Q3 2022 Aeva Technologies Inc Earnings Call

To further scale manufacturing.

Second we have significantly grown the number of engagements we are involved in.

They are across an expanded list of applications, reflecting the unique flexibility of our technology that is attracting more inbound interest.

Importantly, <unk> <unk> combination of high performance and product maturity has enabled us to progress to advance or RQ stage on multiple automotive and industrial programs.

And with our innovation on leading development platforms, such as Nvidia SM.

And tempura.

More Oems now have the ability to validate and implement <unk> differentiated capabilities.

Third we are on track with our industrial collaborations and continues to target launch in 2024.

With Nikon, we signed a joint development agreement in the past quarter for our first high precision industrial products.

This important milestone solidifies the plan through production.

Elsewhere, we are off to a strong start with our <unk> collaboration and continuing to pursue additional opportunities with industrial automation.

Fourth we continued to strategically build a leading team to bring Ava 40, Lidar to mass production. In particular, we are pleased to welcome three new leaders to <unk> Board of directors, who offer invaluable expertise in product commercialization strategy and public company experience.

In addition, we continued our expansion globally into Germany, India, and Thailand with sales development and manufacturing teams to support our growing commercial momentum.

And fifth we further cemented our leadership in FMC W technology with.

With more than 130 granted patents, we expanded our industry leading portfolio of FMC W. Technology IP built on years of development and on road deployment that has resulted in a proprietary 40 letter on chip solution.

Turning now to slide seven I would like to provide more color on key business developments over the past quarter.

Since announcing <unk> two earlier this year, we have seen a sharp rise in interest enabled FMT EW technology. The unique combination of high performance product maturity and scalability of our solution is a first for the industry and drawing inbounds from a broad range of customers looking to implement our 40 lidar for passenger vehicles.

Those commercial trucks mobility and industrial automation.

A key priority of this past quarter was bringing up manufacturing in order to support qualification with our partners and meet the growing demand from new customers.

Commercializing a new product is not trivial enable team made good progress in the first full quarter of areas through deployment, enabling us to increase the production output by 300% and shipped to more than 25 customers globally in the third quarter.

While we don't intend to provide an update every quarter, we plan to build on this as we continue to bring up manufacturing.

Because our proprietary silicon photonics platform integrates all key optical elements of lidar sensing onto the chip module. It allows us to significantly simplify and further automate the manufacturing process.

Also continued to work closely with our supply chain, including securing materials needed to support the planned growth in volume as.

As recently announced we continue our expansion globally and we have established a local team in Thailand that will enable us to work alongside our partner Fibernet and manufacturing and Lidar module.

As such we are on track to continue increasing our volumes quarter over quarter in Q4, and look forward to meeting more of the growing demand for our products.

Now onto slide eight areas to us growing our number of commercial engagements and importantly, moving forward toward production since announcing areas to back in February <unk> progress to advance or a few stages on multiple automotive and industrial programs.

In automotive, we continue to see a growing appreciation among Oems for FMC w's fundamental perception advantages that are enabled with direct velocity measurements and how they can address many of the challenges affecting time of flight or through July to our solutions.

This is a case for passenger vehicles for Adas, all the way to autonomous driving for commercial trucks and mobility applications as Oems look to achieve more reliable performance, especially in corner cases across all levels of automation as well as the ability to increase automation overtime.

As such Oems have been eager to evaluate <unk> 40, <unk> and our advancement to more RF skews is a testament to the OEM recognition of <unk> unique ability to offer high performance and a scalable solution design for automotive reliability.

We expect decisions for some of the programs to be made in the coming months.

While we did not anticipate winning every opportunity. We believe we are well positioned to convert additional programs towards production.

Let's turn to slide nine we are excited to be the first FM CW Lidar integrated with Nvidia drive Sim and into Parra, our T maps to leading autonomy software development tools that we believe will enable Oems to accelerate development and adoption of FMC W. Lidar.

Our customers utilize these platforms to assimilate scenarios and validating performance of <unk> 40, Lidar alongside other modalities as part of their multi sensor autonomous stack.

And because some Oems require compatibility with platforms such as <unk> four developments.

Our integration broadens Avon reach introducing additional Oems to <unk> unique performance and capabilities that they can now directly implement into their vehicles back.

Switching gears to our industrial progress on slide 10, I'm happy to share that we have entered the next phase towards commercialization with Nikon and.

In Q3, we signed a joint development agreement with Nikon and critical next step that defined the development and validation milestone for our first high precision industrial product through to the start of production in 2024.

Within this if you are also on track to compete by year end the development of our lighter on chip perception platform for industrial automation.

Reflecting the performance flexibility of <unk> technology, we are leveraging our same lateral inches for automated driving.

