Aeva Technologies, Inc. Q1 FY2024 Earnings Call

Good day. My name is Desiree and I will be your conference facilitator. I would like to welcome everyone to Aeva Technologies' First Quarter 2024 Earnings Conference Call. As a reminder, today's conference call is being recorded and simultaneously webcasted. I would now like to turn the call over to Andrew Fung, Director of Investor Relations and Corporate Development. Andrew, please go ahead.

Thank you, and welcome, everyone, to Aeva's first quarter 2024 earnings conference call. Joining on the call today are Soroush Salehian, Aeva's Co-Founder and CEO, and Saurabh Sinha, Aeva's CFO. Ahead of this call, we issued our first quarter 2024 press release and presentation, which we will refer to today and can be found on our Investor Relations website at investors.aeva.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 dates. 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-K. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Aeva's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. A 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.

Thank you, Andrew, and good afternoon, everyone. In Q1, Aeva continued to build on our strong start to 2024 as we executed on our customers' milestones as well as furthered our commercial traction on new opportunities. I would like to highlight our key accomplishments in Q1. We shipped a record number of sensors to customers in Q1, including to Daimler Truck. As a result, the first Daimler Truck vehicles equipped with Aeva sensors are now on the road for real-world operation in order for Daimler Truck to continue to prepare their stack for commercial operations. We are excited to enter this next phase and are overall on track with the OEMs' development milestones and startup production timelines. We also made significant progress on multiple automotive RFQs. In particular, Aeva completed a comprehensive audit for a global top 10 passenger OEM and advanced on multiple other automotive engagements, which reflects the growing interest and maturity of Aeva 4D LiDAR. To support our commercial momentum, we established a new automotive center of excellence located in Germany, which positions Aeva to collaborate directly and more closely with our existing and new partners in Europe. We believe this team further positions Aeva to expand our automotive momentum. Let's now discuss in more detail our recent business developments. With Daimler Truck, we have successfully kicked off the next phase as our exclusive Tier 1 production supplier for long-range and ultra long-range LiDAR. In Q1, we delivered a significant number of sensors to Daimler, which have been integrated into the trucks and are now on the road collecting data. As part of this, our teams are in close collaboration to integrate Aeva’s unique velocity data into their perception stack and continue addressing key use cases needed for safe operation at highway speeds. This work and the real-world data will help Daimler Truck and Torc validate their stack on routes they intend to deploy for commercial use in series production. Overall, we are progressing well on Daimler Truck's milestones on their path to production. We will continue supporting the rollout of additional trucks over the course of this year, as Daimler Truck expands its fleet for on-road deployments. As partners, we are jointly on track for Aeva’s startup production in 2026 to support Daimler Truck's market entry in 2027, which they recently reiterated in their post-Q1 investor update. As highlighted in their Q1 update, Daimler Truck is making great strides on their path to vehicle launch, where they highlighted the startup testing with the industry's first vehicle platform and finalization of the production intent hardware for commercial launch. Finally, before moving to the next topic, we will have some additional updates to share together with Daimler Truck and Torc at upcoming events. The first will be at a Fireside Chat at Financial Times Future of the Car later this week, where I will be joined by Peter Vaughan Schmidt, the CEO of Torc. And later this month, we will be at the Advanced Clean Transportation Expo or ACT with Joanna Buttler, Head of Autonomous Technology Group at Daimler Truck and other key management at Torc. We hope to see you there. Now, I would like to provide an update on additional opportunities that we are working on in automotive. Interest for Aeva's unique 4D LiDAR continues to increase following the production program win with Daimler Truck. This is across a range of applications including both passenger and commercial vehicle programs. Based on our engagements and inbound interests, we are excited to see that the industry is advancing on its trend towards FMCW technology to enable new capabilities, including automation at highway speeds. While the adoption of FMCW has begun first in commercial vehicles, there continue to be signs of similar trends emerging in passenger vehicles with an increasing number of industry participants publicly announcing FMCW initiatives for next-generation programs as well as Aeva's growing number of RFQs. In particular, we mentioned last quarter our engagement with a new global top 10 passenger OEM. I am pleased to share that we have advanced as a finalist on this OEM's RFQ, having completed the comprehensive audit and final assessment ahead of their award decision. In Q1, we also progressed on other ongoing automotive RFQs and advanced from the RFI to RFQ stage on additional opportunities. We continue to expect a number of these RFQs to be awarded this year. In addition, the recent rulemaking from the National Highway Traffic Safety Administration requiring passenger vehicles in the U.S. to have standard automatic emergency braking systems by 2029 has the potential to accelerate OEM adoption of LiDAR. We believe FMCW LiDAR is an enabler for achieving the more stringent requirements. The new standard will require OEMs to prevent forward collision at speeds up to 100 kilometers per hour or 62 miles per hour as well as prevent collision with pedestrians at up to 45 miles per hour, both of which are at higher speeds than what solutions on the road today are reliably capable of preventing. Building on the work that we have done with Daimler Truck, we believe Aeva 4D LiDAR is particularly well-positioned to help OEMs achieve automation at higher speeds. Aeva's unique ability to simultaneously deliver long range at high resolution and instant velocity measurement enables our LiDAR to more accurately detect and classify objects at farther distances, even in challenging conditions such as inclement weather. The new standard also requires for the first time that testing for pedestrian automatic braking to be conducted in the dark without overhead lighting. With more than three quarters of pedestrian fatalities occurring in conditions other than daylight, this is another important test scenario where we see LiDAR with its ability to function in complete darkness has the potential to meaningfully improve safety for vulnerable road users, including pedestrians and cyclists. Aeva’s 4D LiDAR further improves perception with instant velocity for every pixel that can enable faster and more accurate object segmentation and greater ability to filter out noise, resulting in more confidence in avoiding hazards on the road. So overall, we are highly encouraged by this industry development. Our focus is on meeting the growing interest for Aeva 4D LiDAR and converting our current RFQs to production wins. As part of this, Aeva announced a new automotive center of excellence with a local engineering team in Europe out of Germany. This positions Aeva to collaborate more directly and closely with OEMs that we are engaged with in the region and will also allow us to accelerate the validation, testing and providing direct OEM support for their programs. We have assembled a team of industry veterans with extensive experience spanning ADAS, autonomous, and software technologies at top OEMs and suppliers such as Mercedes Benz, Daimler Truck, and Valeo. We believe this new center of excellence will not only enable us to support our existing engagements but also better meet the growing interest for Aeva 4D LiDAR on new opportunities.

