Earnings Call Transcript - AEVA Q2 2021

Operator, Operator

Good day. My name is Alice and I will be your conference facilitator. I would like to welcome everyone to Aeva Technologies Second Quarter 2021 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, Director of Investor Relations. Andrew, please go ahead.

Andrew Fung, Director of Investor Relations

Thank you, and welcome everyone to Aeva's second quarter 2021 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 press release and presentation, which we will refer to today and can be found on our Investor Relations website at investors.aeva.ai. 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 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 a 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 Form 10-Q for the quarter ended March 31, 2021. 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. The webcast replay of this call will be available on our company website under the Investor Relations link. With that, let me turn the call over to Soroush.

Soroush Salehian, Co-Founder and CEO

Thank you, Andrew. And good afternoon everyone. Q2 was an important quarter at Aeva where we already achieved a number of the goals we set out for 2021 and made significant strides towards our mission to bring perception to all devices. I would like to highlight a few of our accomplishments as summarized on Slide 5. First, our strategic collaboration with Nikon is a transformative milestone for the perception industry and marks Aeva’s first announced expansion beyond automotive. It's an incredible opportunity to work with a global leader in optics and precision technology like Nikon, where we can leverage their market expertise with Aeva's breakthrough technology to accelerate adoption of 4D LiDAR in a $10 billion industrial automation and metrology market. Second, we are not standing still in automotive and continue to make significant progress in our automotive programs towards production, including expanding our collaboration with TuSimple and continuing to deliver on our milestones with the undisclosed customer that we announced last quarter. Third, in product development, we continue to make good progress on final design and remain on schedule to complete B sample developments by year-end. And fourth, we are seeing incredibly strong interest for key talent to join Aeva and help bring our industry-leading technology to market. Since the start of the year, we have grown our team by over 100%, which will enable us to continue to support our customers' development towards production, as well as pursue additional growth opportunities. Within this, we have made a number of notable leadership hires from leading companies in the technology and automotive sectors, who bring deep expertise in product design, development and validation. Now, let's dive deeper into key business updates for this quarter starting on Slide 7. Earlier this week, we announced Aeva's first expansion beyond automotive, the strategic collaboration with Nikon to bring next-generation high precision solutions to the industrial automation and metrology markets. We are thrilled to collaborate with Nikon, a leader in precision optics and industrial metrology technologies. Their products are used today for automated inspection of high-volume manufacturing by leading global automotive OEMs such as BMW and Stellantis, which is the parent company of FCA and PSA brands, as well as top aerospace manufacturers, among others. As we have detailed before, Aeva's mission is to bring perception to all devices. We have always believed in the significant opportunity beyond autonomous driving that could be unlocked by leveraging our common core 4D LiDAR chip technology. By utilizing the same unique 4D LiDAR technology, we aim to offer an unprecedented level of accuracy to measure objects at the micron level, at a distance and without contact. A level of performance we believe is achievable only with FMCW technology, which is core to Aeva. And Aeva is taking this to the next level with our LiDAR on silicon photonics, where we aim to significantly reduce the cost and size of these industrial automation solutions. Through this collaboration, we’ll have a direct opportunity to pursue a broad range of industrial programs and applications, leveraging Nikon's best-in-class quality and distribution channel to reach customers globally. This gives us a clear and broad path to bring 4D LiDAR to industrial applications by 2025. Now for those new to industrial metrology and automation, the next slide summarizes what industrial metrology is and the many uses for it. Industrial metrology is a large established market today, and is the process of precise measurements of parts manufactured in volume production to ensure manufacturing process control, improve product quality and increase throughput. It requires micron level accuracy, which for context is 1000 times more than typical time-of-flight 3D LiDAR precision. Industrial metrology is needed across a large and diverse number of applications, including automotive and aerospace manufacturing, and generally in volume manufacturing, where there's a need for precise measurement during the production process. However, achieving such superb