Aeva Technologies, Inc. (NYSE:AEVA) Q2 2022 Earnings Conference Call August 3, 2022 5:00 PM ET
Company Participants
Andrew Fung – Director, IR
Soroush Salehian – Co-Founder and CEO
Saurabh Sinha – CFO
Conference Call Participants
Antoine Chkaiban – New Street Research
Arvind Ramnani – Piper Sandler
Richard Shannon – Craig-Hallum
Operator
Good day. My name is Stacy, and I will be your conference facilitator. I would like to welcome everyone to Aeva Technologies Second Quarter 2022 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 turn the call over to Andrew Fung, Director of Investor Relations. Andrew, please go ahead.
Andrew Fung
Thank you, and welcome, everyone, to Aeva’s second quarter 2022 earnings conference call. Joining me 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 second quarter 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 Form 10-Q for the quarter ended March 31, 2022.
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
Thank you, Andrew, and good afternoon, everyone. Q2 was a pivotal quarter at Aeva, as we achieved a major milestone on the path towards the production of our next-generation 4D LiDAR Technology. I’m excited to highlight that and a few of our other accomplishments, starting with slide five.
First, we began delivering Aeries II two units to our strategic customers on time and according to the objectives we set out at the beginning of this year. This is a significant milestone, not only for Aeva but also for the industry, as this is the first time an FMCW 4D LiDAR with the combination of high performance and automotive reliability is commercially available.
Second, with the commercial launch of Aeries II, we are seeing stronger traction in the market. We believe Aeries II offers a combination of performance and level of maturity that OEMs have been looking for, enabling us to advance to the next phase of development with our strategic customers and progress forward on a number of other engagements across automotive and industrial automation.
Third, we are excited to announce a multiyear strategic collaboration with SICK AG, a leader in sensing solutions for industrial automation to deploy 4D LiDAR for a broad range of industrial sensing applications. SICK selected Aeva’s 4D LiDAR due to the unique performance capabilities enabled by our FMCW technology that address specific challenges limiting 3D LiDAR and cameras today.
This collaboration is a first indication of the market demand for Aeries II and further solidified our expansion into industrial automation with a start of production targeted in 2024.
And fourth, we continue to apply a strategic and deliberate approach to how we invest our capital and resources, which has enabled us to reach crucial milestone towards production and expand our commercial momentum, while maintaining strong discipline on capital allocation.
Moving now to slide seven. I would like to provide more color on key business development over the past quarter. Let’s start with Aeries II. The start-up Aeries II delivery is a significant achievement that represents five years of development of Aeva’s FMCW technology, with up to 500 meters of range, instant velocity detection and camera level resolution, we are excited to demonstrate to more customers, how Aeries II can unlock new levels of automation and machine perception across automotive and industrial applications.
Encouraged by the strong demand for Aeries II, we are focused on scaling up manufacturing. Along with this, we continue to work towards our ultimate goal to bring 4D LiDAR production. Aeries II defines its final architecture for our first production programs, and we anticipate completing the next phase of qualification work with strategic customers over the next nine to 12 months.
Turning to slide nine. I want to provide an update on the substantial progress we have made towards our cost targets. From the very beginning at Aeva, we took a different approach to perception with our FMCW LiDAR on chip technologies, with the understanding that achieving low cost and scalability are just as critical as delivering high performance to enabling wide adoption.
This is why we have designed a proprietary silicon photonic chip module, which integrates all of the key optical elements of LiDAR sensing onto the single chip module and significantly reduces the number of components within the system.
To our knowledge, LiDAR remains the only company to have successfully achieved this level of integration and performance to date. Aeries II utilizes our third-generation LiDAR arched module, which has helped us drive over 55% reduction in total system costs from our A-Sample. It reflects our focus on scalability and cost that goes deeply into the individual component LiDAR.
For example, high-performance LiDARs on the market today often use costly fiber base lasers that are prone to lower yields and core durability. In contracts, Aeva approach removed all fiber optics from our system due to our proprietary CFMCW approach, which lowers cost and we believe that the game changer for reliability and the durability of any LiDAR system,
Integration of the core components onto a silicon chip platform results in a much simplified and highly automated assembly process. This removes the need for active alignment at the system level, reducing the overall complexity and cost for manufacturing. From here, our focus will be on the integration of our final component and to bring up of production processes to achieve our cost our targets.
Moving to Slide 10. We have spoken before about the growing consensus among customers that FMCW LiDAR differentiated capabilities can enable new levels of automation, not achievable with legacy technologies.
With Aeries II, our engagements are simultaneously solidifying and broadening. We are engaged on a number of programs that span across applications in passenger and mobility vehicles, commercial vehicles, as well as industrial automation targeting between the 2024 to 2026 time frame. Based on our progress, we anticipate Aeries II evaluation to drive a growing number of additional programs towards production over the next 12 months.