Thanks, Soroush, and good afternoon to everyone on this call today. I would like to review our Q1 financial results. Revenue in Q1 was $2.1 million driven by scaling of Aeries II shipments and NRE revenues. Non-GAAP operating loss was $32.1 million, which is near flat year-over-year as we maintained a disciplined approach to capital allocation. Gross cash use, which we have defined as operating cash flow less capital expenditures, was $32.6 million in the quarter. We finished Q1 with a total liquidity of $314.3 million, which includes $189.3 million of cash, cash equivalents, and marketable securities and a $125 million of available facility. As a result, we remain in a good position to continue executing with our existing production partners and to build on our growing commercial momentum with additional production program wins. As Soroush mentioned earlier, we are engaged on a number of RFQs, which are expected to be decided during this year. We believe that the combination of our differentiated technology and a strong balance sheet positions us well to execute on our existing programs and win additional programs.

Thank you, Saurabh. Aeva is off to a great start in 2024. In automotive, we executed the Daimler Trucks milestone and realized strong progress with multiple automotive RFQs. And in industrial, we are on track with our first industrial SOP later this year with Nikon. I want to thank the Aeva team for enabling these accomplishments and for their continued commitment to Aeva's mission and partners. Looking ahead, we continue to see strong and growing momentum for the adoption of FMCW technology to bring new levels of capabilities to markets in both automotive and industrial. We continue to position Aeva for greater success, having added leaders in their respective fields and maintaining a solid financial position. Together with our strong progress on multiple RFQs, we remain confident in executing on our existing programs and securing additional production wins. With that, we will now open the line up for questions.

Thank you. Your first question comes from Shadi Mitwalli from Craig Hallum. Please go ahead.

Hey, this is Shadi Mitwalli on for Richard Shannon. Thanks for taking my question. Starting off with the Daimler win, is Aeva experiencing any halo effects after this win to show other start of production wins?

