11/6/2024

speaker
Chloe
Conference Facilitator

Good day, my name is Chloe and I will be your conference facilitator. I would like to welcome everyone to the AVA 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.

speaker
Andrew Fung
Senior Director of Investor Relations and Corporate Development

Thank you, and welcome everyone to AVA's third quarter 2024 earnings conference call. Joining on the call today are Sarush Salahian, Ava's co-founder and CEO, and Saurabh Sinha, Ava'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 investors.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 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 Sush.

speaker
Sarush Salahian
Co-founder and CEO

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 40 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 the indoor lab 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-40 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 Diamond Truck'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 10 passenger OEMs 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 IndoorLabs LiDAR Overwatch perception platform and enable the enterprise analytics suite for critical infrastructure to perform around-the-clock AI-powered analytics and to monitor and manage indoor and outdoor environments. The indoor lab is transitioning to AVA 40 LiDAR for production deployments in order to leverage our superior capability, 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 40 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. TORQ Diamond Truck subsidiary that is developing the OEM's autonomous driving technology achieved a significant step toward the safe and scalable commercialization of autonomous trucks. In a comprehensive validation milestone, TORQ trucks equipped with AVA 40 Vidar 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 Diamond Trucks and TORQ and partners are making to commercialize autonomous trucks on the U.S. highways by 2027. As the exclusive long-range and ultra-long-range lighter 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 the Freightliner Cascadia platform. We remain on track with our startup production in 2026 to support Diamond Truck's planned market entry by 2027. In passenger vehicle, AVA was selected for a major European Passenger OEM's automated vehicle validation program. In collaboration with a 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 work jointly on spec alignment on thousands of technical requirements and passing extensive manufacturer and quality audits to be the 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 engagement and growing number of production wins, such as with the indoor lab, 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, pull 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 Saurabh to discuss the financials.

speaker
Saurabh Sinha
CFO

Thanks, Soroush, 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 diamond truck program. In line with our expectations, our non-GAAP operating loss was $31.4 million for the quarter. Gross 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, cash equivalents, 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 additional production program wins that our team is engaged on. As Swaroosh 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 Swaroosh for closing remarks. Thank you, Saurabh.

speaker
Sarush Salahian
Co-founder and CEO

Over the course of 2024, AVA has seen a sharp uptick in our commercial momentum. Starting with the Diamond 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 10 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 40 LIDAR in automotive, industrial, security, and beyond. With that, we will now open the line up for questions.

speaker
Chloe
Conference Facilitator

At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star 2. And once more, for your questions, that is star and one. We do ask that you limit yourself to one question, so there's time for everyone to ask their question. And we'll move first to Colin Rush with Oppenheimer. Your line is open.

speaker
Colin Rush
Analyst at Oppenheimer

Thanks so much. Guys, 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, you know, how many are just given a sense of growth in the number of customers in the scope of that opportunity over the next 12 to 24 months for shipments?

speaker
Sarush Salahian
Co-founder and CEO

Yeah. Hi, Colin. Happy to answer that. This is Soroush. 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. You know, started off the year, of course, with the major production win with Diamond Truck. We have since executed on all the milestones 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, you know, with obviously now this additional production wind industrial security within our lab, We're really excited about this. It's a major opportunity for us with the industrial production when Interlab is the leader in the space, you know, around 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 U.S., starting with JFK, as well as in San Francisco Airport, which we're excited about. And over time, we're going to expand this additional locations over time. So we see now, you know, this plus the National Security Organization window that we had earlier is a significant opportunity. So 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 next few years. So this is something that's obviously you know, we see as the first opportunity and over time as vendor lab and other applications continue to grow their platforms and the deployments with new sites, we see the revenue potential today could grow over time. So in a nutshell, we're really excited about that the progress we've made. It's not just in automotive, which we're really, you know, working well and progressing well, but also industrial and other applications.

speaker
Colin Rush
Analyst at Oppenheimer

Excellent. And then, you know, as you work towards our production with Torque, Can you talk about the remaining key manufacturing hurdles that you guys are looking at and will be able to talk about with both markets over the next couple of years?

speaker
Sarush Salahian
Co-founder and CEO

Yeah, sure. So, you know, so far we've been really well on track and really well aligned with Diamond Truck and Torque, our partners for production here. We have hit, you know, all the milestones, everything we've been planning on with Diamond Truck and Torque. towards their SLP milestones. And importantly, Torque and Diamond also have been continuing hitting their milestones, right? So with what we've seen and talked about and Torque 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 Torque and Diamond trucks, but also for the industry. And this is further, you know, confidence building towards the timeline of our SOP, which obviously is in 2026, but also torque and diamond trucks market entry in 2027, which, by the way, they have reiterated even as of the past few days. So, for what's going on from here from now on, first of all, this year at this point, we have now, you know, we continue to scale on sensor shipments to diamond truck and torque. We've actually completed all of the sensor shipment deliveries that we need to do for our Ares II platform with Lear and Torque 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 Torque 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 Atlas deliveries, We are also using that to capitalize on our momentum in other programs in automotive, including other passenger vehicle .

