heart of the product that goes and we supply to Nikon addition with our processing.
So that is a focus for us, I think in the next number of months as we get closer, we'll be talking about updates on this on the progress for this, but we have been working with Fabrinet and team we have on-site there to really prepare and continue expanding the outputs and throughputs and focusing on the yields in our automated manufacturing line over there that you'll look towards.

Colin Rusch

Thanks so much appreciated.

Operator

Suji DeSilva, Roth Capital.

Suji Desilva

Hi Soroush, hi Saurabh. Question on the top 10 OEM as well for me. I just want to be clear. The one you're talking about here is that the same one with the award win you announced and the perception stack, I just want to clarify that.

Soroush Salehian

Yeah, this is the same.

Suji Desilva

Its all the same one. Okay.

Soroush Salehian

Yeah, same one we've been talking about.

Suji Desilva

Great.

Soroush Salehian

It's not the only one that has differentiated, obviously --

Suji Desilva

Understood.

Soroush Salehian

Multiple OEMs are there.

Suji Desilva

Understood. And then so for this OEM, have you specified whether this engagement is for a broad platform wins for the OEM that will be multiple models and across whether it's a target sort of vehicle, just to understand if you've kind of clarified the breadth of your opportunity here?

Soroush Salehian

Yeah. No, we have not discussed that. I think that will be, I think, the right opportunity in the future as we as we go towards the final decision coming up. But what I can tell you is obviously the opportunity is from a top 10 OEM with large volumes and with production in the mid of the decade as we've talked about. So this is not some sort of a pilot program or something like that we're talking about here.

Suji Desilva

Okay. That color definitely helps. And then lastly on the OEM or just in general with the auto OEM waterfall wins, is there anything that gets clinical easier after you secure this first one publicly and start kind of delivering to them in terms of the second, third and fourth, when just wanted to understand how that might be or whether they're each kind of Fresh Start?

Soroush Salehian

Yes. Well, first of all, I think I'm hopeful you can see some of that trend already happening, right? So we've been talking about our progress and momentum in this space and converting additional programs to wins this week, we announced not one but two in each sector, and we're really excited about that. And these are folks that -- for example may case have been using some applied before and are familiar buyers.
So I think that's where we see opportunity and that progress to actually be able to move faster because folks have experienced they know what they're doing, that they're the this for some time. And they can also appreciate the advantages in terms of what they can see that helps them -- enable them to expand their operation, scale up their deployments and all of that.
So and we absolutely believe that with all the work that we're doing here with, I think the really the breakthrough past few months that we've had on the heels of two OEM wins, expanding our Board with automotive experience that Dr. Sommer coming on and his renowned experience in this space as the CEO of that ZF and one of the Volkswagen as well as bolstering our balance sheet.
All of this really helps us to position Aeva and a really strong position to win additional programs as we go towards production and also give confidence to our customers that are looking at a select few players that can, not just win something, but also be there beyond their SOPs to support them. And that's really what we're doing here in a multistep approach. So that's what I can say and I think, obviously, we do believe that with us delivering on a first large and OEM our program when subsequent ones are going to be down much -- more streamline to get and move on there.

Suji Desilva

Okay. Very helpful sir. Thank you.

Operator

Richard Shannon, Craig-Hallum.

Richard Shannon

Well, hi, guys. Thanks for taking my questions as well. Maybe we'll hit on the top 10 OEM here. I think your language was you were down selected in this past quarter. Does that mean you are the only supplier remaining that they're looking at or are there others?

Soroush Salehian

So look, at the end of the day, we never know in terms of what the end customer does and that, is not something that necessarily we look at. I think what we what we really look at is there's been actually multiple layers of down selection that happen at this stage, we're in the final phase. And as I mentioned, the decision coming up in the next quarter.
But also importantly, we have worked with us for some time and they have already started deploying our sensing technology on their vehicles, which actually replaces some time-of-flight technology as we have talked about in the past. So that is what I can say right now, that gives us that additional further information and support that we're looking for.
So obviously, we're also working on around providing some of our perception and collaborating with the OEM or the perception to really utilize systems to FMCW advantages, including the velocity picture. And since the last time we spoke, of course, the OEM has also and deployed with our flight are there on additional vehicles that they have continued to build. So a number of things happening, but I think I will stop there for the information.

Richard Shannon

Okay. Fair enough. Appreciate that the color. My follow-on question here is related to May Mobility. How do we think of them in terms of the to the ultimate scale of opportunity that exists within through 2028. I don't know if this is something that even with an order magnitude of a typical automotive OEM, you're going with anyways, you could give some color on how big that could be relatively speaking?

Soroush Salehian

Sure. Happy to. So let me give you a bit of color about May and answer your question hopefully there. So obviously, we're very excited about this. It's one of the first deployments for us and among automotive sector, starting with Aeries II deployment already this year. And let me give you a background of May and kind of give you some context about the size and the comparison you mentioned.
So first of all May it's been around for a long time, been working with a number of players and they're partnered with some of the largest automotive companies, including Toyota, their operating paid a [Thomas] ride today across four states with more coming next year and they have done over 350,000 rights.
And are taking a more measured approach when it comes to scaling as converted some of the other players who need to take contracts from the municipalities and cities. And in terms of scale, I may have talked about this. They're scaling the operations by thousands of vehicles in the next few years here.
And again, what they see in Aeva is the unique FMCW approach, enabling them really to expand their current ODD, their operating main domain and from what they are now to really enable the scaling and the continued to expand.
And so we're talking about here the multiyear production deal, which gave us the exclusive long lead by our supplier for May vehicles globally. We have minimum volume commitments starting from this quarter every year through the end of 2028. And in terms of the size of this opportunity, we actually believe this is similar to some the potential size of some of the initial luxury passenger vehicle programs that are coming to the market.
And that's what we can say them again may have probably help about 1,000 vehicles. We're talking about multiple LiDERs for per vehicle. And the other thing I think that's interesting here is as compared to the luxury passenger will have initial dip on the electrification has required us to do that. And then mobility business model does actually enable us to in a mutually beneficial scenario to have higher ASPs than the typical passenger vehicle that are a considerable right? And so that is why in terms of the overall size, we're actually pretty excited about this.
And also this aligns with the timing of what we have always talked about 2025 with our sort of production. So we're working hard towards delivering our commitments and really excited to partner with them and for the next year in.

Richard Shannon

Okay. Appreciate that detail as well. I will jump out of line guys. Thank you very much.

Operator

Thank you very much. This concludes our question and answer session. And the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.