Aeva Technologies Q2 2023 Earnings Call Transcript

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August 8, 2023

There are 9 speakers on the call.

Operator

Good day. My name is Jen, and I will be your conference facilitator. I would like to welcome everyone to AVA Technologies Second Quarter 2023 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.

Operator

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.

Speaker 1

Thank you, and welcome everyone to AIVA's Q2 2023 earnings conference call. Joining on the call today are Suresh Salahyan, AIVA's Co Founder and CEO and Saurabh Sinha, AIVA's CFO. Ahead of this call, we issued our Q2 2023 press release and presentation, which we will refer to today and can be found on our Investor Relations website at investors. Ava.com. Please note that on this call, we will be making forward looking statements based on current expectations and assumptions, which are subject to risks and uncertainties.

Speaker 1

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 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 ks. In addition, during today's call, we will discuss non GAAP financial measures, which we believe are useful as supplemental measures of AIVA's performance. These non GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.

Speaker 1

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 Suresh.

Speaker 2

Thank you, Andrew, and good afternoon, everyone. AIVA in Q2 continued to make good progress on the path towards commercializing our unique 40 LiDAR on chip technology. I am excited by developments with existing collaborations as well as new opportunities and would like to highlight our key accomplishments, which are summarized on Slide 4. 1st, Our collaboration with a top 10 OEM is going very well. We are deepening our engagements and integrating further into their AV stack.

Speaker 2

In Q2, we signed a strategic collaboration agreement, where AIVA would provide our perception stack as well as join the work with the OEM on neural network based machine learning models in order to optimize the OEM's AV stack and achieved important use cases that previously challenged 3 d time of flight lidar. In addition, The OEM has decided to expand its on road deployment with AIVA 40 LIDAR on the back of the milestones we have delivered. 2nd, I'm happy to share that AIVA secured our first win in rail with Raylergy, a leading supplier of railway automation solutions, including to Europe's largest freight carrier. AIVA's 4 d LiDAR was selected due to our unique velocity data that delivers superior perception capabilities compared to the conventional 3 d LiDAR supplier we will replace. And 3rd, We reached critical milestones with our industrial automation partners that keep us on track for 2024 SOP, Including the validation of the lidar on chip module for the 1st industrial product by Nikon and progressing on track with our development milestones with 6 AG.

Speaker 2

I would now like to provide more color on our recent business developments, which begins on Slide 6. This past quarter, we significantly deepened our collaboration with the top 10 OEM on a number of fronts. The first is around perception software. We signed a strategic collaboration agreement to provide AIVA's perception stack built around our unique velocity data to help the OEM safely operate under important use cases. We will also join the work on neural network based machine learning models incorporating data from AIVUS 4 d LiDAR to optimize the performance of the overall AV stack.

Speaker 2

As mentioned last quarter, AIVA's FMCW technology successfully enabled a key safety use case for highway driving that this OEM was unable to achieve previously with 3 d time of flight LiDAR. Through our ongoing work, We have been able to demonstrate additional ways how FMCW's advantages over time of flight such as direct velocity measurement and long range without the need to push high optical power enables new levels of perception that can help the OEM more reliably achieve the high standards for performance and safety. To provide an example, by leveraging velocity for every pixel, AIVA's ultra resolution differentiates stationary from dynamic points and brings camera level resolution that can be up to 20 times that of a conventional resolution. As a result, our LiDAR can detect small hazardous objects like a tire fragment atoutworthof50 percent greater range. And because we can instantly measure the velocity for every pixel, AIVA can more quickly and confidently classify objects as compared to 3 d time of flight lidars that require multiple frames Endpoints to Infer Velocity.

Speaker 2

Perception capability like this is critical to safety operating applications such as highway automation. We're thrilled that the OEM has decided to further leverage AIVA to accelerate development of perception software to enable its highway speed autonomy use cases. The second As we continue to achieve perception and development milestones, the OEM has decided to expand on growth deployment with our lidar further into 2024. This includes plans for additional vehicles equipped with AIVA 40 LIDAR that will be used to validate our perception software and overall AV stack in order to bring it to market. Overall, we are very encouraged by our progress with the OEM.

