Aeva Technologies, Inc.

Q1 2023 Earnings Conference Call


spk08: Good day, ladies and gentlemen, and welcome. My name is Judith, and I will be your conference facilitator. I would like to welcome everyone to Ava Technologies' first quarter of 2023 earnings conference call. During the opening remarks, all participants will be in listen-only mode. Following the opening remarks, we will conduct a question-and-answer session. As a reminder, today's conference is being recorded and simultaneously webcast. I would now like to turn the call over to Andrew Fung, Director of Investor Relations. Andrew, please go ahead.
spk03: Thank you, and welcome everyone to AVA's first quarter 2023 earnings conference call. Joining on the call today are Soroush Salahian, AVA's co-founder and CEO, and Saurabh Sinha, AVA's CFO. Ahead of this call, we issued our first quarter 2023 press release and presentation, which we will refer to today and can be found on our investor relations website at 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 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. And with that, let me turn the call over to Soroush.
spk05: Thank you, Andrew, and good afternoon, everyone. In Q1, the AVA team was focused on advancing the commercial momentum for AVA's unique 40-liter on-chip technology. And I'm happy to share that we made significant progress in a number of notable areas. I would like to highlight our key accomplishments this quarter, which are summarized on slide four. First, progress with the top 10 OEM is going well. We recently received feedback that AVA-40 LiDAR is enabling a key safety use case that was previously unattainable by the OEM. I am excited to share that we are also in discussion to deepen our relationship to include joint perception software development, leveraging AVA's unique combination of high resolution, long range, and instant velocity. we are seeing encouraging progress with other opportunities in automotive. This includes a joint development engagement with a passenger vehicle OEM looking to switch from 3D time of flight LIDAR as well as advancing to a growing number of RFQs. And third, reception for our perception platform for precision distance measurement has been quite positive. We are engaged with multiple leaders in industrial sensing to use ABUS perception platform and hope to share more later this year. I would now like to provide more color on recent business developments, starting on slide six. As mentioned earlier, we are off to a strong start with the top 10 OEM on providing a perception solution that meets their high standards of performance, safety, and scalability. The first vehicles integrating ABUF 40 LiDAR have been built, and we have already achieved important development milestones including feedback from the OEM that we successfully enabled a key safety use case for highway driving that was previously unachievable with 3D time of flight LiDAR for this customer. This was possible because of AVA's unique FMCW technology that simultaneously offers high resolution, long range, and instant velocity capability. Together with our perception software, AVA's 4D LiDAR reliably detected and classified critical objects on the road far away. This is a particularly important capability in use cases such as highway automation, where faster speeds require greater reaction time and higher sensing fidelity. I am excited to share that we're also in discussion with the OEM around the use of AVA's perception software and looking at ways to help accelerate the autonomous stack developments. This gives us further confidence around our perception software capabilities and highlights the importance of leveraging direct velocity measurements in an automated driving system. Let's move now to slide seven. As we have shared, we have been making significant progress on our engagements and wanted to provide more color on our ongoing opportunities. Our focus remains on programs for large-scale deployment and we are seeing strong interest from leading automotive and industrial companies looking to bring next-generation perception to market. This includes progressing from the RFI to RFQ stage with some of the top global passenger vehicle and commercial vehicle OEMs. And in industrial automation, we are currently in multiple discussions to deploy our perception platform for precision distance measurement applications. Many of our opportunities are with companies who have experience with LIDAR or even selected 3D time of flight LIDAR for initial pilot deployments in the past and are now increasingly interested in AVA for the next generation due to the advantages of our FMCW approach. While we may not win every opportunity, each program offers meaningful revenue potential. As an example, the passenger vehicle program opportunities we are working on target volumes well over 100,000 units per year at steady-state production. These programs have target start-up production between 2025 and 2027, and we expect award decisions approximately over the next 6 to 12 months. Turning now to slide 8, following the successful bring-up of our new final assembly manufacturing line, we are working with FabriNet to similarly expand our lighter-on-chip module manufacturing. This expansion will add capacity to support the growing interest in both automotive and our perception platform for industrial automation, with the ability to ramp further for mass production. As part of this, we will automate 100% of the LiDAR on-chip module assembly steps. This will enable higher throughput that will further bring down costs on the path towards production. We expect to complete bring-up of the new line by year-end. With that, let me turn the call over to Saurabh, who will discuss the financials in more detail.
