This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Good day. My name is Betsy, and I will be your conference facilitator. I would like to welcome everyone to AVA Technologies' third quarter 2021 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 would now like to turn the call over to Andrew Fung, Director of Investor Relations. Andrew, please go ahead.
spk04: Thank you, and welcome everyone to Ava's third quarter 2021 earnings conference call. Joining on the call today are Suresh Salahian, Ava's co-founder and CEO, and Sarath Sinha, Ava's CFO. Ahead of this call, we issued our third quarter press release and presentation, which we will refer to today and can be found on our investor relations website at investors.ava.ai. 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 Form 10-Q for the quarter ended June 30th, 2021. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of AVIS 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 Suresh.
spk08: Thank you, Andrew, and good afternoon, everyone. Q3 was an exceptional quarter at AVA as we achieved a number of important milestones that solidified our path towards commercialization. I would like to highlight a few of our accomplishments, which are summarized on slide five. First, today we announced a key production win with the automated trucking company PLUS to implement AVA's breakthrough 4D LiDAR on PLUS's driver-in and fully autonomous trucks at volume scale. This win is significant because it further confirms the industry's increasing transition to FMCW LiDAR to enable safe automated driving. as well as the leading performance and scalability of Ava's automotive-grade LiDAR on-chip solution. We also remain on track with key development milestones across our other automotive and non-automotive collaborations. Second, we continue to strengthen our supply chain to bring Ava's 4D LiDAR to market. We have announced our agreements with Fabrinet, a leader in advanced precision optical and electronic manufacturing, to produce our 4D LiDAR chip module, which accelerates our manufacturing capabilities and automotive-grade certified production line. And third, AVA achieved the important milestone of completing the design release of our B sample, which finalizes the architecture and provides the path to our final cost structure. Turning now to slide eight, I would like to provide more color on our key business updates. We are incredibly excited to share that PLUS, a leader in self-driving truck technology, has selected AVA40 LiDAR for long-range perception on their production autonomous trucks. This multi-year production program includes PLUS's intentions to deploy trucks globally starting in late 2022, with PLUS's driver-in solution followed by their fully autonomous system. And PLUS plans to deploy over 100,000 trucks by the end of 2025. We have been working with PLUS since 2019 to test and validate AVA's 4D LiDAR. PLUS selected AVA for its unique combination of ultra long range and instantaneous velocity measurement, which enhances PLUS's long range perception system and provides faster response time in safety critical situations. The combination of AVA's 4D LiDAR and PLUS's proprietary autonomy stack also addresses many critical edge cases, such as previously unseen obstacles that may confound deep neural networks in the perception stack. Adequate response time is crucial to enabling safe automated driving, particularly for heavy-duty trucks since they take much longer to stop than passenger vehicles. this has been a challenge to reliably achieve with legacy time-of-flight LIDARs. While the industry has for some time understood the potential for FMCW to significantly improve perception with its unique advantages over legacy time-of-flight LIDAR, such as direct velocity measurements and lack of interference, the tradeoff between range and resolution with conventional approaches has held back the adoption of conventional FMCW technologies. However, AVUS 40V breaks that dependency, enabled by our proprietary signal processing algorithms that leverage the strengths of FMCW to sense precise velocity and position at more than 500 meters of range, while simultaneously achieving millions of points per second. This enables AVUS solution to reliably measure and classify objects with higher confidence and at longer distances than legacy LiDAR solutions, and already does so today. And because FMCW uses a continuous beam to constantly transmit data, we can use our same core LiDAR chip and scale performance through software. This flexibility provides our customers, including Plus, with the ability to not only leverage ABUS 40 LiDAR for their driver end solution, but also enable next level capabilities as they bring their fully driverless solutions to market, utilizing the same AVA 40-bitre hardware. Sauce shares a similar focus with us to deploy their self-driving technology to volume scale. The company's customers include some of the largest freight carriers and OEMs, including Amazon and FAW, the largest heavy-duty truck OEM in the world. We are excited to be selected for production and look forward to supporting PLUS's volume ramp. Let's now move to slide nine, which highlights a key development in solidifying the path to bringing AVA's 40 LiDAR to market. Earlier this week, we announced that