accuracy in an affordable and compact package remains a key challenge for the industry. This has limited mass adoption of these solutions in the market, with many in the industry continuing to rely on slower or less accurate legacy solutions that result in lower throughput and higher costs. Turning to Slide 9, Aeva's breakthrough 4D LiDAR chip technology solves these challenges, delivering high precision in a compact form factor and at significantly lower costs. Aeva's FMCW technology uses a continuous beam to constantly transmit data. And we can use our same core LiDAR chip for automotive applications, but adjust our proprietary signal processing algorithms to process that data for different performance metrics. For example, micron level accuracy versus a 500-meter range. To our knowledge, Aeva's 4D LiDAR is the only solution that has the potential to achieve this incredible level of performance scalability, utilizing the same foundational technology. With all core components integrated onto a silicon chip platform, we can deliver a compact, high-performing LiDAR system that is more reliable and truly scalable at an affordable cost for industrial automation applications. We expect our solutions will be comprehensive, including hardware and software that provides precision measurement capabilities. The end result is next generation solutions that we hope will establish a new standard in precision measurements to fundamentally improve manufacturing quality and productivity across industrial applications. Turning to the next slide, I want to highlight the broad and large opportunities in the industrial automation and metrology markets. By incorporating our game-changing solution that delivers high precision at an unmatched cost, we believe Aeva's 4D LiDAR can meaningfully accelerate adoption across existing applications. We also believe this only scratches the surface of what's possible in industrial automation beyond metrology alone. As the trifecta of high precision, small form factor, and low cost opens up a number of new applications with performance, size, and cost that have been limiting factors such as machine tooling, infrastructure, and other volume manufacturing, collectively a $10 billion and growing market. We are excited to pursue these large opportunities where we believe Aeva can provide unique differentiation as we continue our work towards our mission of bringing perception to all devices. Now switching gears to automotive, we continue to make good progress across our automotive programs, including continuing to deliver on our milestones with the undisclosed customer that we announced last quarter. In addition, I want to provide an update on our work with trucking partner TuSimple on Slide 11. We have expanded collaboration with TuSimple over the past quarter and are now taking another step forward with the implementation of Aeva's 4D LiDAR as the only long-range LiDAR on TuSimple's currently operating on the road. As part of this, TuSimple is also incorporating Aeva's unique instantaneous velocity data into its perception stack, which helps classify hazardous objects instantly with greater confidence and at long ranges, enabling a critical factor of safety needed for autonomous trucks. Turning on Slide 13, I would like to share our progress on the priorities we set for 2021, which are focused on investing in developing a world-class perception solution and supporting our customers on the development milestones to bring our 4D LiDAR to market. In the past quarter alone, we have already achieved a number of the goals we set out for this year. And based on our strong progress, we are well on track to hit the remainder of our goals. On our B Sample developments, we are progressing well with our final design and remain on schedule to complete our B Samples development by year-end. Importantly, this iteration will represent our final product architecture and puts us well on track towards production. Second, with our goal for additional programs towards production, our strategic collaboration with Nikon represents one more of those programs. Given our progress with ongoing engagements, we feel confident in one additional program this year. As we continue to see strong commercial traction, Aeva's approach to partnerships has not changed. The aim is not to win the customer counts, but instead, our focus is on aligning with leading companies that have a shared determination and ability to deploy LiDAR at scale working closely to build the world's best perception solution for mass adoption. Third, on accelerating engagement in non-automotive applications. As we discussed earlier, we expect the Nikon collaboration to accelerate Aeva's non-auto opportunity in the large and growing industrial automation and metrology markets. We also continue to see strong inbound interest across the board and with our growing team have the ability to support our customers' ongoing developments and pursue additional opportunities that align with our strategy. And fourth, on strengthening our supply chain for production. Over the past quarter, we finalized the key supply chain for our silicon processing chip. And with that, I will turn the call over to Saurabh to discuss the financials.

