Earnings Call Transcript - AEVA Q1 2025

Operator, Operator

Good day. My name is Jess, and I will be your conference facilitator. I would like to welcome everyone to Aeva Technologies' First Quarter 2025 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.

Andrew Fung, Senior Director of Investor Relations and Corporate Development

Thank you, and welcome, everyone, to Aeva's first quarter 2025 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 2025 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 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 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 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. And with that, let me turn the call over to Soroush.

Soroush Salehian, Co-Founder and CEO

Thank you, Andrew, and good afternoon, everyone. It continues to be an incredibly exciting time at Aeva with our commercial momentum accelerating across a larger range of applications. While we continue to make strong progress in automotive, including on the Daimler Truck Production Program as well as the Global Top 10 Passenger OEM Development Program, we have already achieved the first key milestone. Aeva's mission from inception has been to build a core FMCW technology platform to bring perception to a broad range of applications beyond just automotive. And in Q1, we delivered a number of accomplishments that further realized that mission. In industrial automation, we unveiled the Eve 1 line of high precision sensors, which we believe can have the potential to be a breakthrough for the $4 billion per year laser displacement sensor market. Eve 1 utilizes our CoreVision LiDAR on chip module to deliver sub-micron precision that is more reliable and flexible at a lower cost and size than current solutions in the market. This level of precision enables Aeva to go beyond LiDAR as the industry has known it until now and provide an offering that can accelerate our growth into new industrial automation markets because of our differentiated FMCW technology. We are seeing strong commercial traction with Eve 1 already, including securing multiple industry-leading industrial automation companies as our first strategic customers, with orders of over 1,000 sensors booked and plans to ship later this year. Aeva also entered a new market, Intelligent Transportation Systems or ITS, with Sensys Gatso, a leader in traffic enforcement solutions selecting Aeva as its exclusive LiDAR supplier for its new mobile speed detection products in Australia. Aeva was selected because of 4D LiDAR's ability to provide accurate velocity measurement for speed verification. We are seeing increasing interest from other leaders in the ITS market as well, as well as infrastructure monitoring segments, and we plan to respond to this market with our existing sensor suite, but with fine-tuned perception software specific to this market segment. Importantly, our momentum is opening new strategic opportunities to Aeva that we believe further validates our technology platform and market-leading FMCW performance as we scale existing market segments such as automotive and industrial and enter new ones. Earlier today, we announced a strategic collaboration with a global Fortune 500 company technology subsidiary, who plans to invest up to $50 million in Aeva and partner to help expand Aeva's end markets and deliver advanced perception sensing products across multiple market segments, including consumer electronics, industrial, and automotive. This leading technology company sees significant growth potential for Aeva's perception platform adoption across many applications and believes our FMCW solution provides a strong path to penetrating multiple market segments with mass deployment. We're also selecting this company as our Tier 2 manufacturing partner for the top 10 passenger OEM program previously announced. We believe this new partnership will help further enhance our position for broader mass deployment across future generations with the global top 10 passenger OEM development program. So in summary, we have accomplished a lot in a short few months and there is much more ahead for Aeva. We have never been in a stronger position to continue executing on this significant interest in Aeva's unique FMCW technology. Let's now discuss in more detail our recent business developments. I'm excited about Aeva's major expansion in the precision sensing market with the Eve 1 line of high precision laser displacement sensors. Like our automotive solutions, Eve 1 is powered by Aeva's CoreVision LiDAR on chip modules, but specifically designed for high volume and inline industrial automation applications such as factory and process automation. As the industry's first FMCW based displacement sensor, we believe Aeva's Eve 1 represents a breakthrough for industrial sensing. It brings a number of major performance, size, and cost advantages versus current solutions that primarily use the laser triangulation approach. For example, Eve 1D sensors are designed to measure down to sub-micron precision and due to the coaxial measurement can operate across a wide range of target standoff distances all the way up to 200 meters, all within the same compact, all-in-one form factor that combines measurement and data processing. Because of FMCW's immunity to interference from other sources of light, our sensors can maintain this high level of precision in a wide range of operating conditions. These advantages allow for faster, more precise inspection, giving customers high levels of throughput, improved quality control, and better cost efficiency in manufacturing processes. We are very encouraged by the significant commercial momentum and positive feedback we are already receiving with leading industrial automation companies due to our sensors' ability to address many of the shortcomings of traditional triangulation solutions. We have already signed on multiple strategic customers, including SICK AG and LMI Technologies. These customers are leaders with more than 15% of the market share and volumes close to over 300,000 units per year just for these high precision sensors. Our first orders of over 1,000 sensors are already booked and the initial shipments to select customers have already started. Given