AVA has selected Fabrinet to produce our 40 LiDAR chip module. As the engine of AVA's unique FMCW LiDAR technology, the chip module is the critical element that integrates all core sensing components onto a single silicon photonics platform. We are pleased to work with Fabrinet, a leading manufacturer of silicon photonics integrated devices and advanced precision optical systems, and equally important, a trusted automotive qualified supplier to many global OEMs and Tier 1s. As part of the agreement, we are bringing online an advanced production line at SaperNet that accelerates AVA's production manufacturing capabilities. The new line will produce our third-generation chip module and scale for serious production. By securing capacity with a leading manufacturer now, we feel confident and our ability to supply the expected volume at automotive grade quality for our customers' programs. Ahead of that, we are working with FabriNet to increase automation and process efficiency, as well as establishing a local engineering team in Thailand to support the manufacturer ramp up well before the start of series production. I would now like to update everyone on our 2021 objectives. which are detailed on slide 11. We have already achieved three of the four goals set for 2021, and we are confident in delivering on the final remaining goal to finish feed sample development this year, based on the significant progress already made to date. First, we have reached our goal for two additional programs towards production with SLUS and Nikon. two leaders in their respective markets with opportunities to scale to large volumes. Importantly, we also continue to deliver on development milestones for our other partners. With our growing team, we believe we are well positioned to support ongoing work across all of our programs. Second, on accelerating engagement in non-automotive applications. This goal was met with our Nikon collaboration announced last quarter. We should be expect to accelerate AVA's non-auto opportunity in the $10 billion and growing industrial automation and metrology markets. As I mentioned earlier, there is growing interest in AVA's unique 40 LIDAR for both automotive and non-automotive applications. We will continue to put our focus and resources towards opportunities that align with our mission to bring AVA 40 LIDAR to mass scale. Third, we have significantly strengthened our supply chain for production with a number of key developments throughout this year, including finalizing the key supply chain for our silicon processing chip, and most recently, selecting Fabrinet to produce ABUS 40 LiDAR chip module, which accelerates our manufacturing capabilities towards startup production. And fourth, on our B-sample developments, This quarter, we completed the product design release, which is a key milestone to finalizing the product architecture and provides us a path toward the final cost structure. As mentioned earlier, we expect to complete development this year and are planning to deliver resample units to our partners for qualification starting in 2022. This leaves us well on track with our timeline to commercialization. And with that, I will turn the call over to Saurav to discuss the financials.
spk03: Thank you, Soroosh. Let's turn to slide 13, which summarizes our financial results. Revenue in the third quarter was $3.5 million, reflecting substantial progress we continue to make on customer development milestones and our paths towards production. Our non-GAAP operating loss was 19.9 million, comprising of R&D expenses related to product development, and to a lesser extent, G&A and sales and marketing expenses. Gross cash use, which we define as operating cash flow, less capital expenditure, was 24.2 million for the third quarter. Our balance sheet remains strong with cash, cash equivalents, and marketable securities totaling $478 million at the end of the third quarter, demonstrating continued discipline in how we spend and invest for growth. Finally, our weighted average shares outstanding in the third quarter was $212.6 million. In summary, our results reflect the great progress we have realized with a growing list of customers. And as we continue to advance towards commercialization, we are in a strong financial position to execute on our programs and bring Ava's 4D LiDAR to mass scale. With that, I'll turn the call back over to Saroj for closing remarks.
spk08: Thank you, Saroj. Before taking questions, I would like to first thank the AVA team for their relentless dedication to our mission, which is resulting in our growing commercial traction. And to all of our stakeholders, we appreciate the commitment and confidence in AVA's breakthrough $40 technology, which we hope will enable the next wave of perception. I am incredibly excited by AVA's accelerating momentum. The production win with PLUS marks an important milestone for us. And with all of our progress towards commercialization in the last quarter, I have great confidence in the increasing demand for our unique technology and the upcoming opportunities that lay ahead. We remain laser-focused on supporting our customers on the path to production and Ava's mission to bring perception to all devices. Thanks, everyone, for your time today. We will now open the line for questions.