With different software to achieve micron level precision.

To our knowledge this level of precision as a uniquely made possible by Eva FMC W technology and enabled us and Nikon to jointly bring to market a high precision product that is more accurate get smaller and lower cost than legacy solutions.

Beyond the first product with Nikon, we continue to see opportunity to expand into additional applications to our to our high performance and small chip based form factor.

Moving to slide 11 provide.

Proprietary FMC W. Technology is the driving force behind our commercial traction and we continue to extend our technology leadership with a ranted patents now surpassing 130, <unk> globally and with over an additional 135 patents pending.

And this further solidifies, our moat and our sensing industry.

Our industry, leading portfolio of FMC Wip reflects breakthrough innovation in numerous areas, including Silicon Photonics algorithms system design and 40 perception.

Our IP is how we were able to solve the challenges facing traditional FM CW approaches.

It shows our ability to simultaneously deliver millions of points per second on a per diem basis at 500 meters of Frank <unk>.

Together with direct velocity measurement. This differentiated capability enables classification of objects and growth hazards had long ranges with greater confidence providing critical response time needed for the safe operation of automated vehicles.

It is also how we are able to introduce new levels of perception leveraging fourth dimension of velocity such as our proprietary 40 perception and localization software. This capability provides real time six degrees of freedom vehicle motion estimation to enable accurate centimeter level vehicle positioning and navigation without addition.

With sensors by coffee high performance <unk> or less robust methods like visual plan, even in future deficient environments such as tunnels.

It provides oems the ability to meet Acos D redundancy requirements for positioning solutions.

Our technology is built on multiple generations of development and years of on road deployment. We believe this gives us a material lead over others, who have attempted to develop FMC there'll be technology or are at earlier stages of FMC W deployment and look forward to expanding our mode as we continue to innovate.

Let's now turn to slide 13, which summarizes the strong progress we have made on our key objectives for 2022.

With one quarter remaining this year, we have completed the majority of the goals, we laid out for 2022 and our focus on accomplishing the remaining I would like to share a bit more on each one.

First on areas through deployment in qualification with customers, we have made meaningful progress, bringing up manufacturing, enabling us to deliver aries due to more customers and work on qualification with existing strategic partners.

Looking ahead, we continue to scale up manufacturing and meet more of the growing demand for Agi <unk>.

Second on converting two additional programs towards production one of the two programs both met with <unk> AG collaboration.

And we are encouraged by the progress, we're making on our advance engagements towards an additional program towards production.

Third on accelerating the release of our first non automotive applications are signed joint development agreement with Nikon is an important next step that moves us forward towards the 2020 for Sop.

And as previously announced the AG collaborations.

Ration further solidified our expansion into industrial automation with Sop also targeting 2024.

And fourth on preparing the supply chain and processes for commercial deployment. We continue to work closely with our supply chain partners to continue increasing our production and scale up manufacturing. In addition efforts also continue on track towards certification and automotive Spice ahead of production.

With that let me turn the call over to <unk>, who will discuss the financials.

Thank you solution and good afternoon, everyone, let's turn to slide 15, which summarizes our third quarter financial results.

Revenue in the third quarter was $1 4 million driven by progress scaling of Ares to deployment.

non-GAAP operating loss was $31 7 million in the third quarter, which was largely driven by R&D expenses for product development.

Gross cashews, which we define as operating cash flow less capital expenditure was $27 2 million in the third quarter.

Reflecting our ongoing disciplined to capital allocation, we ended the third quarter with $358 million in cash cash equivalents and marketable securities.

And lastly, our weighted average shares outstanding in the third quarter was $217 9 million.

Overall, our third quarter results reflect the ongoing execution of our plan.

We continue to be deliberate in our ramp of at least two and believe we are on track to further scale manufacturing.

Support our existing partner and pursue expanding interest for <unk> for the Lidar.

And with that I will hand, the call back to solution for closing remarks.

Thank you <unk> in summary, we are making significant strides in commercializing <unk> unique FM CW technology already with our rapid pace of increased production and the customer feedback leaves me, even more excited and convinced of the opportunities at <unk>.

I want to thank the <unk> team for their tireless focus and delivering everyday I am confident that with a strong team we have assembled the growing demand from our customers and our progress to meet the demand we will continue to execute on our objectives.

So our customers and stakeholders. We appreciate our ongoing partnership and look forward to continuing to work to bring perception to everything.

Thank you everyone for your time today, we will now open up the line for questions.

If.

If you would like to ask a question. Please press star one on your telephone telephone keypad now.

And you will be placed in the queue in the order received.

In the interest of time, please limit yourself to one question. So that all analysts will have time to ask a question. Once again, if you would like to ask a question. Please press star one on your phone now.