the strong reception of the market, we're working on ramping up our capacity to meet the growing demand for our Eve 1 sensors with our existing manufacturing partners. In addition to our strategic first customers, we are engaged with multiple other leaders in this large but concentrated marketplace, where the top five participants represent around 60% of the market. The overall addressable market for these laser displacement sensors is greater than $4 billion today with annual volumes of more than 2 million sensors. It is projected to grow meaningfully as laser displacement sensors redefine precision manufacturing and quality control in automated production environments across many industries. From positioning during manufacturing to inspection of a wide range of components and products such as PCBs, metal sheets, or tire threads to even packaging, laser displacement sensors are increasingly utilized in numerous factory and process automation applications. Because of Aeva's ability to directly measure velocity, we believe our technology will open up new capabilities that bring the possibility to expand the use of Aeva sensors across the industrial precision market. We are already exploring with existing customers to leverage this capability. Aeva is uniquely positioned for the high precision sensing market due to FMCW's ability to achieve the needed micron level precision that is not possible with time-of-flight LiDAR. From metrology applications with Nikon to displacement sensors with SICK AG and others, we see significant opportunity to continue growing in the large industrial robotics and factory automation market, leveraging our CoreVision LiDAR on chip module and our proprietary precision algorithms for the industrial applications. Let's now move to an update on our progress with the global top 10 passenger OEM. We have officially kicked off our development program with the OEM and have already achieved the first milestone centered around integration. As we announced back in March, this OEM has selected Aeva for a LiDAR development program for its next generation global production vehicle platform, where we are jointly working closely on development and integration of Aeva's Atlas Ultra 40 LiDAR for use across a broad range of the OEM's global line of passenger vehicles. This is effectively the first development phase of the serial production program. As you may recall, in addition to the development program, we also secured a letter of intent from this OEM toward the series production program award. We expect that upon successful completion of the development program, which is expected later this year, the engagement will transition to a large scale global production program opportunity for Aeva. We're highly encouraged by the strong start to the development program and believe the overall progress we continue to make positions us well for the OEM's series production work. I would now like to discuss the new strategic collaboration that we announced earlier today. Our partner will invest up to $50 million in Aeva through a combination of $32.5 million in Aeva common stock and up to $17.5 million in new joint product development revenue as well as capital investments to bring production capacity online for Aeva's next generation solutions across automotive, industrial, and consumer applications. As part of this, the partner will take an approximately 6% stake of equity in Aeva. With our strategic partner, we plan to accelerate Aeva's product roadmap in industrial and expand into new consumer application end markets utilizing our partner's global manufacturing expertise and electronics innovation. As part of the agreement, Aeva will also select this company as our Tier 2 manufacturing partner for the global top 10 passenger OEM program. The OEM has extensive experience working with our strategic partner and their decision to invest and partner with Aeva is a major vote of confidence in the performance, maturity, and scalability of our LiDAR. We believe this further positions Aeva to successfully transition our development program with the OEM into the series production phase. More broadly, this strategic collaboration marks another significant validation from a highly respected technology and manufacturing leader that Aeva's differentiated FMCW tech is the future for the industry. The company sees significant potential for our LiDAR to bring new levels of perception across many applications. They have significant experience with LiDAR as well as have extensively evaluated all other LiDAR solutions. The decision to invest in Aeva and partner on joint development was driven by our partner's view that a scalable high-performance FMCW LiDAR is key to enabling broad deployments of perception solutions across multiple use cases and multiple end markets, not only in automotive but also industrial and across consumer markets as well. We are incredibly excited about this new strategic collaboration. In the coming months, we plan to name the partner and both companies plan to jointly provide more details about our new partnership. We look forward to jointly leveraging our respective strengths to accelerate the adoption of Aeva's technology across a broad range of markets and applications. Turning now to Aeva's recent entrance into a new market, Intelligent Transportation Systems or ITS. This is an area where there has been growing adoption of LiDAR to enable safer and more efficient roadways and other modes of transport. Sensys Gatso recently selected Aeva as the exclusive LiDAR provider for its new mobile speed detection products in Australia. Our 4D LiDAR's velocity measurement will provide speed verification to help address speeding problems and improve road safety at high-risk locations. Sensys Gatso is a global leader in traffic safety enforcement solutions. Besides Australia, the company's solutions are in 60 countries with more than 60,000 deployments globally. Initial deployments of Aeva sensors in Australia have begun and we look forward to supporting additional deployments in that country and exploring rollouts in additional markets with Sensys. Aeva has also engaged in a number of other ITS opportunities besides Sensys Gatso and is making strong progress on expanding in this area.