spk00: We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. In the interest of time, please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question today comes from Colin Rush with Oppenheimer. Please go ahead.
spk07: Thanks so much, guys. Can we start with that? I'd love to get a little bit better understanding of what sort of value-added engineering and specialized procurement expertise they're bringing to the table formally in the agreement you've made with them.
spk08: Sure, Colin. Yeah, thanks for the question. So, obviously, Fabrin is a leader in silicon photonics integration and manufacturing. We've been working with them for quite some time already. And what they really bring to the table is the capability to manufacture automotive-grade LiDAR chip modules, right? That chip module is at the heart of our system. And to be clear, their expertise is in this LiDAR chip module manufacturing, and they're already automotive certified and a supplier to both OEMs and tier 1s. So, you know, today, FabNet is already manufacturing hundreds of thousands of silicon photonics integrated modules. So they're really capable and experts at what they do, which is one of the reasons that we actually decided to work with them. And the other thing I think that's interesting about our group at FabNet is, They are already manufacturing a lot of chip module at their auto-grade facilities, and we do plan to intend to continue using them for production as we scale over volumes in those same facilities.
spk07: Perfect. I'll take a couple other questions around that relationship offline. But then, you know, as you enter into production agreements now and you look at your pricing,
spk08: to the table pretty significant so i'm curious how is your thing about pricing and and how that conversation is going you know with with the the handful of customers that you're working on right now particularly as you move into these production agreements sure yeah look obviously i can't provide details on exact a speed but we are seeing strong traction in the market we are really encouraged by the increased momentum as evident by you know the number of engagements and the wins we've had and talked about the past quarters with this plus win obviously as an example for for automated trucking um this also laid the foundation for us to scale up in the automated trucking space uh as far as the pricing goes of course you know for each customer we work closely with them to make sure that we have uh the ability to support them all the way through to volume production and in you know in general uh we're in line with what we've discussed before in terms of that
spk00: The next question comes from Tristan Guerra with Baird. Please go ahead.
spk01: Hi, good afternoon. Any color that you could provide in terms of the potential volume and the timing for the plus design wind that you've announced today? And is the functionality pretty much the same as previously announced wind, not to be too simple?
spk08: Sure. Thanks for that great question. So first of all, Look, we are very excited to be selected by PLOS for this key production program. I'll give you a little bit of color about this. So this is a multi-year supply agreement for global deployment. It is actually beginning in late 2022. um and plus selected ava because they believe in our unique capabilities including instant velocities uh and ultra long-range uh capability which really enhances long-range perception for plus and helps us to bring safe automated driving to scale that is why they see significant value as you mentioned in not just incorporating eva in fully autonomous uh solutions but also in their driver in solution so that's how they're starting with driver in a bit earlier but intend to continue and implement the same AVA 40-liter hardware into a fully autonomous or driverless solution. And I think that really shows the importance of AVA's unique value add and flexibility for both assisted driving as well as autonomous driving. And with our work on the B sample, we're starting to really see that action pick up. And, you know, in general, from, you know, giving you a bit of context about the scale, so as I mentioned on the call, PLUS plans to deploy over 100,000 units by 2025. And what's interesting, I think, for that is we have the right to supply majority of the truck volumes with the long-range LiDAR in this timeframe. And so that should give you a sense of the scale that we're talking about here.
spk01: Thanks. That's very useful. And then for my follow-up, you've talked about, you know, getting the design win on your range and velocity. I know that in the past some people have talked about latency being a little bit different for FMCW than other LiDAR technologies. So the question will be, you know, are given obviously the design interaction that you have, people must not see latency as an issue. Is that because of the algorithms that you have that allow you to enhance latency what it is to perhaps other FMCW LiDAR suppliers?