spk00: Thank you, Soroush, and good afternoon, everyone. Let's turn to slide 10 to discuss our Q1 2023 financial results. Revenue for the first quarter was $1.1 million, driven by ARIES II deliveries to existing partners as well as to new customers for our unique 4D LiDAR capabilities. Non-GAAP operating loss was $31.3 million as we continue to strategically invest in product and other research and development initiatives consistent with our plan. Gross cash use, which we define as operating cash flow, less capital expenditure, was $37.3 million, reflecting operating expenses and timing of working capital. As such, we ended Q1 with $288.4 million in cash, cash equivalents, and marketable securities. Weighted average shares outstanding was $219.6 million in Q1. To sum it up, AVA is in a solid financial position to support our commercial momentum. We are making good progress on the key objectives we laid out for 2023, and we will continue to take a disciplined and strategic approach to execute on our plan. I will now turn the call back to Soroush for closing remarks.
spk05: In summary, I am excited by the progress and feedback from both existing and prospective customers on AVA's 40 LiDAR. Our differentiated FMCW technology is increasingly resonating with leaders in the markets we are pursuing, and our priority remains on converting more of our commercial traction to program wins. I want to especially acknowledge the dedication of the AVA team that is making all of this possible, as well as the ongoing support of all of our stakeholders. AVA is laser focused on delivering on our objectives and is well positioned with our unique technology and our balance sheet to continue to execute on our mission to bring 4D LiDAR to markets. With that, we will now open the line up for questions.
spk08: Thank you, Sam. Ladies and gentlemen, we will now be conducting the question and answer session. If you would like to ask a question, please press star then 1 on your telephone keypad. A confirmation turn will indicate that your line is in the question queue. You may press star 2 to leave the question queue. We ask that you please limit your questions to one question each. For participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Colin Roche of Oppenheimer.
spk06: Thanks so much, guys, and I appreciate you taking the time today. You know, with the process with FabriNet and the automation, can you talk a little bit about what your sampling capacity is right now and how it's going to change over the balance of the year and what you think the impact might be with some of these customer relationships?
spk05: Yeah, Colin, happy to answer the question. Look, we're obviously working closely now with FabriNet to build up our further automation on the line. This is important, of course, because we're going to be working to automate 100% of the assembly steps, as I mentioned, inside the LiDAR chip. This has a couple of different effects, right? First of all, this line is going to help us to support our series production ramp. This also allows us to further really simplify The system assembly process, as we have talked about before, and at the end of the day, gives us ability to really provide the scale that's needed to support the customers. And it's important because increasingly, both on the automotive, as we have talked about with the top 10 OEM, the advancements from RFI to RFQ, as well as on the industrial side, with the multiple engagements we have, we are seeing this demand and we are now responding to it so that we can build up the additional capacity. This line will also increase our throughput. So what I can say is it will sufficiently satisfy our demand quantity needs as we go towards production. And also gives us further confidence in our ability to really keep us on track towards achieving our targets for the cost.
spk06: All right. That's super helpful. And then just shifting gears around the software development. Can you talk a little bit about the level of activity that you've got in terms of building up the ecosystem and the different software pieces that you're going to need to develop for each of the different end markets? And I'll take the rest of it offline after that. Thanks, guys.
