Aeva Technologies, Inc.

Good day. My name is Chloe and I will be your conference facilitator. I would like to welcome everyone to the AVEC Technologies Third 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.

Thank you and welcome everyone to AVEC's Third Quarter 2024 earnings conference call. Joining on the call today are Sush Salahian, AVEC's co-founder and CEO, and Sarab Sinha, AVEC's CFO. Ahead of this call, we issued our Third Quarter 2024 press release and presentation, which we will refer to today and can be found on our Investor Relations website at .avec.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 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 AVEC'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 Soush.

Thank you, Andrew, and good afternoon, everyone. AVA and Q3 continue to gain momentum across multiple fronts as more customer programs and industries look to adopt AVA's unique 4D LiDAR technology to enable next-generation solutions. From new production awards to key milestones achieved towards production with existing partners and progress on securing additional wins, AVA achieved major accomplishments this quarter, and I'm excited to highlight a few of them. First, we secured a major industrial production win for security applications with in a multi-year supply agreement with the opportunity to deploy AVA 4D LiDAR at multiple large locations across the U.S., starting with JFK and SFO airports, followed by plans to grow additional deployments on other applications. This is an exciting expansion for AVA that offers meaningful revenue potential and builds on our first win in security earlier this year. In automotive, our production partners Torq and DymaTruck achieved an important milestone towards safe and scalable commercialization with a successful validation of fully driverless operations at highway speeds. Of course, Torq's autonomous trucks are equipped with AVA 4D LiDAR as the exclusive long and ultra-long range LiDAR supplier. It is incredibly rewarding to be a part of such tangible progress towards bringing DymaTruck's autonomous truck program to production. AVA was also selected for a major European passenger OEM's automated vehicle validation program because of our FMCW advantages like direct velocity measurement, which will be used to help validate the OEM's next generation vehicle automation systems. And lastly, AVA remains on track with multiple RFQs for passenger vehicle production programs. In particular, we continue to advance further towards the finalization of the RFQ for a global top ten passenger OEM's production program. Let's now discuss in more detail our recent business developments. We are excited to be awarded a multi-year production supply agreement with the Indoor Lab. With over 15 years of experience, the company is a leader in AI-powered analytic solutions used to improve safety, security, and operational efficiency at major U.S. airports, mass transit, agriculture, and smart infrastructure. This production win represents a major expansion in security applications for AVA and is also our first industrial production win for Atlas, our next generation 4D LiDAR designed for mass production. Under the agreement, Atlas sensors will be integrated into the Indoor Lab's LiDAR Overwatch perception platform and enable the enterprise analytics suite for critical infrastructure to perform -the-clock AI-powered analytics and to monitor managed indoor and outdoor environments. The Indoor Lab is transitioning to AVA 4D LiDAR for production deployments in order to leverage our superior capabilities, such as direct velocity measurements and immunity to interference, but also, importantly, because of our product scalability and the maturity of our Atlas product. Our first installations are at some of the largest and busiest airports in the U.S., starting with a new terminal at JFK in New York and multiple terminals at San Francisco International Airport. In addition, the Indoor Lab is planning to expand deployment opportunities of 4D LiDAR to other applications at scale for other airports, as well as mass transit, agriculture, and smart infrastructure applications across the United States. As we deliver on the initial deployments, we expect to scale our supply to significant volumes to support the deployments and other industrial security applications, resulting in estimated revenue opportunity in the multiple tens of millions of dollars over the next two to three years. We have already begun shipments to the Indoor Lab last month and plan to scale volumes in 2025. Moving now to the latest on the Diamond Truck Production Program. Torque Diamond Truck's subsidiary that is developing the OEM's autonomous driving technology achieved a significant step towards a safe and scalable commercialization of autonomous trucks. A comprehensive validation milestone, Torque trucks equipped with AVA 40 LiDAR with 360 degrees field of view coverage successfully completed fully driverless runs at highway speeds of 65 miles per hour. This is a major accomplishment that clearly illustrates the tremendous progress and dedication down truck and torque and partners are making to commercialize autonomous trucks on the US highways by 2027. As the exclusive long range and ultra long range LiDAR supplier for Diamond Trucks autonomous truck production program, multiple AVA 40 LiDARs are being integrated into each truck for operation with Torque's virtual driver technology to enable highway speed autonomy starting with a freight liner Cascadia platform. We remain on track with our startup production in 2026 to support Diamond Trucks plans, market and trade by 2027. In passenger vehicle, AVA was selected for a major European passenger OEM's automated vehicle validation program. In collaboration with the leading simulation and validation technology provider, AVA 40 LiDAR will gather ground truth data which will serve as the benchmark for validating its next generation vehicle automation systems including sensing, perception, decision making and control systems. The OEM's decision to use AVA 40 LiDAR for this project is another example of the growing interest to leverage FMCW technology due to its ability to natively provide the additional dimension of instant velocity data along with other advantages that are missing in conventional LiDAR sensors. We look forward to supporting the validation work and providing the OEM real world experience with the differentiated capabilities of AVA 40 LiDAR. Now moving on to additional opportunities that we are engaged on. We are highly encouraged by the growing interest in our unique FMCW technology and Q3 made strong progress on multiple automotive RFQs and engagements with leading OEMs. In particular, with a global top 10 passenger OEM that we have discussed over the course of this year, we have advanced through multiple phases of their RFQ now, having worked jointly on spec alignment on thousands of technical requirements and passing extensive manufacturing call the audits to be their potential tier one supplier. AVA has been down selected to the final stage of the RFQ and will remain in close collaboration with OEM across the technical and commercial teams as they work through the finalization of the RFQ for the production program. To support our ongoing engagements and growing number of production wins, such as with the IndoorLab, I am pleased to share that we have made the strategic decision and superb execution to pull forward the first shipment of Atlas by almost six months to this quarter. This was a massive team effort across the AVA organization that meaningfully changes our ability to support recent production wins, pulls forward scaling of our Atlas deliveries and capitalize on additional interest for our unique technology. Atlas is our production intent product that was designed from the ground up to be automotive grade and scalable to mass volume. Based on our engagements, customers are increasingly looking for solutions that can be deployed at significantly greater scale than today's solutions. By accelerating the availability of Atlas, we believe this further positions AVA to be in a market leading position to not only deliver on our recent production wins, but continue to convert additional opportunities to production wins. With that, let me turn the call over to Sarab to discuss the financials.