spk08: Sure. Look, you know, what I think is interesting is the traditional way, what we call traditional conventional way that FMCW has done actually has a number of challenges in terms of meeting the both high resolution and the long range simultaneously. And I'm not sure exactly what you mean by the latency, but that is part of the thing that I think AVA has really figured out to break. And AVO is not a traditional conventional FMCW system. And that's why we are starting to see now a continued momentum with the wins under our belts because of us having solved some of those key challenges. And that, I think, is important and is evident by now us seeing attraction in trucking, but also we're starting to see that also across other automotive and non-automotive applications.
spk00: The next question comes from Suji Dosula with Roth Capital. Please go ahead.
spk06: Hi, Soroush. Hi, Sourav. Congrats on the progress here and the plus announcement. In trucking, I know you've been working with them for a while, but it seems like that market might come to volume sooner than, say, passenger cars. Is that because of the business case or because it's a kind of more controlled environment? Any color there, if that is the case, would be helpful.
spk08: Yeah, look, I mean, I think it's no secret that, you know, there's obviously a shortage of truck drivers today on the market. And, you know, the business case for commercial trucking is pretty clear, right? So we are starting to see kind of an acceleration in the market adoption for autonomous trucking on the roads. And also, more importantly, we're starting to see some consensus forming about the type of perception capability you need to enable such autonomous trucking on the road. And we see that going towards FMCW-based technology. I think that's, you know, evident also by the partnership that the window announced. today with Plus and some of our past partnerships, including Too Simple as well. So I think that's the key driving factors that enable commercial trucking to make sense in terms of a bit earlier timeline of adoption.
spk06: Okay. I just want to get some color on the B sample that you're planning to shift to call the customers at the end of the year. I just want to understand the implications for the schedule, maybe the C-sample that comes after that, and whether the Tier 1 production line is needed before you go to production, or whether a partner like Fabrinet obviates the need for the C-sample production line build by the Tier 1s. Any color there would be helpful.
spk08: Sure. So Fabricant actually makes our LiDAR chip module. They don't assemble the full system, but that's at the heart of our system. We are working, obviously, with our partners to manufacture the B sample. As I mentioned on the call today, we recently just crossed the key milestone in our product design release of the B sample, which sets upon our architecture. And B sample, of course, is critical because B It provides also with the final cost structure, a path to that for the system, a path to the final cost structure. And so in 2022, our partners will be validating every sample. With those learnings, we'll continue to refine our system towards production. And, you know, in parallel, we're going to continue our work on the supply chain to make sure that we have all the capacity well ahead of production. And I think with all the work we have done on the supply chain side, including securing our key suppliers for the silicon processing chip, as well as the Fabrin announcement with our water chip module. We have great confidence in our ability to not just meet the timeline, but also meet the demand of the customers with the capacity and the quantities that are needed.
spk00: The next question comes from Pierre Faragu with New Street. Please go ahead.
spk02: Hey, thanks, guys, for taking my question and congrats on the new win. I have two specific questions on tracking. So first, when I look at Aurora Plus and C-Symbol, now they all use FMCW. So I'm not sure, you know, how you can talk about the market share, the three names represented, I guess, in tracking, they're fairly big. So is it fair to say that FMCW is winning specifically in tri-train? And if that's the case, why is that? And so maybe similar traction in passenger car, for instance, and it's just less visible because of the timing of press releases and things like that. And if that's the case, yes, maybe let us know. And I'll have a quick follow-up.
spk08: Hi, Pierre. Yeah, sure. Thanks for the question. Look, I think, as I mentioned, you know, on your first question, first point, yes, we do agree. I think there is a general consensus of increasing transition to FSAW, you know, for autonomous driving in general, but I think it's becoming also first evident with the trucking side because of the fact that some of the timelines are actually clear. That, I think, is clear. As you mentioned with the names there, we see that as critical. I think the reason is really in multiple and really the key areas of the key benefits of AVA's unique MCW approach. Long-range detection capability, the ability to go past 500 meters. Ability to detect instant velocity immediately is super crucial for trucking also because you need to see objects that are quite far out. And when you have even a few points or pixels on an object at those kinds of distances, when you add the dimension of velocity, right away you will know that this is something you should care about. And so you don't have to keep looking at it and taking effectively framed snapshots which is typically done with legacy time of flight LIDAR to do that. And that's crucial because, you know, trucks take a long time and a long stopping distance. So that's why you want to be able to see further out. And that's, you know, these are the two things. There's other things, of course, around the scalability, you know, the fact that we have been able to innovate this now on the lotter chip module, and we're making significant progress on being able to ramp up our supply chain to manufacture this lotter chip module. I think it's all coming together along with the fact that we have, you know, no interference as well, which becomes more and more critical as you have more of these, you know, on the road. So I think it's kind of a bit of – the manifestation of how many we have talked about before, and we're starting to see that transition happening.