Hey, Shadi, this is Soroush. Happy to answer that. Yeah, absolutely. Actually, overall we are seeing a growing interest for our technology specifically for FMCW, especially on the back of the Daimler Truck win and a number of announcements since we have announced that at CES earlier this year. I think one of the things that's very important is we're also seeing this feedback from the OEMs that the production win that we had with Daimler Truck really helps derisk the OEM's decision as they're moving to the next generation platforms as they're completing this pilot initial deployment and their decision to move to FMCW technology. This win really helps derisk that. So, all the concerns or potential comments around whether FMCW or 4D LiDAR would happen are no longer relevant. As I mentioned last call, it's no longer a matter of if and now it's really a matter of the execution and the timing of how we make this happen. And we're seeing that feedback directly from the OEM, which we're really excited about. And as I mentioned on the call, this also is not just limited to commercial vehicles, especially on the passenger vehicle side. We're now engaged in multiple automotive RFQs. As I mentioned earlier, since it's been about two months since we introduced this new top 10 passenger vehicle OEM, we have made significant progress on that side as well on this RFQ. In the past few months, we completed a comprehensive manufacturing and quality audit, which is now the second time that we're doing that. We have now also been selected as a finalist with the top 10 passenger OEM for the RFQ for the final production award. So, this is a significant opportunity. We're on track with the timing of this happening in the next few months this year, as we talked about. So, on the back of this momentum, we are seeing growing interest across both passenger and commercial vehicles. That's also why we talked about earlier that we have decided to establish this new automotive center of excellence in Germany to really help us expand our engineering team to work directly with the OEMs to provide direct support and really expedite some of those interactions and timing of the discussions with folks both in Europe as well as globally. So overall, I would say that we are seeing definitely these tailwinds help us advance in automotive, especially on the passenger car side as well.

Awesome. That's great to hear, and that makes sense. And then just one more follow-up question. I know you currently have one top 10 OEM. Are you able to quantify if any of your other RFQs or RFIs are with the top 10 OEMs?

Yeah. Look, we obviously haven't talked about specific numbers for top 10 or top five OEMs. But I can tell you that at this point we are engaged with multiple significant scale and top OEM RFQs. There are players in different regions, across both passenger and commercial vehicles. But as we provided the update in this quarter, we are making progress on multiple fronts, and we've also given some clear updates on our progress with this specific top 10 passenger OEM. So, it's not just one OEM that we're working with. There are multiple across passenger and commercial vehicles. And decisions are occurring for multiple of those throughout this year. So that's also the other thing that we're seeing. Overall, from a start of production timing, we also see those to be aligned around the same timeframe with Daimler Truck, maybe a little bit later, but around that timeframe.

Thanks so much, guys. Now that you've got a number of test units out and you've run your own system on the software side, can you talk about how much compute efficiency you're seeing for customers because of the real-time velocity data? And then also how important the lower power consumption is in some of the decisions that you may end up seeing later this year from customers?

Yeah. Thanks Colin, happy to answer that. I think one of the things that we are seeing from customers is that, first of all, there is a significant focus on advancing automation towards highway speeds. The current solutions are getting on the highway, but they're not quite achieving highway speeds. As we've seen and we talked about earlier as well the new ruling by NHTSA to further expand automatic braking at higher speeds is very important, and I think this will act as a tailwind for the LiDAR industry as well. We see that for our technology, FMCW is a key driving point, because with our technology we have the ability to see further with velocity measurements, and the perception enabled by that allows for reductions in compute calculations and inferences needed on the vehicle OEM side. Because we effectively are able to bypass several inferences and directly measure dynamic objects' velocity. This greatly helps from safety and high-confidence object detection and classification standpoints, as well as on the cost side as you mentioned. This is something that we see allows OEMs to do two things: One, increase their functionality without significantly increasing costs, which is important, especially as they enter the mass market. Two, it could also allow them to potentially reduce some of the other sensing modalities on the market. For example, while they may still have a radar sensor, they can plug in the 4D LiDAR and reduce the need for an advanced radar or completely replace that. As we move into higher volumes, performance over power and cost will become critical, and we believe our technology is already demonstrating that roadmap for OEMs. Ultimately, OEMs are looking to future-proof their systems, moving past the pilot stage into mass scale. As we ramp up with Daimler Truck and market entry in the '26 and '27 timeframe arrives, we expect higher volume opportunities to emerge as FMCW technology is adopted.

That's incredibly helpful. And then just outside the automotive and transportation space, there's obviously a move towards understanding and monetizing AI in the physical world, and sensors are an incredibly important part of that. Can you talk a little bit about not just with the metrology opportunity, but other opportunities that you guys are seeing coming your way now that there's some incremental validation on the technology?

Yes. You mean on the non-automotive side, did I hear that right? Absolutely. We have significant interest and growing momentum on the automotive side as you can see and hear from us. But that doesn't mean that we aren't doing anything on the industrial side. In fact, we are fully on track with our Nikon program later this year where that's going to start ramping up. We are seeing, because the core innovation of our technology integrates everything into a silicon photonics module, we are utilizing that same technology, with different software, to achieve performances in metrology and precision for other applications. We are engaged with several other clients in the industrial field to expand on what we're doing with Nikon. As we advance with our automotive production, we expect this to create interesting and attractive products for non-automotive customers, enabling them to reduce costs while improving efficiency and automation at the factory level.