spk05: Sure. Yeah. Look, first of all, as I mentioned on the call, we're excited that we're seeing increasingly OEMs, such as the top 10 OEMs, start to see significant value. and not just our 40-liter, but also the perception software. And as our software gets embedded into the AV stack or the ADAS stack, as well as some of the industrial applications, on the automotive side, it provides added value for the OEMs, and we see it to start creating this flywheel effect for deeper engagement and the use of our capabilities. And that's why, for example, the top 10 OEMs talking further to strengthen our relationship there, and they're looking to leverage our perception software to help them accelerate the AVSEC. And this is important because for us, obviously, we have the added dimension of velocity, the unique data products that we have, and the OEM is able to use those and working with us together jointly to really tune it building effectively a system that consists of the hardware and the software on top of that that's really tuned for their specific applications. And what we are hearing is that this is going to also help them differentiate some of their capabilities compared to their competition. So we are really encouraged by that. And I think over time, we're going to start seeing more of these types of engagements, hopefully, that we can continue to engage on at a deeper level with the perception software side.
spk02: Thank you.
spk08: The next question comes from Joseph Moore of Morgan Stanley.
spk10: Great. Thank you. I wonder if you could talk about when you start going to production. There's a mention in the slide deck of 2025 through 2027. I thought there was some industrial stuff going into production in 2024. Is that still the case?
spk05: Yeah, Joe, happy to answer that. Yeah, as we have talked about, we're on track with our customers on the industrial and automotive side. We continue to be engaging multiple customers on the industrial side in addition to automotive. What we talked about on the call today, 2025 and 2027, are really some of those opportunities, especially on the automotive side, that are new opportunities that we are targeting. and opportunities that we are advancing from RFI to further stages, including RFQ. So, you know, we are on track with the engagements that we have and, you know, obviously provide some more color around these new opportunities.
spk10: Great. That's helpful. Thank you for clarifying. And then in terms of the cash balance, obviously you have a pretty healthy balance sheet, but the burn rate of $37 million in Q1, you know, I guess what Over the next, say, eight quarters or so before you start to really ramp revenue, can you just kind of give us a guide to what happens to the cash balance?
spk00: Hey, Joe. This is Rob. I can answer that for you. So we have a strong balance sheet, as I mentioned in the prepared remarks, $290 million of cash and marketable securities. That gives us a lot of strength as we execute on our plan. In terms, we only provide FY2023 guidance. And what we mentioned at the last call, that we expect our OPEX, non-GAAP OPEX, to be similar to 2022 levels, which was around $124 million. And we are on track for that. And non-GAAP OPEX is a good indicator of the cash burn for the year.
spk02: Thank you.
spk08: The next question comes from Pierre Faragu of New Street Research.
spk01: Hey, guys. Thanks for taking my question. A quick follow-up on your outlook for cash burn. So if you have like an OPEX burn rate around 120, in the low 120s today for OPEX, what happens when you start ramping production? Is there like an additional element of cash consumption because starting production means additional capex, like bad initial yield that could drive like cash burn, additional cash burn on top of your OPEX? Or should we expect actually an almost instant, immediate, slowly ramping contribution, like cash contribution?
spk00: Hey, Pierre, this is Saurabh. Yes, I think your latter is true. We expect that the OPEX as well as the CAPEX to be steady because certain R&D activities are already completed and CAPEX needs will be light given that we are leveraging the CMs.
spk01: Yes, okay, that makes sense. Thanks for that.
spk08: Thank you. The next question comes from Sujit Dasolva of Roth MKM.
spk09: Hi, Sarush. Hi, Sarush. Congrats on the progress here. Question on the top 10 OEM. I'm just trying to understand, you know, a lot of LIDAR companies, competitors, viewers have announced partnerships. I just want to understand how this one feels different to you guys so you can differentiate it. It sounds like a deeper relationship, but I just want to really kind of get that nuance. So it should be good. And just, you know, what was the key safety feature that 3DOF couldn't handle? It sounds like... identifying a low-lying object in the road that's at a distance, but if you can clarify that, it'd be great.