Saurabh Sinha, CFO

Thank you, Soroush, and good afternoon, everyone. I would now like to discuss Aeva's first quarter 2025 financial results. Revenue in Q1 was $3.4 million. While still early in our commercialization, this was a record product revenue in the quarter and reflects the continued growth in commercial traction from automotive and industrial customers. The NRE revenues are driven primarily by the Daimler Truck program. Q1 non-GAAP operating loss was $25.9 million, which is 19% lower year-over-year. This is consistent with our plan to reduce non-GAAP operating expense by 10% to 20% on a full-year basis. Gross cash use was $31.3 million in the quarter, comprised of operating cash use of $30.8 million and capital expenditures of $0.5 million. Typically, our Q1 cash use is higher compared to the rest of the year, driven by the timing of payments and working capital. We finished Q1 with total available liquidity of $206 million, which includes $81 million in cash, cash equivalents, and marketable securities and $125 million in undrawn facility that is fully available to draw at Aeva's sole discretion. This liquidity position does not reflect our new strategic collaboration with a global Fortune 500 company's technology subsidiary. We anticipate closing the $32.5 million equity investment portion in the coming months, pending regulatory review and satisfaction of customary closing conditions. As we demonstrated in Q1, we remain thoughtful in how we invest. We believe we can scale manufacturing while continuing to win additional business and lower total spend. With our increasing commercial momentum across the board, we now have added confidence to increase our revenue range to at least 80% to 100% growth on a full year basis compared to 2024. This does not yet incorporate the strategic collaboration announced today and we look forward to providing an update at our Aeva Day as Soroush will share later. Now let me hand the call back to Soroush, who will provide closing remarks.

Soroush Salehian, Co-Founder and CEO

Thank you, Saurabh. Aeva is off to a very strong start in 2025 and I'm pleased with our progress. We continue to believe that we are at an inflection in our commercial momentum as we make significant progress with the global top 10 passenger OEM and secure major customers across an expanding list of applications from automotive to industrial automation and most recently ITS. With our new strategic collaboration with a global Fortune 500 company, we are in an even stronger position to accelerate the adoption of our differentiated technology platform to global scale and enter new markets. There is indeed a lot going on at Aeva and we are just getting started. I am pleased to share that later this summer on July 31, we plan to host an Aeva Day in New York City, where we will dive deeper into our unique technology, commercial traction, including with our customers and partners, and the overall outlook for the company. Please stay tuned for more details to be shared in the coming weeks. In closing, I'd like to thank the Aeva team for delivering our amazing accomplishments in this quarter and to all of our stakeholders for their ongoing support. And with that, we will now move on to Q&A.

Operator, Operator

Thank you. We will now turn to Colin Rusch with Oppenheimer.

Colin Rusch, Analyst

Thanks so much, guys, and congratulations on all the progress. So with this new partner, I know you're going to be sharing details over time, but can you talk a little bit about which incremental target markets you may be able to address with this partner as part of your manufacturing process?

Soroush Salehian, Co-Founder and CEO

Hey, Colin. Yes, happy to answer that. So first of all, we're very excited about this partnership and the strategic partner we announced earlier. As you mentioned, the anchor has drive, but I can tell you at a high level, this is a very critical and I think crucial partnership that we're forming. I think our target clearly here is not just to continue delivering, let's say, on our automotive-only products. This is not the only piece. It's actually to expand into new markets. This includes the consumer market application, which this partner has considerable experience in. This includes working on joint products across that and for new markets, especially also accelerating in the industrial applications. On top of that, we are also working with this partner given their existing experience. They're a well-known automotive tier qualified partner in the space, they're already Tier 2 in the space. They have a number of relationships with key OEMs, including with the top 10 passenger OEM that we announced earlier. We have also decided as part of this to select them and partner with them as our Tier 2 manufacturing partner for the top 10 passenger OEM program, which gives us that even added vote of confidence in our position in the automotive space with that top 10 passenger OEM. But also, I think what we're really excited about is the opportunities with their scale. They're part of a Fortune 500 company. We are excited to leverage that scale to take us into the next chapter with those other applications. Obviously, that is also strengthened by their commitments, which is real and in the form of strategic investment into the company to $250 million. So we are excited to kick this off together.