spk02: Thanks. That makes a lot of sense. And then my second question is very pragmatic. You've given a lot of specifics about how deep you are and how, you know, defined, well-defined your partnership with Splash is today. Can you give us, like, a similar description of where you stand with the symbol in terms of visibility on their ramp? and whether you've already entered a similar agreement to be part of the system through the journey to 2025.
spk08: Sure. So, look, I can't obviously comment on the details of other customers on this call today, but we are progressing relative simple across the global milestones, and we continue to support them with a lot of technology as they continue to expand their fleet. And we look forward to do that throughout the next years as they continue to build out a robust platform for automated trucking and driver out functionality.
spk00: The next question comes from Sam Peterman with Craig Havell. Please go ahead.
spk05: Hi, guys. Thanks for taking my question. I wanted to ask on automotive as well, but specific to passenger cars rather than trucking. Our sense of the industry right now is that OEMs are starting to make decisions on LIDAR for production in the 2024, 2025 years today. And obviously, that aligns with your timeline for ramping sales in automotive. So I was curious if you could share, you know, where are you guys in discussions with auto customers today? And do you have any RFI or RFQs?
spk08: Sure, Sam. Yeah, thanks for the question. So obviously, yes, of course. You know, we are involved in almost all the RFI, RFQs that we see around not just trucking but also passenger cars in this space for those timeframes. We're seeing strong traction in the market in general, as I mentioned, and encouraged by kind of the increased number of engagements. and both automotive across passenger, trucking, and mobility, but also not automotive applications. I think some of the examples we talked about, okay, we talked about today quite a bit, but also, you know, our financial agreement to deploy our 40 LIDAR for the undisclosed customer that we talked about earlier this year, and others that we have, you know, we are, of course, not discussing about today yet, really give us a lot of visibility in the the timeline and the selection and ramp up to our customers that's coming up. So as I also mentioned before, we'll continue to align with our partners who are highly capable and have the desire and also importantly the capability to bring advanced perception technologies to mass scale. And that's what we want to focus our efforts with. And so, you know, that's what I can say so far.
spk05: Okay. Fair enough. Thanks for that. Second question, I wanted to ask, we haven't heard anything on the consumer side in a while. Is there development ongoing to scale your platform down to consumer products like mobile phones, especially now that you've got this B sample almost locked down? Any color on kind of development work that's going on there and when we might see samples there would be great. Sure, yeah.
spk08: So in terms of, you know, opportunities, of course, you know, generally we do see significant opportunities in the consumer electronics as well. As I've discussed previously, we're focused currently on enabling foundational capability, right? So what that means is the raw level performance needed for our perception solutions. So as we have talked before, we have, you know, so far focused on very long-range performance. And more recently, working also to provide a completely different level of performance with our micron level accuracy, which trades off the range of perception. These levels of performance, this raw fundamental capability, is what really allows us to go after those other applications, including consumer. Because when you measure things at the micron level, that changes the game of perception. And to our knowledge, SMCW technology is the only technology that is capable of doing that from a distance, meaning without a contact. And so as we continue to develop this capability and implement it into sampling level, we're going to also go after those applications and working with customers to effectively enter that into the market. And as we have more updates, we'll share those as well.
spk00: This concludes our question and answer session and also concludes the conference call. Thank you for attending today's presentation. You may now disconnect.
Disclaimer