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spk01: Good day. My name is Chloe and I will be your conference facilitator. I would like to welcome everyone to the AVA Technologies second quarter 2024 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, senior director of investor relations and corporate development. Andrew, please go ahead.
spk03: Thank you and welcome everyone to AVA's second quarter 2024 earnings conference call. Joining on the call today are Sushela Heon, AVA's co-founder and CEO, and Saurabh Sinha, AVA's CFO. Ahead of this call, we issued our second quarter 2024 press release and presentation, which we will refer to today and can be found on our investor relations website at .ava.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 days. 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 10Q and Form 10K. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of AVA'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 Sourj. Thank
spk04: you, Andrew,
spk03: and good
spk04: afternoon, everyone. In Q2, we achieved key milestones on our existing production program, while also meaningfully advancing on a number of additional opportunities. Importantly, we secured wins with new customers, highlighting the broadening interests for AVA's unique 4D LiDAR. I'd also like to share our key accomplishments in Q2. We continue to strengthen our partnership with Diamond Truck. We remain on track with Diamond Truck's program milestones, including continued sensor shipments to build out the OEM fleet of on-road vehicles. Diamond Truck also publicly unveiled the autonomous Freightliner vehicle and technology demonstrator, which incorporates AVA's 4D LiDAR as the exclusive long-range and -long-range LiDAR and highlights the OEM's progress and commitment to deploying autonomous vehicles at scale. In automotive, we have made significant progress on opportunities with multiple global top 10 passenger vehicle OEMs. With one top passenger OEM, we continue to expect their award decision later this year. And with another top passenger OEM, we began a new collaboration around 4D LiDAR vehicle integration. In industrial, we completed the final validation of our LiDAR on chip in Nikon's product ahead of our first industrial launch in Q4 this year. And lastly, AVA continued to broaden the reach of 4D LiDAR with our expansion into security. We are proud that a top U.S. National Defense Security Organization selected AVA 4D LiDAR as a primary detection sensor to help protect some of the nation's critical energy infrastructure. Let's now discuss in more detail about our recent business developments. With Diamond Truck, we continue to work closely together and remain on track with the OEM's milestones and the startup production timeline. In Q2, we continue scaling sensor shipments to Diamond Truck and Torque for deployment on additional vehicles for on-road data collection and development. The AVA team is working very closely together with Torque and Diamond Truck on important use cases for safe operation of trucks at highway speeds. In the last quarter, Diamond Truck also publicly unveiled its battery electric autonomous freightliner eCascadia technology demonstrator, which incorporates multiple AVA 4D LiDARs as the exclusive long-range and -long-range LiDARs. This vehicle highlights the significant progress Diamond Truck is making to commercialize autonomous trucks on U.S. highways and is part of the OEM's broader strategy to deploy a propulsion agnostic autonomous truck platform for scaling automated trucks to significant volume. Looking ahead, our focus is on supporting the rollout of additional Diamond Truck vehicles and related on-road development as well as preparing for AVA's startup production in 2026, in time for Diamond Truck's market entry. Beyond Diamond Truck, our engagements for additional automotive programs continue to solidify in Q2 as we advance on a number of opportunities expected to be decided in the coming months and expanded other ones. In particular, we made significant strides with multiple global top 10 passenger OEMs. This includes one we have discussed in the last quarter. The AVA team continues to advance in close collaboration with this OEM and we continue to expect the OEM to make an award decision for this production program later this year. With another global top 10 passenger OEM, we have started on a collaboration for 40-liter vehicle integration. This OEM is experienced with -of-flight LIDAR and increasingly appreciates the benefits of FMCW for next-generation capabilities. We look forward to further demonstrating the perception and integration capabilities of our differentiated 40-liter technology. More broadly, we are highly encouraged by the industry's growing recognition that FMCW can help enable more advanced capabilities, including automated driving at highway speeds. Following our production program win with Diamond Truck, AVA is experiencing this in exciting and tangible ways across a broad range of applications from passenger vehicles, commercial vehicles to mobility. Our focus is on meeting the growing interest for AVA 40-liter and the multiple opportunities to convert production wins in the near term. Turning now to industrial, AVA is on schedule for our first industrial launch in the fourth quarter. Over the quarter, we successfully completed the final validation of our LIDAR on-chip module in Nikon's product and are now preparing for our deliveries to Nikon in Q4. In support of this, we have also successfully scaled up our dedicated LIDAR chip manufacturing line at Fabrinet. This first collaboration with Nikon is for industrial metrology applications where Nikon's existing customers across automotive, aerospace, and renewable energy already use Nikon's high-precision inspection products in the manufacturing processes, including some of the leading OEMs and automotive players in the space. With AVA's LIDAR