Yeah. Hey, guys. Thanks for letting me ask the question. I apologize if I missed this. I know you said you were making progress with more passenger vehicles. Have you gotten more interest from other trucking OEMs as well?

Yes, Kevin. Happy to answer that. Absolutely, yeah. We are currently engaged in multiple RFQs, which includes both passenger and commercial vehicle programs. The first win sets the foundation for others to follow. What we are hearing and seeing from the OEMs is that the Daimler Truck win really helps to derisk their decisions as they move from pilot to production deployments and as they shift towards our FMCW technology across both segments. We are experiencing interest in both passenger and commercial vehicles. Notably, as Daimler is a marquee brand, we see others interested in leveraging our technology for their applications, particularly for high ADAS and automated highway applications.

Okay, perfect. And then kind of going off that, can you give us some color on the processes for both trucking and passenger cars pertaining to the RFI and RFQ processes, as well as the milestones to get to SOP? I would imagine that passenger vehicle OEMs would generally be more stringent on certain tests or validation processes?

Yeah, happy to. In automotive, there are multiple activities, standards, and qualifications that need to be met. When dealing with top brands, there is always a super stringent requirement for qualifications, regardless of the application. For example, Daimler required us to go through significant qualification steps across our manufacturing processes, quality assurance, and development teams, and we were audited accordingly. Interestingly, on the commercial vehicle side, the requirements for performance and reliability, as well as longevity, tend to be more demanding compared to passenger vehicles. Therefore, we view our technology as being validated for mass-market OEMs. This enables easier deployment into consumer or passenger vehicle applications. Currently, we have completed this process twice: we first introduced a top 10 OEM last year, advanced to the RFQ stage, passed the comprehensive audit, and then secured the production win with Daimler within a few months. Now we’re discussing a second top 10 passenger OEM and have progressed faster than with the previous experience, enhancing our confidence as we finalize these RFQs.

Hi, Soroush. Hi, Saurabh. So for Daimler, could you maybe handicap the opportunity to expand beyond trucking, which is mainly North America to additional geographies and then to passenger? Just give us some sense if work has already been done and how much of that could potentially waterfall in versus what a realistic expectation is?

Sure Suji, happy to answer that. With Daimler Truck, we're focused on delivering our first program launch SOP for 2026. We're acting as the exclusive Tier 1 supplier for long-range and ultra long-range LiDAR for this production program. We're closely engaged with the Torc team developing the autonomy stack. We see future opportunities to expand this partnership into more markets, regions, and applications as we're building a foundational tech stack enabling highway autonomy. This capability can be applied to various scenarios. As mentioned earlier, passenger vehicle OEMs are increasingly interested in expanding their operational design domain toward higher speeds, especially with the recent NHTSA ruling requiring automatic emergency braking at over 60 mph. Our developments will not be limited to commercial vehicles alone; we do see the potential to expand beyond trucking. Of course, we’ll share more as developments unfold, but we are enthusiastic about these prospects. Additionally, we have some significant events this month with the CEO of Torc Robotics and Daimler Truck's head of Autonomous Group, where we’ll discuss additional exciting insights.

No, that's great. Great exposure for you guys. I'm going to step back and ask a question about the process that you went through to win Daimler Truck. Could you summarize three or four key steps in that process? Additionally, could you explain which steps provided the most confidence that you would win this customer? Also, how many potential customers might be past that phase for a qualitative sense of the pipeline?

Absolutely. At a high level, there are multiple stages in this process, which typically ranges from several months to one or two years from initial conversations. Key steps include RFI, RFQ, and the final nomination. The transition from RFI to RFQ stage is critical; it marks where final commercial bids and manufacturing quality audits occur. After the RFQ stage, the finalists are designated, which is another crucial checkpoint. With Daimler Truck, we progressed through these stages: we moved quickly to RFQ, passed the manufacturing audit, became a finalist, and won it within two quarters. Currently, we are advancing on several other programs beyond this OEM and have made considerable progress with this new top 10 passenger OEM as well. We have crossed both the RFQ phase and the manufacturing audit phase with them, so we’re excited about the developments we’re witnessing.

There are no further questions. Ladies and gentlemen, this concludes the call for today.