Colin Rusch, Analyst

Amazing. And then the second question is really around the relationship with SICK. Pretty substantial opportunity just not only with them, but with metrology and other industrial sensors. I guess how are you thinking about that relationship starting to evolve considering the range of products that they offer and the foundational technology that you guys could bring to that platform?

Soroush Salehian, Co-Founder and CEO

Yes, absolutely. Look, I think, as you can see, we are also very excited about that. I think this area and this market, especially for Aeva, I think is one that can be easily overlooked. I think this is an opportunity in a market that is massive. We are talking about 2 million units per year just for high precision sensors. It's a consolidated market with some key leaders in the space. So it's a market that's here and now. As you mentioned, with SICK, for example, we have a long-standing strategic partnership. They're one of our first strategic customers in this space. They are a great partner for us to bring this technology to market, one that we see is going to be disruptive in the space. SICK is really invested and committed to making happen. SICK alone does about close to 15% of this market share, they own close to 300,000 units. That is quite significant. We see the opportunity, over time, to transition across maybe a significant portion, if not the majority of that portfolio to FMCW based technology. We should also tell you the confidence that I think SICK has also in FMCW. We have been talking about the flexibility and performance capability of our platform for quite some time. Aeva has been delivering on that, working from Atlas to Atlas Ultra to this Eve 1 precision sensors. Now we have a platform that same exact Core Vision chip module with our proprietary precision algorithms can achieve sub-micron precision, which is really powerful. But in a way that is small, lower in cost, and more repeatable. This allows, I think, folks like SICK and others to implement this and move on. In this short period of time, we recently announced two strategic partners, SICK as well as LMI Technologies, which is another player in the space, especially in the 3D sensing space. We have booked our first over 1,000 units just in the past few short weeks. This is giving us strong signals of traction and momentum in the market. We've already started delivering the first unit. We expect this trend to continue. We see that this 1,000 units going to transition to tens of thousands in the near-term and potentially reach 100,000. This is a considerable opportunity. The annual revenue size of this market is about $4 billion today, projected to grow to $6 billion. Just taking a small percentage will be crucial for our company.

Colin Rusch, Analyst

Great. Thank you so much, you guys.

Operator, Operator

We will go next to Joe Moore with Morgan Stanley.

Joseph Moore, Analyst

Yes, I also wanted to ask about the laser displacement sensor opportunity. How long does it take you to ramp new customers? You've been working with SICK for a number of years now and other industrial companies. As you proliferate the technology, is there going to be a shorter lead time to bring on new customers and just give us a sense of how quickly this market can evolve for you?

Soroush Salehian, Co-Founder and CEO

Yes, absolutely. I would say it's the usual way, right? The first one takes time. From there, we also work with to define the key product, and that's what we've been doing with SICK as our strategic partner, which has been a fantastic relationship. Working with LMI has had a much shorter timeframe. We have other engagements in the pipeline that we see as well. A handful of players in the space make about 2 million sensors per year, and SICK by themselves represent 15%. So others also represent significant chunks, and we have quite a bit of interest in this space already. We don’t expect that each new engagement is going to be a matter of years, but rather, much shorter, hopefully in a matter of months. Now that we have a product scaling throughout this year with these first 1,000-plus units, we’re already seeing additional orders coming in. We are ramping up our manufacturing capacity to build that up for this market. On the manufacturing capacity side, we set a target earlier this year to install a manufacturing capacity of 100,000 units per year. The team is executing on this, coming along very nicely with the first piece of equipment brought up. We are on track for that. We have more confidence now to build that up given the momentum in this industrial automation space.

Operator, Operator

Great. Thank you.

George Gianarikas, Analyst

Hi, everyone. Thank you for taking my questions. Can you maybe talk about a little potential momentum you have with other passenger OEMs in addition to the LOI you signed very recently, any continued conversations there you can describe?

Soroush Salehian, Co-Founder and CEO

Yes, George, happy to answer that. It is important to highlight that our vision from the beginning has been perception for everything. We are building a platform across multiple applications and delivering on that vision. We have strong traction with automotive, starting with Daimler Truck. We are in a $1 billion program opportunity for us as we go forward, delivering across the milestones there. Our products are on the road with Daimler Truck and torque vehicles. Separately, on the top 10 passenger OEM, we've kicked off the development program and achieved the first milestones in the past month and a half. Everything is on track for us to transition to production phase. Beyond that, we have multiple other engagements across commercial vehicles. We are seeing folks transitioning to FMCW for long-range commercial vehicle space. We are investing in these spaces, and we see good opportunities across multiple programs. We have engagements with other top passenger OEMs and advanced discussions towards some decisions. There are numerous opportunities, including reputable top OEMs across passenger and commercial vehicles, and we believe we can select our focus strategically across the right programs.