Thanks, Sush and good afternoon, everyone. Now let's review our Q3 financial results. Revenue in Q3 was 2.3 million representing scaling of our sensor shipments to automotive and industrial customers, as well as our Daimler truck program. In line with our expectations, our non-GAAP operating loss was 31.4 million for the quarter. Growth cash use was 26.4 million in the third quarter, which is defined as operating cash use of 25.9 million and capital expenditure of 0.5 million. AVA's liquidity totaled 259.8 million at the end of Q3, comprised of 134.8 million in cash equivalent and marketable securities and a 125 million of available undrawn equity facility. We believe this places AVA in a strong position to support our current production partners for their SOP launches, as well as securing production program wins that our team is engaged on. As Sush shared, AVA continues to see growing interest for our unique 4D LiDAR. We are focused on meeting this increasing demand and securing additional production wins. Now I would like to turn it back to Sush for closing remarks.

Thank

you, Sarab. Over

the course of 2024, AVA has seen a sharp uptick in our commercial momentum. Starting with the Down the Truck Production Award announced at the beginning of this year to more recently our major expansion into security applications with multiple wins, we are converting more of our engagements to production wins, as well as converting the one programs to growing product shipments and revenues. I would like to thank the AVA team for delivering these wonderful achievements. Looking ahead, we see opportunity to further build on our growing momentum and our focus on executing on the multiple passenger RFQs and engagements such as the global top ten passenger OEM that we spoke about, as well as responding to the growing interest for our perception solutions in industrial automation, security, and other applications. With an expanding list of industries looking to leverage FMCW advantages for automation and perception solutions, AVA is in a strong position to drive the adoption of 4D LiDAR in automotive, industrial, security, and beyond. With that, we will now open the line up for questions.

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. And once more for your questions, that is star and one. We do ask that you limit yourself to one question. So there is time for everyone to ask their question. And we'll move first to Colin Rush with Oppenheimer. Your line is open.

Thanks so much. Now that you've got a couple of wins on the security side and with the ground truth, can you talk a little bit about what's going on with the potential customers in those areas? How many, just given the sense of growth and the number of customers in the opportunity over the next 12 to 24 months for shipments?