Now let’s move to Slide 11, which highlights a new strategic collaboration that solidifies Aeva’s expansion into industrial automation. We are thrilled that SICK decided to partner with Aeva to bring 4D LiDAR to the industrial sensing applications.
Headquartered in Germany, SICK is a global leader in logistics, factory and process automation technology with major global accounts across a diverse mix of industries, driving around €2 billion in annual revenues.
Our multiyear collaboration will start with Aeries II for application within SICKs logistics automation and factory automation businesses, which together totaled around €1.6 billion in segment revenues. A number of applications within those segments currently use 2D and 3D LiDAR, but after working with Aeva for the past two years, SICK will expand to leveraging Aeva 4D LiDAR and our unique FMCW technology to deliver superior performance in automation applications that limit the use of camera and 3D LiDARs.
For Aeva, this collaboration will enable us to leverage SICK leading market positions and large sales force to efficiently scale the 4D LiDAR across a wide range of industrial sensing applications for SICK numerous customers worldwide. We look forward to work closely with SICK toward our target start of production in 2024.
Turning to slide 12. You can see some examples of our target applications with SICK. this includes a variety of outdoor sensing for logistics automation, including ports, grains, airports and mining for a long-range instant velocity detection and immunity to the sun and retroreflector blooming are critical advantages Aeva 4D LiDAR offers that can enable a safer operation, as compared to our negative solutions can achieve today.
Importantly, we plan to use the same foundational LiDAR on chip architectures that we have developed for automotive with adaptable software to deliver the specific performance requirements required by SICKs diverse mix of customers worldwide.
Let’s now turn to slide 14, where I will provide an update on our key objectives for 2022. We have made great progress in the first half of the year and have completed a number of critical steps, that we believe lays the foundation to achieve our key objectives for 2022.
I would like to share a bit more on each one. First, on Aeries II deployment and qualification with customers. We began shipping units to our strategic customers in late Q2 on plan and consistent with the time line that we provided at the beginning of the year. Moving forward, we will be working closely on qualification in the second half of 2022, as well as bringing up manufacturing.
Second, on converting two additional programs towards production, one of the two programs was met with the SICK collaboration. Beyond that, we are progressing with multiple other engagements, as well as receiving new inbound [ph] interests in both automotive and non[automotive applications.
Third, on accelerating the release of our first non-automotive applications, with the SICK -collaboration, we have further solidified our expansion into industrial automation, and we also remain on track with our first industrial precision product with Nikon launching in 2024.
Meanwhile, we are on schedule to complete development of a common LiDAR on chip perception platform for industrial automation by Q4 of this year, which we expect to further drive momentum in these markets.
And fourth, on preparing the supply chain and processes for commercial deployment. We continue to work closely with our supply chain partners to scale up manufacturing and efforts also continue on working towards certification and automotive space.
And with that, let me turn the call over to Saurabh, who will discuss the financials.
Saurabh Sinha
Thank you, Soroush, and good afternoon, everyone. I would like to review our second quarter financial results, which are on slide 16.
Revenue of $1.5 million in the second quarter was driven by the progress on our customers’ development milestones and product sales. Non-GAAP operating loss was $29.3 million in the second quarter which reflects the combination of continued R&D expenses for product development and Aeva’s ongoing discipline in capital investment.
Second quarter gross cash use, which we define as operating cash flow, less capital expenditures was $34 million. As a result, we continue to maintain a strong cash, cash equivalent and marketable securities position, which totaled $378.9 million at the end of the second quarter. And lastly, weighted average shares outstanding in the second quarter was $216.9 million.
So to summarize, in the first half of the year, we executed well on our plan for 2022 in terms of both product and commercial objectives. In the second half of the year, we aim to continue to execute on our plan and believe we have the financial resources to continue to invest to bring 4D LiDAR to market.
And with that, I will hand the call back to Soroush for closing remarks.
Soroush Salehian
Thank you, Saurabh. I am incredibly proud of our accomplishments in Q2 and want to especially thank and congratulate Aeva team on achieving the significant milestone of delivering the first Aeries II units to our strategic partners. This is a major step forward towards bringing our unique FMCW, LiDAR chip technology and production.
I would also like to thank all of our stakeholders and customers for their ongoing support. Looking ahead, we continue to see growing commercial momentum for our technology. Our collaboration with SICK AG is another example of the diverse and significant opportunities ahead.
As we work towards scaling up Aeries II and our Perception solutions, we look forward to working with our partners and responding to the growing demand to enable next-generation of Perception in automotive and beyond.
Thanks, everyone, for your time today. We will now open up the line for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] First question comes from Antoine Chkaiban with New Street Research.