George Gianarikas, Analyst

Thank you. And as a follow-up, you mentioned that you're increasing the guidance to 80% to 100% growth, I think. Can you describe the strength leading to that increase?

Saurabh Sinha, CFO

Yes, George, I'm happy to take that question. We are experiencing increased momentum in both industrial and automotive markets. The guidance increase comes primarily from the product revenue piece. We had a record product revenue this quarter, and we are excited as we execute on this. Keep in mind, this guidance does not factor in the strategic collaboration we announced earlier in the day. We will discuss more at the Aeva Day on July 31 in New York City.

Operator, Operator

We will go next to Richard Shannon with Craig Hallum.

Tyler Anderson, Analyst

Hi. This is Tyler on for Richard Shannon. I was wondering, when you mention increasing volumes in the industrial market by 10x in calendar '25, how do we think about the revenue contribution with that? Are the gross margins here better than the corporate average?

Soroush Salehian, Co-Founder and CEO

Yes. Hey, Tyler, this is Soroush. To answer your question, first of all, the growth is coming from key customers. If you look from a revenue standpoint, these are significant, millions of dollars in contributions. The demand for these sensors is considerable. ASPs are in the thousands of dollars, which is different from the automotive ASP. Given the strength of the volumes and the ASPs in the thousands of dollars per unit, it's quite important for us. Saurabh can comment further on our margins, but we expect healthy margins as we scale up, with some fluctuations in gross margins in the near term.

Saurabh Sinha, CFO

The only thing I will add is that we are continuously improving our cost to manufacture products, expecting to have healthy margins as we scale.

Tyler Anderson, Analyst

Awesome. That makes sense. And then over what time do you expect to finish the manufacturing capacity ramp?

Soroush Salehian, Co-Founder and CEO

Yes. This year, our goal is clear to install manufacturing capacity of about 100,000 units, and the team is on track for that. This also includes our other programs on the automotive side.

Operator, Operator

We will go next to Suji Desilva with ROTH Capital.

Suji Desilva, Analyst

Hi, Soroush. Hi, Saurabh. Congrats on the progress here. Can you just recap for us the remaining milestones for the global top 10 passenger OEM now that you've achieved this key milestone?

Soroush Salehian, Co-Founder and CEO

Yes, Suji, happy to do that. It is important to highlight the work we're doing. We kicked off the program and have achieved the first milestones around vehicle innovation. From here, our work involves activities around packaging and making sure the design of our sensor fits across the OEM's global production platform for their vehicle model lines. This isn't customization but more integration to ensure it meets specifications. This work needs to be completed later this year, giving us confidence as we execute with the OEM. We also have a production letter of intent which shows confidence from the OEM in our partnership. With our strategic partner, we have a good path to closing this program.

Suji Desilva, Analyst

It just sounds like, reading between the lines of what you just said, that one of the reasons this OEM chose you is because of the flexibility and how relatively smooth this multivehicle fitting will go because of the FMCW technology and your flexible design versus probably time-of-flight, which might be a little more tricky for each of the vehicles. Is that a fair statement?

Soroush Salehian, Co-Founder and CEO

Yes, absolutely. We're discussing with this OEM and others how we can work together not just for this initial generation but around new perception sensor products for future generations, which would have larger volume opportunities. Having those conversations is important to us.

Suji Desilva, Analyst

And actually, that was my last question. In the Fortune 500 announcement, you do mention next-gen perception sensing products. Can you give us some ways to think about what that means in terms of roadmap versus the LiDAR product you've had?

Soroush Salehian, Co-Founder and CEO

Yes, absolutely. As part of this investment from the Fortune 500 company, it's in a few different areas. One is equity stake into the company, about 6%. The other piece is collaborating together around joint new product development, where we expect to bring new products into new markets including industrial, and consumer applications. As part of this partnership, Aeva will select this company as a Tier 2 partner for the top 10 OEM. It's a strategic collaboration showcasing that a well-known partner in the space has decided to partner with us after evaluating many other players. This is positive for Aeva as well as the industry.

Operator, Operator

It appears that we have no further questions at this time. This will conclude Aeva Technologies' first quarter 2025 earnings conference call. We thank you for your participation. You may disconnect at any time.