on-chip module, we will together offer micron-level accuracy in a faster, smaller, and lower-cost solution that we believe will open new opportunities. This upcoming launch will mark a pivotal milestone for AVA as we progress from the development stage to commercialization for the first time in industrial automation. While we plan to scale our dedicated manufacturing production line at Fabrinet over time, we believe this transition has the potential to accelerate our other ongoing engagements. We continue to engage with industrial leaders on expanding into additional opportunities where we can leverage the same AVA LIDAR on-chip module and our perception platform software for industrial metrology and automation across a broad range of applications. Now, speaking of new applications, we recently announced AVA's first expansion into security. Our 4D LIDAR was selected by top U.S. National Defense Security Organization to help protect critical U.S. energy infrastructure. AVA sensors are expected to be a primary detection sensor to protect sensitive locations in various facilities from intrusion, such as water entries and exits and perimeter fences. We expect to deliver the first set of sensors later this year. This selection comes after evaluation of other technologies, including 3D time of flight LIDAR. Because of our instant velocity data, immediate interference, and ultra long range, AVA 4D LIDAR was selected to enable faster and more reliable detection. AVA's mission is to bring the next wave of perception to a broad range of applications, and this one is another example of the increasing interest to adopt our technology across a diverse mix of end markets, including for some of the most demanding and high-stakes physical security applications. We look forward to supporting this important application and helping to protect some of our nation's critical infrastructure. Lastly, I would like to share a bit more about our new collaboration in rail. AVA 4D LIDAR was selected for Germany's Automated Train Program. This program is funded by the Germany Federal Ministry of Economic Affairs and Climate Action, and managed by Germany's national rail operator, Deutsche Bahn, in collaboration with other industry leaders such as Bosch and Siemens. The group is developing driverless, fully automated passenger train dispatch and parking functionality by 2026. AVA's 4D LIDAR was selected after evaluation of other sensors, including 3D Time of Flight LIDAR. Our ability to instantly detect velocity enables faster and more reliable detection of hazards, which can add critical reaction time to avoid obstacles surrounding train tracks. In addition, AVA's unique ability to offer precise real-time location state estimation without the use of GPS means we can provide accurate positioning even where GPS can be compromised, such as tunnels, urban canyons, and other areas where trains regularly operate. We are excited to work with some of the rail industry leaders on this project and leverage 4D LIDAR's perception to bring new levels of automation to this end market. With that, let me turn the call over to Saurabh to discuss
spk02: the financials. Thank you, Saurabh, and good afternoon, everyone. Let us now turn to AVA's Q2 financial results. Revenue in Q2 was $2 million driven by sensor shipments to multiple customers and NRE from Daimler trucks. Non-GAP operating loss was $32 million as we maintained a deliberate and disciplined approach to spend. In Q2, gross cash use, which we define as operating cash flow less capital expenditure, was $29.9 million. At the end of the quarter, our total liquidity stood at $285.2 million, of which $160.2 million was in cash, cash equivalent, and marketable securities, and $125 million in an undrawn facility. We believe this capital position will continue to enable us to support our existing production partners and together with our unique 4D LIDAR technology, convert more of our commercial momentum to additional production program wins in the coming months. With that, let me turn the call back to Saurabh for closing remarks. Thank you, Saurabh.
spk04: To
spk02: wrap
spk04: up, in Q2, we continue to deliver on key milestones for our production partners, including Daimler truck and Nikon, and secured additional customers in new applications such as security and railway. I'd like to thank the ABA team for their determination to advance our commercial momentum in tangible ways in just three months. And I'd also like to express our appreciation to all of our stakeholders for their ongoing support. Our increasing list of wins and the significant progress on new opportunities are further indications of the growing demand for our products across a diverse mix of markets and ABA's leadership position to drive this adoption with our 4D LIDAR technology. ABA is in the final stages on a number of key opportunities and continue to advance on other engagements across automotive and beyond. We believe we remain in a strong position to continue converting a portion of these opportunities to win this year and continue to further ABA's mission to bring the next wave of perception to a broad range of applications from automotive to industrial automation and beyond. With that, we will now open the line up for questions.
spk01: At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star two. We do ask that you limit yourself to one question to allow everyone to get their asked. And once more, that is star and one. We'll move to Colin Rush with Oppenheimer. Your line is open.
spk05: Thanks so much, guys. It's great to see you move into the security space. I'm curious how leverageable that opportunity is for you. It seems like the potentially relatively robust pricing and getting through the vetting process there could mean that there's other doors open. I just want to get a sense of the total scope of that in the case in which you might be able to attack it.