Speaker 2

Our focus will continue to be on supporting this OEM to achieve the requirements and positioning AIVA to be selected for the production vehicle program. Moving now to Slide 7, where I would like to share more about our first win in rail. AIVA 40 LIDAR has been selected by Raylergy to enable their autonomous train solutions. Notably, we believe AIVA replaces a conventional 3 d time of flight LiDAR supplier because our velocity data, ultra resolution and other benefits of FMCW enabled Raylurgy to accurately and reliably identify obstacles on and around the rails, critical use case requirements that could not be achieved with 3 d LiDAR. The first application with Rayleigh is for the largest freight operator in Europe to automate shunting activity, which is when trains are separated, moved and linked together with new cars.

Speaker 2

Railergy's solution is intending to incorporate multiple AIVA LIDARs per locomotive to safely enable these actions autonomously. We are excited to work with RAYLurgy and see opportunities to broaden deployment to RAYLurgy's other customers, which include other major rail operators. Regulators look to bring safer and more efficient transport, we are beginning to explore opportunities for different types of applications with leaders throughout the rail ecosystem, including locomotive OEMs, technology innovators and operators. From our engagements, it is clear that AIVA's combination of long range, instant velocity and immunity to interference and offer unique advantages for rail automation applications. And we look forward to pursuing these opportunities to bring scale deployment of Forti LiDAR in rail.

Speaker 2

Let's now turn to Slide 8. I am happy to share that we are on track to begin start up production for our industrial automation programs in 2024. And I would like to provide some color on our recent progress with Nikon. This past quarter, we completed development and validation of our LiDAR on chip module for the first product with Nikon. As previously mentioned, This first product is an industrial metrology solution that enables automated inspection during high volume manufacturing.

Speaker 2

It requires micron level precision, where we will leverage our same core 4 d LiDAR chip used for automotive applications, but with different algorithms to achieve ultra high precision. Due to our unique LiDAR on chip module, we are able to offer these capabilities at a lower cost in a much smaller size compared to the current solutions utilized today. With all performance specifications confirmed, this paves the way for us to progress to the next stage where we will work on the production qualification of our first industrial product together with Nikon ahead of SOP in late 2024. Switching gears now to the opportunities we're pursuing, let's turn to Slide 9. Railurgy represents a new win this year and we're making progress on further expanding our number of program wins.

Speaker 2

In automotive, we continue to advance on large series production programs with a number of leading vehicle OEMs. Feedback has been consistent and encouraging as more OEMs, including especially ones who have previously selected time of flight for initial pilot deployments are appreciating that AIVA's differentiated FMCW technology can help safely enable their next generation Broader Scale Deployments. In Industrial Automation, we have multiple ongoing engagements with large industrial sensing companies to leverage our perception platform for industrial measurement applications. Our focus as a company remains on programs for large scale deployment with SOPs in the mid decade, where each of these opportunities offer significant revenue potential for AIVA, and we continue to expect additional award decisions over the next 6 to 12 months. With that, I'll turn it over to Saurabh.

Speaker 3

Thank you, Suraj, and good afternoon, everyone. I would like to discuss our Q2 2023 financial results, which are summarized on Slide 11. Revenue for Q2 was $700,000 on account of continued deliveries of Ares II to existing and new customers. Non GAAP operating loss was 31,100,000 reflecting our ongoing discipline and strategic approach to R and D and other operating spend. Gross cash use, which we define as operating cash flow less capital expenditure, was $28,500,000 which primarily consists of use of cash for operating expenses.

Speaker 3

We finished the quarter with cash, cash equivalents and marketable securities totaling 261,200,000 and weighted average shares outstanding was $220,500,000

Speaker 4

in Q2.

Speaker 3

In summary, EVA continues to maintain a solid financial position as we progress on our objectives. We are very encouraged by the commercial momentum in Q2. And looking ahead, we will continue to execute with a strategic approach to allocate resources and optimize spend to further our existing programs and new opportunities. I will now turn the call back to Suraj for closing remarks.

Speaker 2

Thanks, Saurabh. Halfway into 2023, we have made strong progress on our objectives for the year and I am extremely excited about where we As I conclude, I want to thank each member of the AIVA team for their ongoing dedication as well as our stakeholders for their continued support. With that, we will now open the line up for questions.

Operator

Thank and our first question today will come from Antoine Chabon with New Street Research.

Speaker 5

Hi, guys. Thanks a lot for taking my question. Can you maybe provide more details on the strategic collaboration with the top 10 OEM that you just announced? Any indication on volumes and are there any other LIDAR vendors in the pipeline for that specific project? And maybe also when in 2024 do you expect to expand on the road deployment and what key milestones do you You need to achieve to get there.