Antoine Chkaiban
Hi, guys. Thanks for taking our question. Congratulations on the muster contract with SICK. And you’ve announced a number of deals outside of the automotive segment to ensure leaseback. And – are the non-photo businesses tracking in line or ahead of your initial expectations -and in particular, any update on how you see photo versus non-photo opportunities ramp in your revenues? Any color on timing and relative size of each opportunity would be very helpful. Thank you.
Soroush Salehian
Yes. Thanks for the question. So first of all, yes, we’re absolutely excited by the win we have with SICK that we announced earlier. So obviously, we’re seeing a growing demand across the board for in auto, but also in non-automotive. As your question about non-automotive, as a matter of fact, it is accelerating. It is really driven by a lot of inbound interest.
As we said, with the collaboration also with Nikon, where we were able to pull that forward by one year at the beginning of this year for 2024 and now with SICK, we’re further establishing and solidifying that. So which we are also targeting the same 2024 start of production.
So overall, we’re highly encouraged with ability to really use Aeries II and leverage the additional growing demand with our customers to also qualify Aeries II and be able to lock additional program opportunity.
Right now, of course, with Aeries II on chip development and deployment, we continue to see a growing momentum in the markets, and we’re looking forward to lot’s of those opportunities in the next number of months.
Antoine Chkaiban
Great. Thank you. And maybe as a quick follow-up, can you provide a bit more color on why it chose FMCW technology over time of flight, any details on the core use cases, I’m talking about the SICK here?
Soroush Salehian
Yeah. Absolutely. So obviously, from the SICK standpoint, maybe I’ll give you a little bit of on SOCL. SOCL actually is a multiyear strategic agreement that we have. As I mentioned, we’re trying to start of production in 2024. This offers a meaningful revenue opportunity for Aeva.
So SICK is a leader, one of the foremost dealers in logistics, and at automation with major global accounts across versus the customers, industries. They had over 11,000 employees and a large sales force, which we really plan to leverage to efficiently scale our 4D LiDAR to a broad range of customers.
And in general, to give you a rough also idea of the size of the scale, we’re talking about opportunities here that SICK like already providing as a supplier in 2D and 3D LiDAR sensors. And this is for the logistic of factory automation businesses. And that segment already is for $1.6 billion opportunity.
So with they have been working with us for the past 2 years, and they have looked at other 4D LiDAR technologies and end up deciding to go with us because of the fact that FMCW provides unique advantages, including voltage measurements, instant velocity and ability to actually not have things like go single blooming effect on retroreflector which is critical and especially outdoor applications we’re initially focused on it.
And with [indiscernible] Aeries II with the work with them. And really from there, we’re looking to bring this out to a number of applications pretty much ending at outdoor. So – but just specifically SIXCK has really is a believer in the advantages of FMCW, similarly we have seen in automotive, but now also we are seeing that further solidify into the industrial applications.
Antoine Chkaiban
Great. Thanks much for the color. That’s super helpful.
Operator
Next question are Arvind Ramnani with Piper Sandler.
Arvind Ramnani
Hi. Thanks for taking my question. I just wanted to ask, I mean, you certainly have – from the big kind of approach a unique approach to 4D LiDAR. And you’re starting to see kind of progress with different clients. And as you talked about earlier on the call, kind of recognization you’re able to sort of move forward or should pull forward some of your deals.
Can you talk a little bit more about like – should we see sort of further progression? Is there a broader recognization in the industry where people are recognizing your difference – differentiated approach? And should we continue to see like some additional pull forward and will have an impact on your overall revenue?
Saurabh Sinha
Sure. Yes. Thanks for the question. So first of all, as we mentioned before, there is a growing consensus that FMCW will play a key role in enabling Nextel [ph] automation really due to the superior performance versus 3D LiDAR, but also because of the fact that we’ve been able to now integrate the LiDAR on chip in the Aeries II. So with that, we’ve been able also to demonstrate ability to reduce costs dramatically since the samples, as I mentioned on the call, over 55%, right?
So with that, we really expect to work with the OEMs, work in auto, as well as on auto to continue to enable them to progress on the phase of development and qualification. We already started shipping the first Aeries II units and the feedback there has been quite positive.
So with SICK outspend, this is one of our recent wins, is an example of the solidification expansion that we see for the growing consensus around FMCW, but also as we continue to scale manufacturing and bring Aeries II to customers, we expect that to continue to drive and capitalize on the new inbound interest for both auto and non-abdication [ph] So we expect to drive additional programs to production over the number of months.