Saurabh Sinha, CFO

Thank you, Soroush. Turning to Slide 15, which highlights our results. Revenues in the second quarter were $2.6 million, which reflects significant advancements on our customer development milestones and strong ongoing progress towards production. Non-GAAP operating loss was $20.7 million, which is primarily comprised of R&D expenses related to product development and G&A expenses. Gross cash use, which we define as operating cash flow less capital expenditure, was $19.7 million. Turning to our balance sheet, our cash, cash equivalents, and marketable securities at the end of the second quarter was a strong $503 million. Finally, our weighted average shares outstanding in the second quarter was 211.6 million. For the remainder of 2021, we continue to be comfortable that our full-year revenue will be consistent with what we discussed last quarter and that full-year gross cash use will be approximately $85 million to $95 million. In summary, we are furthering our partnerships in automotive and consistent with our mission are also expanding into significant non-automotive opportunities. With our strong balance sheet, we are well positioned financially to continue our progress and execute on our plan to bring Aeva 4D LiDAR to market. With that, I will turn it over to Soroush for closing remarks.

Soroush Salehian, Co-Founder and CEO

Thank you, Saurabh. I'd like to wrap up by thanking the Aeva team for their tremendous work and contribution that produced strong results in our second quarter as a public company. And I'd also like to thank our shareholders and partners for their great ongoing support. We are progressing in 2021 with strong momentum on multiple fronts. And I have never been more excited about what lies ahead for Aeva. As we continue on our automotive program and expand beyond automotive, we remain singularly focused on supporting our customers and pursuing only those additional opportunities that strategically aligned with our core mission. In just the past quarter, we have already demonstrated our ability to meet multiple of our 2021 objectives and are well on our way to completing our 2021 goals as we work to realize our mission to bring perception to all devices. Thanks everyone for your time today. Now let's open up the line for questions.

Operator, Operator

Thank you. At this time, we will be conducting a question-and-answer session. Our first question comes from Suji Desilva with ROTH Capital Partners. Please proceed with your question.

Suji Desilva, Analyst

Hi, Soroush, hi, Saurabh. Congratulations on the progress here. So a bunch of questions. But I'll just stick to this one, the announcement of Nikon very impressive, particularly in the sense that you can do micron level precision along with 300 meters, very impressive range here. Can you talk about the technology differentiation of Aeva that allows you to do that kind of range? And do all the LiDAR competitors have a similar capability? And does this bring more or different competitors into your market opportunity versus others? And lastly, does this industrial sort of success you have better validate your opportunity and consumer health away from auto? Thanks.

Soroush Salehian, Co-Founder and CEO

Sure, thanks, Suji. So first of all, you're right. Absolutely, to our knowledge, one of the differentiations I think for Aeva that's very unique is our ability to actually have this incredible level of performance scalability, which is really utilizing the same foundational technology and using different algorithms to achieve very different performance levels. For example, achieving over 500 meters versus micrometer precision. So with micrometer, obviously, that's about 1000 times more, as I mentioned on the call, than what a typical legacy 3D LiDAR can do. I think applications there are opened up in which where we see industrial automation, industrial metrology being really critical to have that ability to have this kind of micrometer level function. Overall, I would say that you're right, we look at it from a foundational standpoint. Meaning, what micrometer precision would allow us to do is just scratching the surface of what's possible in industrial applications. And I think, with Nikon, our work starts in the metrology applications, where we look at automated inspection of high-volume manufacturing to make better parts, better vehicles, high quality, increased throughput.

Suji Desilva, Analyst

I don't know if I can have a quick follow up in here. But the employee base growing very strongly, Soroush. What are the areas in your business that you're most aggressively putting incremental headcount toward? Thanks.

Soroush Salehian, Co-Founder and CEO

So overall, of course, our focus on the headcount is across the company. But there's primary expansion also in the R&D efforts. Obviously, as we see a strong interest in the international market in automotive, but also the expansion into other applications, not automotive, we need to continue to grow and be able to support our customers. We feel very confident now with our ability to double our headcount since the beginning of the year. So we'll continue to build that foundation to reach critical mass with a focus primarily on R&D to make sure that we continue to support our customers' development milestones as we expand.

Suji Desilva, Analyst

Okay, again, Soroush, Saurabh, congratulations on the progress. Thanks.

Operator, Operator

Thank you. Our next question comes from Colin Rusch with Oppenheimer. Please proceed with your question.

Colin Rusch, Analyst

Thanks so much. Guys, on the trucking opportunity with TuSimple, and you may not be able to comment in too much detail. But as they move towards finalizing their designs for production to ramp up in 2024, can you speak about your relative position, obviously, being on all the existing trucks that they retrofitted as made for accomplishment that as you work through the development timeframes with those guys, and the cost structure they need to reach for those production volumes? So just hope to get a better sense of how that's tracking for you.