Speaker 2

Yes, Anton, happy to answer the question. So first of all, we are very encouraged that OEMs in the automotive space and especially the desktop and OEM are seeing continued value and significance and our perception software. So maybe first, before I answer the question at a high level on how we got here. So first, We first started on the harbor side, delivering errors to hardware to this OEM and then integrating in their vehicles. And from there, starting to on road deployment in the past quarter or so that he had mentioned.

Speaker 2

And then from there with additional units and additional vehicles build, We continue to hit on our milestones for the hardware. And we've been able to really address some of the most challenging use cases using our 40 bar technology in which previously this OEM was having challenges to address With Time of Flight 3 based LiDAR technology and now we are further deepening our relationship into software. And with that, we We have signed a strategic collaboration agreement to include AIVA's perception software really built around our velocity data to achieve some of those key driving scenarios that have been quite difficult to achieve. This includes, for example, driving scenario at highway speeds. We're talking here not 30 or 40 miles per hour, but really highway speeds 60 plus Loss Per Hour.

Speaker 2

And being able to have the vehicle come to a safe stop, especially in those former cases in which It's difficult to perhaps detect objects that are small or very low reflectivity on the roadways such as tire fragment and such. So that's I think where Borilow really shines and I've been able to provide those capabilities. And we're now working with them on neural network based Machine Learning Models, as I mentioned, to really address some of those corner cases that are not really possible before. Looking ahead, as I mentioned, We plan to expand our development fleet with our technology with this OEM into 2024 on the road with multiple vehicles starting in 2024 beginning 2024. And in a nutshell, really deepening our engagement with this OEM moved us from hardware into the software stack, which we believe Now creating the flywheel effect for further emitting AIVA's perception effect and the velocity data into the heart of the AIVA software stack with this OEM and

Speaker 5

you maybe update us on how scaling capacity and taking costs down is playing out? Have Things have trended as you expected over the last 90 days.

Speaker 2

Yes, yes. Hi, Bikesh. So we have continued to progress on delivering our primary 2 product to multiple customers and including of course in automotive as well as industrial space. And Case in point is really our ability to do that has led us to make meaningful advances and progress with a number of customers. For example, the top 10 OEM with us being able to get into the software stack and putting this strategic collaboration in place On that front, for example, for us being able to secure our first win in rail with Railergy And which we're pretty excited about as well and others.

Speaker 2

So I think our ability to continue on deploying ARISPU is Obviously critical to our progress with customers across both automotive and industrial applications As well as around some of the metrology applications. As I mentioned on the call, we have also completed the development milestones for Nikon and our customer for the 1st target deployment in 2024 SOP in 2024 with the metrology acquisition. So We feel pretty good about that. And obviously, we're working towards our SOP targets with Some of these customers. Thank you very much.

Operator

And your next question will come from Colin Rusch with Oppenheimer.

Speaker 4

Thanks so much, guys. With the relationship with Nikon and the ability to pull the timeframe forward. Can you talk a little bit about how that happened and what elements are going a little bit better than you anticipated?

Speaker 2

Yes, Colin, happy to answer that. As we have said before, I guess maybe at the end of the year, We had a plan to find opportunities in which we can pull forward our industrial Automation Launches. And with Nikon, we have really been able to deliver on milestones on or ahead of time And really focus on our ability to actually achieve the micron level precision. That's one of the unique advantages of MCW is that We can tune the software with the same core chip module and LiDAR that we have in automotive, But different for different applications, different software, instead of maybe going hundreds of meters of range, we can trade that down to a lower distance, And achieve ultra precise accuracy, which gets us to Micron Mobile Precision. We have now completed that.

Speaker 2

Icahn has completed also their validation and verifying the performance specs and the key metrics that Really matter for their industrial metrology manufacturing inspection applications and they've been pleased with that and That's allowed them to build further confidence for us to move now to that next phase of Industrializing and Getting the Product Ready for late next year. And I think Really one of the key reasons for us to be able to do that is because we have been doing this for a while already with our Ares II product. It's the same hardware. We have had significant experience in developing and releasing new software functionality and validating that with the key customers. And that's one of the key factors that's led us to be able to do that as well as our ability to actually

Speaker 4

That's super helpful. And then with the OEMs, congratulations on continuing to move forward with some of these vehicle OEMs. Certainly seen some of the other emerging LiDAR providers struggle with actually delivering on some of their roadmaps. Can you talk a little bit about how your conversations are changing with those OEMs? Because I assume that you're at the table with most everybody talking about future proofing some of their platforms.

Speaker 4

And how tangible some of those programs are getting in terms of the potential to move forward in the sales process for you guys?