Hi Colin, happy to answer that. This is Rush. So obviously as you've seen now in the past number of quarters, we have continued to really build up and capitalize the momentum that we've seen in the market. Started off the year of course with the main production win with Diamond Truck. We have since executed on all the systems that we have set out for us as a company and in the market with customers, as well as actually pulling forward the product with Atlas now by nearly six months, which was I think a big deal with the company and across the organization to get this scale really in response to the growing demand. So to answer your question, with obviously now this additional production win, industrial security within their lab, we're really excited about this. It's a major opportunity for us with the industrial production win. I know that as the leader in the space, around the lidar-based AI analytics across applications of airports, smart infrastructure and other large venues. This is a multi-year production supply deal we have. We're starting first with deployments across airports in the US, starting with JFK as well as in San Francisco Airport, which we're excited about. Over time, we're going to expand this additional locations over time. We see now this plus the national security innovation win that we had earlier, a significant opportunity. With indoor as well as these other industrial security applications, to get to the bottom of your question, we estimate the revenue potential here to be approximately up to about $50 million in the years. This is something that we see as the first opportunity and over time, as the indoor lab and other applications continue to grow their platforms and deployments with new sites, we see the revenue potential that could grow over time. In a nutshell, we're really excited about the progress we've made. It's not just in automotive, which we're really working well and progressing well, but also industrial and other applications.

Excellent. Then, as you work towards our production with Torc, can you talk about the remaining key manufacturing hurdles that you guys are looking at and will be able to talk about with public markets over the next couple of years?

Yeah, sure. So far, we've been really well on track and really well aligned with Dama Truck and Torc, our partners for production here. We have hit all the milestones, everything we've been planning on with Dama Truck and Torc towards their SEP milestones. Importantly, Torc and Dama also have been continuing hitting their milestones. So with what we've seen and talked about and Torc made a release about in the past few days, this validation of their driverless operations at highway speeds without a driver in the cab is a critical milestone, not just for Torc and Dama Truck, but also for the industry. This is further confidence building towards the timeline of our SOP, which obviously is in 2026, but also Torc and Dama Truck's market entry in 2027, which by the way, they have reiterated even as of the past few days. So what's going on from here now on? First of all, this year at this point, we have now, you know, we've continued to scale on sensor shipments to Dama Truck and Torc. We've actually completed all of the sensor shipment deliveries that we need to do for our Ares II platform with Dama and Torc this year on time or ahead of time a little bit. And we're now of course focused on deliveries with Atlas into next year. So that's kind of where the key focus is. And the key milestone is going to be the validation for the rest of the Torc fleets as they scale into next year, as well as some of our automotive qualifications and making sure that we bring up the scaling production line for our Atlas up to the levels that needed to for mass SOP throughout next year. So that's kind of the focus that we see in the next number of quarters ahead of us. But overall, we're really progressing well. We're on track. And we actually, because we've been able to pull forward now, this ADVESS deliveries, we are also using that to capitalize on our momentum in other programs in automotive, including other passenger vehicle liens.

Thanks so much, guys. And once more for your questions, that is star and one. We'll pause just another moment to allow questions to queue. And we do have another question. We'll move next to Suji D'Sopa with Roth Capital. Your line is open.

Hi, Suresh. Hi, Sarab. Congrats on the progress here. Question on the Tier 1 OEM win that you have here. Can you give us an update on the progress there and the remaining milestones for that global Tier 1 program? It sounds like it's coming close to a decision point or a volume ramp. Any color there be helpful?

Yes, Suji, happy to answer that. So obviously, you know, we have been talking about our traction of the passenger car vehicle space in the past couple of quarters. Following our production with Diamond Truck, we have seen an uptick in interest for HAVA and for FMCW technology with the passenger vehicle automotive market. And I think with our ability to actually pull forward our Atlas deployments and really hitting all the milestones for our ISO audit and certification, we have continued over the course of this year across our engagements with multiple top passenger vehicle OEMs, specifically for the top 10 OEMs you are referring to. Over the course of this year, we have worked extensively with this OEM, and we continue to do so and we are on track on that. In a little bit more context, we have been obviously working from evaluation of the technology earlier in the year throughout really going through all the extensive testing together with this top 10 OEM. We have completed and passed all the critical manufacturing quality audits that helps us to build maturity as a tier one supplier and gotten the approvals for that, you know, leading to our ability to manufacture for them. We have joined the also work together through the technical teams, aligning on all the requirements, thousands of technical requirements that have been aligned in the past number of months and very close engagement there that we have done. And then more recently, you know, we have been down-selected to the final stages here and are now discussing commercial terms. So that is what I can share. Obviously, we are gaining continued confidence in the OEM as they move towards finalization of the RFU for this vehicle program, as you mentioned. And, you know, obviously there are many factors that go into the decision, but we are feeling overall good about the progress that we have had with this OEM. And this is lastly the second time that we have done this now, first with Diamond Truck and now with this OEM in the passenger car space.

Okay, great. Would you be able to share, Suresh, if there are other competitors in the down-select or whether it is just you kind of moving into new milestones?