Soroush Salehian, Co-Founder and CEO

Sure, happy to answer, Colin. So first, as I mentioned in the call, at this point, Aeva actually is implemented as the only long-range LiDAR onto Simple's current fleet of trucks on the road that are operating. So we're getting a lot of validation data from that, and that's encouraging. We're also expanding our collaboration and development efforts together with TuSimple. So that's one thing. And TuSimple is integrating our velocity data into their perception stack, which is obviously unique to Aeva. I think it's also a strong indication of the value that we believe TuSimple sees in our technology. So in summary, we're continuing to expand our efforts there, both in the hands of the current states as we deploy on the road, get that validation with implementation of our unique differentiation, but also continue to expand our development efforts together.

Colin Rusch, Analyst

That's actually very helpful. And then the metrology opportunity. Clearly, you have to find a timeframe here. But I'm curious about how you're planning to go to market with Nikon to get that integrated into some of the machine designs and integrated into the software so that that really gets used effectively. But curious to how you're going to get that process started and how individual end markets that you're targeting to start with.

Soroush Salehian, Co-Founder and CEO

Sure. Yeah. So we're starting in collaboration with Nikon to jointly bring to market, as we mentioned our products in the industrial metrology and automation, which we expect will drive design wins in automation and aerospace applications initially. We currently plan to start with these applications where we are able to provide our 4D LiDAR chip and software into Nikon's products. But also, we're going to be looking together as we progress on this collaboration into how we can expand our product into a number of other product lines across Nikon but also further beyond that into the industrial automation markets at large. As I mentioned on the call, we see those applications as quite interesting, wherever you need the ability to measure at the high precision that micrometer level, which we think doing so at a distance in a non-contact way is only possible via FMCW technology, which is core to Aeva. We're going to be tackling those opportunities as well. We see a really unique opportunities to go into that. As I mentioned on the call, this includes opportunities such as machine tooling, infrastructure applications. That's what we're going to be aligning our focus on as we expand broadly into these applications.

Colin Rusch, Analyst

Great. Thanks so much, guys.

Operator, Operator

Thank you. Our next question comes from Pierre Ferragu with New Street Research. Please proceed with your question.

Pierre Ferragu, Analyst

Hi, guys. Thanks for taking my question. I have a quick follow up on the previous question on Nikon. So if I understand correctly, step one of the collaboration is really integrating Aeva technology into Nikon's metrology systems. But then, can you describe - give us a sense of how you want to tackle beyond that the broader industry opportunity. I imagine Nikon like just getting into Nikon's product is a very narrow window into the industry opportunity. So beyond that, are you going to go directly after that opportunity? Do you want to expand the partnership with Nikon beyond the existing product lines and co-develop additional products with them? Or are you going to develop your own industrial products by yourself in the long run? And if you can give us kind of a timeframe for these things like getting into Nikon and under market and beyond the existing reach that the product portfolio of Nikon gives you today?

Soroush Salehian, Co-Founder and CEO

Sure, Pierre. Happy to answer that. So first of all, you're right. Our first applications there with Nikon that we're looking at as we started collaboration. Really, it's around industrial metrology and automotive and aerospace manufacturing. But even as I mentioned, we're going to be looking closely at where we can actually apply this fundamental capability across other product lines within Nikon Corporation as well. But generally, just to give you context here, as I said, we're looking at developing the fundamental capability here. So, with the ability to measure at the micrometer precision level, with the ability to integrate everything onto the silicon photonics chip and bring the size down and have the ability to significantly reduce costs, we actually see that Aeva can bring any depreciation into the industrial automation markets at large in general. Of course, I'm not going to comment on the specifics of how we go from each of these steps in the next number of years, but it's a bit early to do that. The foundational capability that we're building here is going to allow us from what we believe to expand those applications fairly quickly after that. As I mentioned, I think on the call, our timeline is to launch our first products in '25. We're going to continue growing into those other applications that I mentioned surely after that.

Pierre Ferragu, Analyst

Thanks. And then maybe a quick follow up on the automotive front. So you've made progress there on your industrialization plan. You've mentioned progress with your existing partner that you cannot name? I’m kind of wondering whether you see your existing partner and your existing commercial developments in the automotive industry that you have today as really the basis on which you're going to make progress in the next couple of years? Or should we expect actually that to announce additional partners in the near term, let's say in the next year or two? And then of course, the question I have beyond that is, can you give us some color about where are your conversations in the auto industry today? I think there is a big lag questioning in the industry that time of flight versus FMCW and the fact that a lot of time-of-flight solutions have been around for longer. Therefore, you need to educate the industry and get it accustomed to the idea that maybe in the long run, FMCW is the solution. So how are these conversations progressing? And how do you see them turning into additional commercial momentum in that space in order to then, I'm not talking about the passenger car business, but the large volume opportunity for you guys?