speaker
Tyler Anderson
Analyst at Craig Hallum

Thanks so much, guys.

speaker
Chloe
Conference Facilitator

And once more for your questions, that is star and 1. We'll pause just another moment to allow questions to queue. And we do have another question. We'll move next to Suji De Silva with Roth Capital. Your line is open.

speaker
Suji De Silva
Analyst at Roth Capital

Hi, Suresh. Hi, Saurabh. 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 would be helpful.

speaker
Sarush Salahian
Co-founder and CEO

Yeah, Sujit, happy to answer that. So obviously, you know, we have been talking about our traction in 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 and automotive market. And I think with our ability to actually pull forward our Atlas deployments and really hitting all the milestones for our ISO audits and certifications, we have continued over the course of this year across our engagements with multiple top passenger vehicle OEMs, specifically for the top 10 OEM that I think you're referring to. Over the course of this year, we have worked extensively with this OEM, and we continue to do so, and we're 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, you know, really going through all the extensive testing together with this top 10 OEM. We have, you know, 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 jointly also worked 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've been now down selected the final stages here and are now discussing commercial terms. So that's what I can share. Obviously, we are gaining continued confidence in the OEM as they move towards finalization of the RFQ for this vehicle program, as you mentioned. And, you know, obviously, there's many factors that go in the decision and you know, 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've done this now, first with Diamond Truck and now with this OEM in the passenger car space.

speaker
Suji De Silva
Analyst at Roth Capital

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

speaker
Sarush Salahian
Co-founder and CEO

Yeah, so look, what I can say obviously is We are at the final stages of the RFQ and have been multiple down selects, right, in that, and we think we're in a good position with this passenger we have.

speaker
Suji De Silva
Analyst at Roth Capital

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

speaker
Sarush Salahian
Co-founder and CEO

Yeah, absolutely. You know, we spoke a little bit about this earlier, but in general, you know, obviously the Indoor Labs partnership is a multi-year production deal that we have with committed volumes. And, you know, we're starting together really to deploy our technology with FortiBIDAR, as well as their analytic solution across a number of airports, large venues, and uh transit mass transit applications we're starting with um jsk airports and san francisco airports and the overall progress of of of indoor labs is really to go after a number of different application installments with the opportunity here that we're talking about um with indoor as well as some of our other industrial security applications we estimate that the the revenue potential for this to be approximately in the 50 million dollar 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 is any kind of a ceiling here, just kind of the first deployment. So hopefully that answers your question.

speaker
Suji De Silva
Analyst at Roth Capital

No, understood. Thanks, Rich.

speaker
Chloe
Conference Facilitator

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

speaker
Tyler Anderson
Analyst at Craig Hallum

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 the pull forward for the shipment about? Is that something that was a technical or a manufacturing matter? Could you describe that a bit for us?

speaker
Sarush Salahian
Co-founder and CEO

Sure. Yeah. Obviously, with our growing interest for our technology with 4D LIDAR and FMCW, we're expanding our applications and 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 Daimler in the past, your vehicle OEMs that we have advanced on, besides this European OEM validation program that we won, we have secured production one with with indoor labs on the industrial side. But this actually is for indoor and outdoor applications. So it's not just indoor applications. But the key there for them actually has been that they've been looking obviously at different technologies in space. They have valid types of technologies and decided that 40 LIDAR is where they're going to go with as they go through production scaling. That's the transition they're making. Part of the reason is, and I've seen this over and over, around the advantages of velocity dimension, the advantages of interference immunity, 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. And 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 to your other question about Atlas and pull-in, 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. 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. 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. So which is obviously ongoing and on time for our dynamotron SOP. So all this, I think has resulted us 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 gonna do here, what we're planning on forward is continue on capitalizing on 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 revenues. So that's kind of how we've been operating.

speaker
Tyler Anderson
Analyst at Craig Hallum

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

speaker
Sarush Salahian
Co-founder and CEO

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

speaker
Tyler Anderson
Analyst at Craig Hallum

Industrial or mass transit and smart infrastructure.

speaker
Sarush Salahian
Co-founder and CEO

Sure. Yeah. So first of all, in what we are seeing, the growing interest there in 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 IndoorLab. And these are actually both indoor facing. So some of these, for example, in the terminals with SSO and JFK are looking at inside the terminal, looking for monitoring of people, you know, wrong behavior or bad behavior, tracking analytics. queue times, things like that. So there's a number of different applications. It's monitoring also on the outside, for example, looking at airplanes and on time 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 So from a commonality you're talking about, it's all the same Atlas product that we have been working on that is for automotive that we're providing here for these industrial 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 configurable and flexible in those applications.

speaker
Tyler Anderson
Analyst at Craig Hallum

Thank you. We appreciate your time.

speaker
Chloe
Conference Facilitator

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

Disclaimer

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.

-

-