spk04: Hey, Colin. Sure. This is Rush. Happy to answer that. Look, you're right. Absolutely. We are actually very excited about this. This is our first expansion in security. We're excited to grow in the market here. First of all, a little background. This top national security defense organization selected us as really going through a whole gamut of testing for a number of different technologies, including evaluating other time of flight hours. And really, I think what they realized, which we've been talking about for some time now is this additional capability that FortiLidar and FMCW technology brings to the table do apply beyond automotive to other applications, including basically longer range detection, better resolution, enabling faster, and really comes down to faster and more reliable detection. So I think overall, as you mentioned, this is significantly higher ASPs than automotive. We're talking about an order of magnitude higher. It is obviously near term. It's part of our plan. We've always talked about diversifying, bringing applications, including not just progressing automotive, which we really showed this quarter, not just the solid progress solidifying with the one top 10 OEM, adding another top 10 OEM in the engagement process, but also now expanding this new application. I think importantly, we think it's just a start of AVA in security. We are actually engaged in a number of other opportunities in defense and security where we see that expanding. This win, I think importantly, provides a lot of confidence in our technology for others to also start adopting that. And we really hope to capitalize on this and work with additional opportunities that we can convert over time. And again, this is consistent with our mission to bring really next level perception across applications. And the key focus here is being able to do so means we are really using the same investment we've made on our 40-letter on chip module and technology in automotive and then taking that expanding it maybe with different algorithms, but the same core technology. We're definitely having to now then make significant additional investments or spend to go tackle those other applications. And I think as we are going towards production, as we scale, we see our ability to expand opportunities to I think meaningfully further increase as well.
spk05: Great. And then with the scale up of the dedicated line, getting full validation for the Nikon products, can you talk about any sort of surprises, whether positive or negative in terms of performance, efficiency of that production, and anything within that validation process that maybe we want to be thinking about as a tailwind or a headwind here for you guys?
spk04: Yeah, I think we have been working obviously with our manufacturing line at Fabana for some time out of Fabana. And I think we said at the beginning of the year that we're going to be working on creating this dedicated manufacturing line for our lighter on chip module. I think this is one of the advantages of having everything integrated at the chip level. We're not using any fiber, reducing the bomb cost, making the process as automated as possible. So what we see here now is actually we were able to deliver on getting the dedicated line up and running a bit ahead of schedule. So that's actually important. We're planning for this around Q3 ahead of Q4 timeframe. Now we're at Q2 already we have completed this, which means really things have been going actually pretty smoothly. So we are starting to turn up the production on here with the dedicated line. This is going to of course support all of our production programs. We are already scaling shipments for Zama truck in which their on-road vehicle is ongoing. We're going to be using that also for Nikon shipment starting Q4 and then hopefully others as go along that we talk about. But I think having that is obviously a critical milestone for us. So that allows us to have this production readiness on time. I think beyond manufacturing also we have been able to in the past quarter continue our automotive tier one readiness as a direct supplier. We achieved this ISO 27001 certification which is information security that builds further confidence for not just our existing production customers but others to work with us on additional programs. One more thing I want to highlight on Nikon specifically, this is just the beginning of our collaboration with Nikon. Obviously this is a multi-year program. Again as you mentioned, similar to security, this is a program where ASPs are higher, similar maybe in order of nice and higher in automotive. It's also near term and we're working together with Nikon that over time as we ramp up for potential to grow additional new opportunities. And more broadly in industrial automation we also see that the ability for sensing technology really to use the same core chip module with different algorithms, different software, achieve micron level accuracy and precision, that is something that's not really possible really with any other wider technology. So this is a market that we see is in some ways pretty interesting and ripe for AVA to go after. We have been executing on this and the fact that we have been able to now complete the validation, the final Nikon product gives us that further confidence to then go after expanding in this market as well. So we're doing all of this just to be clear while we are making significant progress and not letting up on the traction that we see on automotive and actually increasing that as well. Great, thanks so much.
spk01: We'll move next to Joe Moore with Morgan Stanley. Your line is open.
spk06: Great, thank you. I wonder in terms of the top 10 passenger OEM that you're talking about, do you know if the opportunity there is kind of an OEM option? Is it more standard? And then you mentioned other progress with other top 10 OEMs maybe if you could talk about how much energy you're putting into customers beyond the sort of big two that you've sort of talked about, Daimler as well as the big passenger opportunity.
spk04: Yeah, sure, Joe. Happy to answer that. So obviously as you know, we have been focused on of course delivering on Daimler for first OEM SOP on automotive. We're of course working on Nikon as I mentioned. I think with this top 10 OEM that we talked about in the last quarter, we have continued to solidify our position and our progress together. We've completed the, you know, of course that completed evaluation of our product. We completed the audit which contributed to continuous maturity gain of our company as a tier one status. We finished our 27,001 information security as well, further commitment to our readiness. I think at this point I would say, you know, it's important because we have continued close collaboration with them aligning on the technical perception requirements. We're actually starting commercial discussions and negotiations as well. And this is kind of the second time that we've been doing this, right? So first time with Daimler truck and now a passenger car with this OEM. To your question about the option or not, what I can say is that this is an OEM that has experience already with Tomahawk LightR. They have done that and understand what they can and importantly what they cannot do. And they're looking at a mass production volume across multiple vehicle lines which we see as significant production volume opportunities for enabling highway speed automation. So the way you think about this is not that it's like some very niche full only level for autonomy that is on some portion of vehicles. It is that next generation ADAS capability. This is driving capability where it extends it to highway autonomy for higher speed. And we're really encouraged in our collaboration that we see their interest around using FMCW to enable that higher speed automation which they're also seeing that it's not quite really that quite there yet with the technology they're working with. So that's what I can say. So we're encouraged with that and their appreciation of our technology and continue to obviously work with them with expectation that the decision would be made later this year.