Soroush Salehian, Co-Founder and CEO

Sure, yeah. So I think a few questions in there. Let me take a cut of this. So first of all, on the undisclosed customer as I mentioned, we continue to progress well on delivering our milestones. We have hit a number of them throughout the past quarter with this customer, and we're working and continue to work very closely together towards production. So we're feeling pretty confident there. Overall, your question about expansion and the interest that we see in the market is that we are seeing strong traction in the market in automotive specifically, and are encouraged by the increased number of engagements that we see in auto in addition to, of course, knock on doors some of the announcements we made. I think in our conversations, we already see that I think the industry within automotive recognizes some of the crucial advantages of FMCW for future platforms. We fully expect that we become a preferred choice there. We see OEMs being keen on really leveraging next-generation technology that is like FMCW to enable their autonomous driving stack at higher volumes. The abilities that we provide with our technology and combination of long range and integration at the chip level and not having interference lead to providing over time cost-effective solutions. We think provide a good opportunity for us to scale and expand into those larger volume opportunities after this initial pilot launches.

Pierre Ferragu, Analyst

Thanks, Soroush.

Operator, Operator

Thank you. Our final question is from Joe Moore with Morgan Stanley. Please proceed with your question.

Joe Moore, Analyst

Great, thank you. I wanted to ask about the $10 billion characterization of the industrial automation market? Like what are you referring to there? Where is the $10 billion coming from? And I guess, how much of that do you think that Aeva can address over time?

Soroush Salehian, Co-Founder and CEO

Sure. So first, I think the $10 billion market, if you notice on the slide, I think Slide 10. So we talked about some of the applications that cover that. It's generally in industrial metrology and automation, combining automotive manufacturing, aerospace manufacturing, machine tooling, and infrastructure, where we see an opportunity for applications for our technology to be able to provide different levels of precision measurements combined with small form factor high performance. As I mentioned, our focus, of course, initially is going to be first, expanding into industrial metrology applications starting with the Nikon collaboration, but from there looking to expand beyond that into other applications that I've just mentioned.

Operator, Operator

Thank you. Our final question is from Tristan Gerra with Baird. Please proceed with your question.

Tristan Gerra, Analyst

Hi, good afternoon. Looking at the Nikon announcement, does that change the end market exposure in the next few years out to relative to prior expectations where you were primarily emphasizing automotive and consumer? Or is it exactly in line with your expectation in terms of where your technology is going to end up once you deploy in the environment?

Soroush Salehian, Co-Founder and CEO

Yeah, I think Tristan, that is actually completely in line with our expectations that we have said from the beginning. I think this announcement gives us that confidence ability to continue executing on our non-automotive opportunities. As we have said, of course, automotive is first in terms of launch. We have always believed in expansion beyond autonomous driving to be enabled by the fact that we have this unique technology through the incredible performance scalability at the chip level. So leveraging the same technology they've developed, we are looking at applying that to those other applications in industrial, but overall it is consistent with that.

Tristan Gerra, Analyst

Okay, great. And then a quick follow up. Given automotive OEM, each one of them embracing LiDAR as a standard feature for some next-generation cars. Are you seeing automotive OEMs trying to accelerate the ramp of LiDAR-based systems? And how does that match with the time when you expect to be ready in volume production? Do you think that you sit in the sweet spot of that volume ramp opportunity?

Soroush Salehian, Co-Founder and CEO

Yeah, I think so. First of all, we are seeing in certain applications and automotive that the inflection point and moderate adoption is starting to really take shape. I think we are encouraged by that, of course. With all the milestones we have done so far this year, I have made a lot of progress. We have been ahead of schedule in some of those areas, including the chip development. We have significantly expanded our team over 100%, and so we're gaining a lot of confidence in our ability to continue to hopefully accelerate our overall efforts and development. As we're able to do that, we will be looking at those where it makes sense to align with our customers as we are encouraged by the opportunities that are starting to come up more and more in this space.

Tristan Gerra, Analyst

Great. Thank you very much.

Operator, Operator

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.