Arvind Ramnani
Perfect. Perfect. And then just a quick follow-up on that. Certainly, you started on this journey a couple of years back, and some of your competitors, are they kind of looking at what you’ve done in [indiscernible] to kind of follow your production and your approach. Will they be able to sort of catch up? Or do you think the sort of too far along, where it may be a little bit more challenging for some of the competitors to sort of catch update to your approach?
Soroush Salehian
Yes. No, that’s a good question. So generally, obviously, with FMCW, as you know, it is a technology that we see growing consensus. At the same time, it is a technology that is not easy or trivial to achieve. And that’s evident by the fact that Aeva is really the only public company that’s actually able to provide digital technology and visible [ph] innovation and performance to our knowledge, right?
So we have been able to make significant progress in the past number of years and also be able to actually get to a level of maturity with a B sample stage that I’m not aware of anybody else having yet. So that by itself is the fruit of labor is multiple years of development.
So there are certain things that you have to really do that you cannot just bypass in terms of developing the core components and more to validating them with the customers in the real-world scenarios on the road or industry setting. And all of that is time that it takes.
And second is actually around technology and IP. FMCW, the conventional way of doing it is very different from what Aeva has done. And we have been able to address some of the key challenges that anybody who tries to go initially developed those technologies would face. And so with that, we have created one of the largest portfolio of patents is relevant to FMCW, and we continue to add on additional IP on a regular ongoing basis.
So that being said, obviously, there are folks now that are going towards FMCW, including some of the largest players that started with vision-based sensors, move to the 3D LiDAR and now have publicly talked about going to important, but we also see that as a validation for this technology.
So for us, we will continue our focus on making sure that we make the best perception technology on the planet with our FMCW approach, and that’s going to be our focus. So — and we hope that others follow soon.
Arvind Ramnani
Really helpful. Thank you very much.
Operator
Next question, Richard Shannon with Craig-Hallum.
Richard Shannon
Well, great, guys. Thanks for getting me in the queue here. Appreciate it. Maybe a follow-up on the question of your SICK partnership. I didn’t hear any comments about whether this was an exclusive arrangement or whether they’re able to work with other LiDAR players and then kind of an ancillary question.
The technology you’re developing with Nikon seems potentially relevant to that kind of partnership? And is that something in future products beyond areas to that you might be able to use in that relationship?
Soroush Salehian
Yes. Thanks for the question, Richard. So first of all, I’m not going to go into details of the commercial that we have first would say. But we really believe this is a strong collaboration that enable us to expand further industrial automation. In terms of the application, of course, again, SICK has been looking at many of the players in the space that have had 2-plus years and decided to converge on 40 to expand the portfolio from 2D to 3D out to 40 and decided to be unable to do that, so that’s important. I think in terms of the differences between the collaboration, we already have in Nikon, obviously, Nikon is different in the sense that it’s an industry metrology for precision measurement.
So there, we’re really focused on is to leverage our ability to achieve a micron level precision for application, which includes manufacturing inspection, quality inspection on the assembly line, starting with actual automotive manufacturing area other whereas the SICK is about the scanning applications, as well as outdoor and longer-range sensing.
But importantly, all of the applications we including Nikons and automotive application and all use the same foundation of LiDAR chip module with different optimizations for algorithms and software to enable us achieve this very different performance levels and perception capabilities, which has been critical and crucial for our ability to be able to address these very different set of requirements.
And now with SICK we have the ability in a reliable, qualified and really real partner to be able to scale our technology as a channel to honor to a number of applications. And we don’t have to go and make partnerships with many, many other smaller companies to do that. So that’s gives you an answer the question.
Richard Shannon
That’s very helpful,. My follow-up question here is, I know you’ve used this language I think since it’s come public more than a year ago about moving programs toward production. — you said you wanted to do that by the end of the year. I’m wondering if you could give kind of a thought process of what this really means? Are we going to see a press release with some important milestone potentially even with the named customer or not be able to do that by at that point in time. I don’t know what exactly toward production means. Maybe you can provide more clarification, that would be great, please.
Soroush Salehian
Sure. Yes, absolutely. So obviously, with — in terms of target gross production first of all, I want to clarify — this represents one of our two programs that we have targeted for this year towards production. As I said, this is a meaningful opportunity that we’re working toward with targeted production starting in 2024, so that really focus on that. And in general, obviously, as I mentioned, an earlier question, we’re continuing to make good progress with customers, both existing as new engagements and working towards them to really now all of Aeries for the man phase at the moment.
We have already provided to a number of customers, and we’re going to continue to do that. And even if this continue to operate their atoms to use that. And we — our goal is, of course, to continue Aeries II to unlock additional program wins in the next number of months. So that’s really where we’re focused. But again, from the types of [indiscernible] that we talked about.
Richard Shannon
Thanks.
Operator
This concludes today’s teleconference. You may disconnect your lines and thank you for your participation.
Be the first to comment