spk05: Sure, Sujit. So, let me answer your second one first. So, you know, obviously, you know, with this OEM, we've been working actually for quite some time, right? And so, you know, I can't go into specifics of the use case, but they obviously have multiple safety use cases, including those on the highway driving applications, to really reliably detect and classify safety-critical objects on the road, especially from a long distance. So what sets us apart, right? What sets us apart is our ability to, one, simultaneously deliver high resolution and long ranges, and two, added that dimension of velocity to really help us consistently detect objects across ranges. So, you know, as I mentioned before, for example, when you have at long distances with, let's say, 3D time-of-flight light are only a few points, let's say you get a few points five points on an object. When you look at that object and you only have the dimension of distance, you're not sure exactly what you're looking at at those really far distances. So all you can do is keep looking. And over time, at highway speeds, that is a critical time, is a critical aspect. But then you add that dimension of velocity, those same five points, you know, start to have now velocity contribution. So if they have all the same velocity, they're all moving towards you at 75 miles per hour, you better know that that's a vehicle and not a flying object or something like that on the road. So that's something that is, I think, unique provided by us. And I think, you know, for this OEM, it contributed also in a significant way, this added dimension of velocity, to help them achieve this need of a little confidence to address this safety use case. And Also, just to be clear to your point from before, OEM has worked in the past with other 3D LIDARs before. And from the OEM feedback and us continuing to deepen this relationship, we're now the first provider that can actually enable the safety use cases. So that, I think, is really encouraging for us. And to your point, we are working to further strengthen our relationship to add in the capabilities of our perception software and collaborate there around the use of our perception software there. So that's what I can say for now. And, of course, as we have able to share more, we will do that in the future.
spk09: I just have one quick follow-up, and this may be a trivial point. I mean, having a test vehicle mentioned relatively quickly in my mind, is that because of the Ares II product and something specific about it, or can any LIDAR... vendor just easily get a test vehicle up and running the way you did?
spk05: Yeah, look, I think we have made significant progress around our maturity over the past, you know, couple years here and even months. And I think that's, you know, our ability to scale and provide our EC2 product in a way that works out of the box for the OEMs and our ability to support those, the OEMs directly where we put our attention and focus, I think has been a direct contributor to enabling the OEM to move quickly. And this is kind of our model, right? We're looking to help them to accelerate their development. So with that, obviously they have also experience working with hardware stack and implementing sensors on the road. So we've been working pretty closely to support this and looking forward to continue supporting them as they build up the rest. Okay.
spk08: Thanks, Serge. Thank you. The next question comes from Tristan Guerra of Baird.
spk07: Hi, good afternoon. Just a follow-up question on the customer engagement for which you provided an update. What are the pending thresholds for existing engagements to ramp in volume production? What's the timing of those thresholds? And how many engagements, if any, are actual signed deals with the OEM for a volume ramp?
spk05: Yeah, so Tristan, happy to answer that. So obviously we're, you know, on these specific programs we're talking about that we're advancing through our fuse, there's multiple programs across each end market, includes passenger and commercial vehicle application. You know, the programs are for, you know, level three and higher automation. You talked about scale and timing. So as I mentioned on the call, you know, these are programs that we see there is meaningful scale and, For example, on the passenger car side, we see some of the target volumes to be over 100,000 vehicles per year. So this is something that is important. And also, from a timing standpoint, where we see the decisions happening is in the next 6 to 12 months. That's what we see. And timing of production really is around this 25 to 27 timeframe. So that's what we've been working on. And especially in some of these engagements, as I mentioned before, a number of these OEMs have had experience with time of flight or previously selected maybe time of flight for initial deployment, but are continuing to now engage with us because they increasingly see FMCW as that potential end state and a scalable solution to really enable their next generation capability. So we're, you know, encouraged by that. We're going to continue our activities with those folks.
spk08: Thank you. The next question comes from Richard Shannon of Craig Hallam.