Speaker 2

Yes, sure. So, look, we are generally quite encouraged, very pleased with progress we're making across The automotive space and Vision Industrial. I think, as you mentioned, where we also see a lot of, interesting developments is especially in areas where number OEMs in the past have had experience with Thomas Lido 3 d LIDAR and we're for initial deployments. But since engaging with us, Seeing some of the key unique selling points and advantages of MCW and how this is really the next generation technology that's coming to market, Been working with us and measuring our capability and absolutely to deliver on the milestones from the requirements over time. These 2, I think, factors have really helped us to be able to make meaningful progress with number of Automotive OEMs in the States.

Speaker 2

And I think we have always talked about that with where we believe the industry is headed. And some of that is starting to form shape with the progress that we are making, as is the case with AutoML, As is the case with Raylargy, both of which have had experiences with the e time applied by our now deciding to

Speaker 4

Okay. That's a problem. Appreciate it.

Operator

And your next question comes from Joe Moore with Morgan

Speaker 6

Stanley. Great. Thank you. I wonder if you could talk a little bit more about the win with Raylergy and particularly When you think about the train market, how big is that? Is it And I think are there opportunities to expand beyond that into other sort of autonomous train efforts?

Speaker 2

Yes. Hey, Joe, happy to answer that. So First of all, yes, we're pretty excited about our first win in rail here. Again, this is another example of how unique capabilities of FMCW enable scenarios for automation that are currently challenged when you use some applied technology. And this is exciting for us because it's our first expansion into their applications and we really started to see some of the breadth Apps and Applications that FMCW can help end customers solve.

Speaker 2

I can give you some context on the overall opportunity in rail here. So the overall opportunity in rail, globally is about over $1,000,000,000 in the market opportunity. We're talking about 100,000 locomotives globally. And Of that, it's about 15,000 locomotives in Europe alone. And we're talking about multiple lidars for locomotive.

Speaker 2

So the opportunity with Radiology, specifically is really with the first deployment in Europe with the largest European fare carrier, about 2 to 4 lidars per locomotive at ASPs of multiples higher than in automotive. And we're beginning in 2025 for one of the LiDAR for the rail with railogy. Separately, we are engaged with some of the leaders in this space that include trained OEMs, that includes technology providers and some of the leader operators that we see potential to expand further in the rail application. And RAYLurgy alone also is working with other major rail operators beyond Europe to deploy their solutions to various applications, including in Europe and in the U. S.

Speaker 2

And Other Global Markets.

Speaker 6

Okay. Thank you.

Operator

And we'll move next to Suji Desilva with ROTH MKM.

Speaker 7

Hi, Suraj. It's Rob. So Just trying to understand, Suresh, the additional auto customers that could follow this Tier 1 you're working with, would those engagements take the Same form of this in terms of a development engagement and then weaving the software together, would they have a different shape? And concurrent with that question, The ability of AIVA to handle multiple of these engagements concurrently or kind of focusing resources on one and then have it kind of Look forward sequentially, I'd be curious to understand how you would waterfall from

Speaker 2

here. Yes. So you have to answer that. So look, I think we're here building a framework and a platform in which we plan and intend to deploy in collaboration with multiple OEMs over time with a focus of creating kind of one core product with FMCW, Harvard Technology, but also our approach to software is being in a modular way in which we can build The key topic features on top of our hardware in a way that can be qualified With, let's say, the first OEM, including with this top 10 OEM, but can also be And from there scaled and deployed across multiple other programs. And that's something that has always been in front of us and that's something that we're happier So I think it's very important to start early on with The vehicle manufacturers, so that especially bringing a new technology with automated driving, So that you can ensure timely validation, ensure addressing the corner cases and really making Sure works before it comes to close to production and that's the example that we have.

Speaker 2

And we're hoping that we can leverage this playbook with other OEMs as Well, of course, each customer is going to be different. Sometimes it may not make sense to provide all the modules of the perception software, That models our approach, I think, is a critical part of our strategy. To your second part of the question about kind of Our ability and resources to support multiple OEMs. Today, we have the sufficient staff to be able to support all the engagements that we have today. As we of course go along, we're continuing to hire and expanding on the team So that we can support some of those key programs on the OEMs.