spk06: Great, thank you.
spk01: Move next to Richard Shannon with Craig Hallam. Your line is open.
spk07: Hi guys, thanks for taking my questions. Let's hear, maybe touching on Nikon here. Obviously interesting to see the first real customer getting to some nice volume here. Wonder if you can kind of discuss what you have from them, whether it's forecasts or even orders so far here. And how do we think about a kind of revenue run rate as you get into production presumably sometime next year? I'm not sure if we have a good way of understanding the scale here. Clearly it's smaller than what you might look for for a larger automotive program. But I'm not really sure I have a good sense of scale here. Maybe we can kind of couch that in some terms. I think that'd be helpful.
spk04: Sure, let me answer that question and of course, yes, Ron can add. Obviously this is a multi-year program with long commitments with Nikon. As I mentioned, strong ASP, the way you think about that is multiples, order of magnitude higher than automotive. From a volume standpoint, obviously what we can share and be careful there, but think of it as similar to maybe a mobility program. So when you look at the net of it, things balance out from volume versus ASP obviously. And as mentioned, we're starting at the end of this year with the launch and then ramp up over time. I think the way we think about this is this is again a first program opportunity with Nikon. We are working across other opportunities and we see that potential to grow over time. And beyond that industrial automation, this is being vetted as the first product that can deploy into industrial automation. We see the similar need with other customers and others from industrial automation and metrology standpoint. I believe we get to micro-level precision that we think can actually further expand on that. So that's kind of what I can share about the size of course and the opportunity. We're pretty excited about that and obviously having a dedicated line to help us manufacture for everybody including Nikon, Diamond and others at FabNet helps us to expand on this growth and capitalize on it. That's what I can say.
spk07: Okay, that's helpful. Maybe a quick follow on question here regarding your top 10 OEM that you talked about here for the last few quarters. It seems there have been some delays in terms of decision making on LiDAR and broader autonomy programs here. I know you repeated the language, expected a decision sometime this year. Has there been any delays there? Is there any risk of that moving into 2025 at all?
spk04: Yeah, good question. I think what's interesting what we see in the market is that in I would say an environment where we see some of the maybe others in the space either reducing some of the activities around RFQs or some of the timelines pushing out. We've always maintained and talked about that the industry is transitioning from kind of kind of fly towards FMCW and FortiLiR. We think this actually has been helpful for us as evidenced by the fact that one, we're on track with Diamond Truck. We talked about our SOV timeline remaining in 2026. We're continuing hitting milestones. We're strengthening a partnership there. Two, with this top 10 OEM we talked about last quarter, we're continuing on track as I mentioned with further engagement with the technical team, completion of the audits and now starting the commercial negotiation discussions there. And we've maintained that what we believe is the timing for the decision still remains to be this year. Of course, we don't control their timeline, but this is all the indications and the feedback we have and we're very encouraged by our progress. So far, we're continuing working with them around how we actually integrate and our technology also in the vehicle level. Now, importantly also, we have now added a new engagement from another top 10 passenger OEM. This is another OEM that's working with a time of flight solution and is also looking to potentially transition to FortiLiR. So there's another major program, major volumes globally. Timelines are similar in line with the other top 10 passenger OEM. And we are, I think importantly, very encouraged by the OEM's desire to only work with ABAP on this deep level of vehicle integration concept. So that's something that gives us some indication around where there's maybe some reduction activities. We're seeing an increase in activities. And obviously, some of these are transitions from other technologies. And this is consistent with what we have talked about in the past and the broader trend that we're seeing in the industry. Obviously, we're not expecting to be going to win everything, but we are seeing increasing interest in our technology. We're progressing in the right track. We have maintained our timelines as we have talked about it. And that's something that we see as important. So overall, I would say while maybe some of those others may have pushed out with what we are involved and active with, we are seeing our current programs on time and other programs coming up, giving us multiple shots on goal that we feel good about securing at least one program in the next month.
spk07: Okay, great. Thanks, Rosh.
spk01: And it does appear there are no further questions at this time. This does conclude today's program. Thank you for your participation. You may disconnect at any time. Have a wonderful evening.
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