Yeah, so look, what I can say obviously is we are at the final stages of the RFU and have been down-selected in that and we think we are in a good position

with this

passenger.

That is fair. And then switching over to the Innovation Labs partnership, I am wondering how does the financial opportunity for that play out as you start to develop, I guess, customers together or pipeline together?

Yeah, absolutely. So, you know, we spoke a little bit about this earlier, but in general, you know, obviously the Interlabs partnership is a multi-year production deal that we have with committed volumes and, you know, we are starting together really to deploy our technology with FortyBitR as well as their analytic solution across a number of reports, large venues and transit, mass transit applications. We are starting with JSC airports and San Francisco airports and the overall progress of Interlabs is really to go after a number of different application installments. With the opportunity here that we are talking about with Indoor as well as some of our other industrial security applications, we estimate the revenue potential for this to be approximately in the $50 million range over the next few years. And this is the starting point where we see with these opportunities and as there is growing interest for the platforms and new sites and applications, we think the potential revenue opportunity will grow over time. So this is, we don't think by any means any kind of ceiling here, just kind of the first deployment.

So hopefully that answers your question. No, understood. Thanks, Rich.

We'll take our next question from Richard Shannon with Craig Hallam. Your line is open.

Hi, everyone. This is Tyler Anderson on for Richard Shannon. Thank you for taking my questions. I was wondering if there was any qualitative differences between all of the places that you're looking to get into for indoor and outdoor. And also what would be pulled forward for the development about? Is that something that was a technical or a manufacturing matter? Could you describe that a bit for us?

Sure. Yeah. So obviously with our growing interest for our technology with FortyLightR and FMCW, we're expanding our applications, really capitalizing on the growing interest in the market. So I think your question around industrial applications, obviously besides what we talked about in automotive with the past two weeks, we have advanced on, besides this European OEM validation program that we won, we have secured production one with indoor labs on the industrial side. But this actually is for indoor and outdoor applications. So it's not just indoor application. But the key there for them actually has been that they've been looking at obviously different technologies in space, they've developed different types of technologies and decided that FortyLightR is where they're going to go with as they go with production scaling. That's the transition they're making. Part of the reason is, and we have, you know, I've seen this over and over is around the advantages of velocity dimension, the advantages of interference immunity, right? Not having issues with interference, looming, as well as I think importantly, our ability to show not just superior capability, but also maturity of our Atlas products. These were some of the key drivers, especially when you talk about monitoring analytics of different behavior, people in different settings, inside the airports, as well as outside. And your other question about Atlas and pulling, this has been obviously a strategic decision that we made earlier in the year. The moment we announced Atlas following, you know, same time with our win with Diamond Truck, we saw a sharp uptick in the interest in the market for our products. And our team has been working together for the past number of months across engineering, as well as manufacturing operations to really pull forward this Atlas deliveries by about six months or so. That's something that we, you know, has taken a significant amount of effort from the team. But in general, of course, you know, with non-automotive applications, we see the ability to pull this forward because often they don't necessarily need some of those automotive qualifications or certifications to be completed yet, which is obviously ongoing and on time for our Diamond Truck SOP. So all this, I think, has resulted in our ability not just to deliver on the existing programs with production programs that we have, but also win additional programs. And what we're going to do here, what we're planning out forward is continue on capitalizing this momentum, not just executing on our existing programs, but also converting those additional opportunities to production wins and then those wins to growing shipments and revenue. So that's how we've been operating.

And then are there commonalities between the indoor and outdoor opportunities that you're looking at? Is there a population or a geographical situation that you're looking for when you're entering into a space?

You're talking specific to the industrial sensing, right, Tyler?

Industrial or mass transit and smart infrastructure.

Sure. Yeah. So first of all, in what we are seeing, the growing interest there in the industrial security, there is, you know, across different regions, our first deployment is starting in the U.S., obviously with our, you know, this first national security organization program that we have and now with the conce kh, that's set up right here, so... At the beginning, there's this sector. And in this sector, hours and hours per day, it's monitors people that are surrounding our package trust service, является, job and docking and undocking. But also there is other applications outdoor for just security monitoring around the fences and perimeters which are some of the different customers. So from a commonality you're talking about is all the same Atlas product that we have been working on that is for automotive that we're providing here for these industrial security applications be it indoor, be it outdoor, be it for perimeter or mass transit applications. That's some of the I guess beauty of kind of the platform that we have built that is highly software configured configurable and flexible in those applications.

Thank you, appreciate your time.

There are no further questions at this time. This does conclude today's program. We thank you for participation. You may disconnect at any time and have a wonderful afternoon.