spk11: Well, thanks, guys, for taking my question. I think my first one is going to be based on slide seven in your deck here, talking about your advancing the opportunities in automotive and industrial. Talking about programs starting SOP in 2025 to 2027. Specifically, are any of these auto programs that you're targeting looking at SOP in 2025, or would they be later than that?
spk05: Yeah, Richard, absolutely, yeah, they are. You know, some of the auto programs fit in the same timeframe, starting from 25 to 27 timeframe, yeah.
spk11: Okay. And any way that you'd kind of count the number in the automotive space specifically?
spk05: Yeah, I can't provide exact numbers, but it's multiple programs, right? It's not one, so that's obvious. And, you know, again, as I mentioned, you know, across the different segments, automotive, passenger, commercial, and industrial, we see programs that are offering meaningful potential with production scale once they reach those.
spk11: Okay, fair enough. And my quick follow-up question here is, just kind of thinking big picture here, and looking at the landscape of automotive OEMs out there, of the ones that you're not engaged with, what do you think the reasons are for that? Is it something having to do with the specific levels of maturity or any way you can kind of couch wire with certain ones and when, you know, what are the ways that you can leverage your way into them?
spk05: Yeah, actually, it's a good question. You know, I think across all the engagements that we've had so far, we actually have an intent now from RFI to the RFU stages. I'm not aware of any engagement now currently that we are on that, you know, we're not advancing on. So that's really encouraging. I think, you know, obviously, if you look at our, you know, if you want to look at the way in the past and the time, I think it really had been around maturity, which we have been working towards, building up on our maturization of the product, building up the capabilities in-house, strengthening the team around manufacturing, supply chain, and also bringing the product to a level like ARIES 2 that can be deployed on the road. So that's you know a lot of that work has has happened and from here really focuses around working with the OEMs to qualify our product towards you know the sea samples and the production scale and also obviously you know the whole reason that folks that even selected sometimes time of flight or you know you know dabbled in time of flight initially are working with us increasingly is that they believe in the fact that what they have today is not quite sufficient and really looking at FMCW as filling some of those gaps with the potential that it has in terms of technology. So that's what we continue to be encouraged by.
spk11: Okay, fair enough. Thanks for taking my questions, guys.
spk08: Thank you. The final question comes from Kevin Carrigan of West Park Capital.
spk04: Yeah, hey guys, thanks for letting me ask a question. So, you know, at the beginning of the year, some ladder companies were expecting automotive OEM award decisions in the first, you know, three to six months. I think on the last call, you guys had said you were expecting some award decisions in the next number of months, and now it's, you know, six to 12 months. Kind of seems like there might be a little bit of a delay in OEM decisions, but can you kind of give us any color on what's going on there? Is this you know, timeline kind of in line with your expectations or, you know, is the macro environment kind of playing a role with OEM decisions where they're kind of shifting their focus a little bit?
spk05: Yeah, I think, Kevin, I can answer that. So, I think for us, the timeline is in line with what we are expecting. You know, now that we have some more clarity from the OEMs as we're advancing from our five stages onwards, we see more clarity on the timing of the decisions. Some I think will happen earlier and some is going to happen later. Obviously, we do not control the timing of the OEMs making the decisions, right? But based on our experience, based on knowing kind of what the OEM says and there may be some buffer in that, that's how we estimate the expectations on those decisions. I think generally, though, we are seeing actually increasing activity around the OEMs for deploying sensors and products in ADAS. I think, yeah, you know, it's taking time for some folks to really define what they're going to do, but I think increasingly we're feeling that, you know, in the next, as I mentioned, yeah, six to 12 months is going to be critical for some of these folks to, in order for them to hit their timelines, they need to make some of these decisions, and that's also a contributing factor to doing that. And on the other, I think maybe relevant topic, all those OEMs that we always engage with are really looking and planning to deploy LiDAR on their vehicles. And that's something that's also important in terms of the capabilities.
spk04: Okay, got it. That makes sense. I appreciate the color.
spk08: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. And this also concludes today's conference. Thank you for attending, and you may now disconnect your lines.

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