Speaker 2

But again, our strategy is not to go and spray and pray across many, many opportunities. We're focused on a number that is A, a defined number of growth opportunities with large scale, that each of which provide meaningful opportunity for us potential for the company and with a focused approach, we think that's the right way to go about with our first deployment and then from there we

Speaker 7

Okay, great. Thanks, Arish. My other question is on the industrial auto, the I guess started production sometime calendar 2024. Just curious what the shape of that initial unit ramp might look like or just Size of that opportunity, if you want to talk about that way for a run rate. And just competitively, I know there's other industrial LiDAR vendors out there with high unit run rates already, obviously, a less featured 1 than yours.

Speaker 7

So maybe you could talk about the pricing strategy versus those guys just to contrast what's already out there in the market versus what you're going to bring to market?

Speaker 2

Yes, absolutely. So look, first of all, the planned launch is towards Late 2024, and then starts with volume and scale up from there. Obviously, in industrial, the volume and pricing is quite different than Automotive. But, I mean, just to give you a sense here, we're talking about orders of magnitude in terms of Differences in our ASP between automotive and what is really feasible here. And Martin, one of the key factors for us is that we're using the same core technology that we're developing already through automotive.

Speaker 2

So we can use economies of scale, The same manufacturing line, of course, with some customizations and certain things that may not be needed as, for example, long range or such and different software to allow for that. But from a development perspective, multiple iterations of our biodynamic chip module. And because we have been able to integrate everything down on the silicon products module basis, We're able to achieve such lower costs and ability to build fees for Nikon and also help them use The size and the form factor of the end product and provide additional benefits to the end customers. So that's what I can say.

Speaker 7

Okay, great. Thanks, Raj.

Operator

And our next question will come from Richard Shannon with Craig Hallum.

Speaker 8

Hi, guys. Thanks for taking my questions. I didn't get a chance to listen to your prepared remarks, so apologies if I'm overlapping with some previously asked questions. But I think the first one I want to follow-up was actually a part of Suji's question, which is how to think about the size This opportunity with Nikon specifically. I think the timeframe is I think is well understood.

Speaker 8

Obviously, the ASPs are quite a bit higher, but it's hard about what kind of volumes are here. So maybe if you just want to take it up to the TAM or SAM level here and get a sense of couple of years after this ramps, What kind of opportunities does this offer for AIVA?

Speaker 2

Yes. I think, look, what I can say is, Maybe I can give you, yes, high level figures about the business. So Nikon itself is Doing about $500,000,000 $600,000,000 per year business in the industrial metrology space. There are a lot of leaders in the space, customers in Automotive Manufacturing and Aerospace and others, customers including BMW, Solana and others. So we really see opportunity there starting automotive and expanding further to high volume manufacturing.

Speaker 2

With that, Obviously, what we're looking to do is providing About ASPs from in this space for full entire solution, we're talking about 1 100,000 plus per unit in terms of some of those ASPs and industrial solution. As you take portion of that, we'll check and not comment on specifics, But that should give you some rough sense about opportunity and the scale. And this is just for the industrial metrology applications with Manufacturing, you see opportunities further from there over time about other applications for potential around general volume, electron manufacturing and such wherever it needs to actually inspect and be precise about that, That, can't comment on right now, but that's, that maybe should give you some general guidelines to help out.

Speaker 8

Okay. Fair enough. That's a reasonable answer. Follow on question here was Kennamore in the industrial space here with SICK and I think your investor presentation says, some, let's see, progressing on development milestones with them, with being on track for 2024. Does that mean you're expecting to start generating some revenues with them?

Speaker 8

If that's not the case, please The timeframe there and then what are some of these milestones you have to progress through to get to that point?

Speaker 2

Yes. No, that's correct. We're Obviously, working with them currently under the hardware and we do expect from a revenue standpoint That's correct. And I think from a milestone standpoint that we have been working closely with CAG around ensuring that performance metrics for the industrial end customers across different configurations. One of the key things there for us is, and we're working also across software configuration and configurability with, with C, In which in industrial differences, there's multiple different types of customers, with each with different types of requirements.

Speaker 2

And I think one of the main advantages for FMCW and AIVA is that we can tune those Performance of the system with software and basically has favorability into the actual system without touching the hardware. And that's one of the selling points in which Dick was eventually decided to work with us and Products segment. And so we're working with them around Yes, ensuring to define, validate and qualify those different configurations for some of the lead customers there on the industrial sector. That's the work that we're doing now and later in 2024. And so far, we're progressing.

Speaker 8

Okay, fair enough. That's all for me guys. Thank you.

Operator

There are no further questions at this time and we will now conclude today's conference call. Thank you for

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Aeva Technologies Q2 2023
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