Our first question comes from Colin Rusch from Oppenheimer. Please go ahead Colin.

Oh, thanks, so much guys.

It's great to see all of the customer engagement here and I'm curious what sort of feedback you're getting in terms of the design of the comps so far and any sort of changes that you might make to the form factor or any other element from that process.

Sure, Yes, thanks, Paul and thanks for the question. So first of all I think the feedback so far has been quite positive.

Actually we are seeing interest from folks to implement a number of our sensors on their platforms. So that they can leverage our unique capabilities such as the NDA velocity, which is important especially for detecting hazards before they become an issue right as well as some of the unique 40 perception features such as ultra resolution right.

And to your question about the form factor actually so with <unk> since we are dramatically reducing the size of the of the units as our areas one system.

The first time that I think the customers are realizing <unk> the maturity and the size. In addition to the performance for an S. FTW technology, which was never possible before is now possible with what April is driving and delivering so that other thing is I believe some of the feedback.

And the surprise the positive side for the while we have seen so far.

And this is also again across automotive and Adas.

All the way through to higher levels of automation as well as some of the industrial applications.

Applications right. So that's.

That's what I can say that I think separately also we are also talking to some of the Oems to initially actually yet decided to go with some of the time of flight or <unk> solutions for some of the pilot programs, but now are looking for better Cape.

Capabilities in both performance.

Reliability as well as the ability to deliver so hopefully that answers your question.

Our next question comes from Antoine <unk> from New Street Research. Please go ahead Antoine.

Hi, Bruce Hi, Robert Thanks for the question can you maybe comment to deepen the production ramp.

<unk> dollars to increase production by 300%. This is the end of the quarter.

And so yes, I was wondering is everything playing out as planned.

Things compare to your original expectations and both in terms of volume and cost.

Yes.

Yeah sure. Thanks. Thanks for the question. So I think overall actually we are progressing as we planned on the shipments of the units as I mentioned the initial shipments really started at the end of Q2, and we started this ramp up processing in Q3. So overall, we are pleased with the ability to really ramp that up so far by the three.

100% over 300% that I mentioned at the beginning of the quarter.

And at the same time of course, we are nowhere near done right. So we are continuing to make progress ramping up that output with our supply chain and working closely with our manufacturing partners and operations teams are really focused on driving all of that.

And at the same time, we are actively working on securing additional capacity to meet the growing demand that we have seen.

And this is across automotive again, but also some of the stuff on the industrial stuff that is coming into picture more and more now so.

That's <unk>.

Overall, we feel.

Please and also confident with the progress we have made and continue to work on increasing that output quarter over quarter moving forward.

Yeah.

And our next question comes from Fuji Silva from Roth Capital Partners. Please go ahead Fuji.

Rob so.

That's on the progress so as as soon as these customers.

Make decisions in the coming months as you said and essentially so like would.

Would you be able to clarify which customers have selected you how will that communication take place and as you ramp up this production to 300 plus percent I presume. There is some visibility into the units that would be expected from those wins. So how would you communicate that would be a pipeline or some metric that annually or so forth that helps.

To understand how you have commitments for that production. Thanks.

Yeah sure. So as you saw a couple of questions. There so overall.

As you pointed out yes, we are seeing an increased number of engagements we're now multiple across automotive.

In late stages, including <unk>.

So I think we are seeing an interest around adopting our technology. When we're looking at here is programs that are.

Generally from 'twenty, 'twenty, five and onwards from ESOP target.

And.

In terms of that.

Who are these kind of some of these customers already to your question.

Obviously.

The customers working with here are amongst the top players in their respective fields is both in Automotives.

As well as industrial so and as I mentioned he noted.

Some of these decisions to happen in the coming months.

And.

As we as we secure those wins of course, we'll be communicating those and the details of that to the extent that we can.

And to your point about metrics of course, we are validating number of metrics as we progress forward and.

We will decide on what makes the most sense to share with the broader community as well.

Okay.

And our next question comes from Arvind Rub 90 from Piper Sandler. Please go ahead Arvind.

Hi, Thanks for taking my question. So yeah I just had a question.

Certainly two years back on the competitive environment was great.

It was quite active.

With a number of players.

And.

Certainly kind of the.

Kind of the chatter.

The space is kind of died down over the last six months or so.

Can you just give us and we just kind of looking at it externally as investors.

But if we were too soon to the rooms of decision makers, who are buying laser technology.

Can you just give us a sense of how some of those conversations.

As it pertains to the competitive environment.

Yes, so I mean overall, we're having a number of conversations across the board with both Oems and passenger and commercial vehicles and.

In mobility and some of the partnerships that we've had that we've talked about for example, with Nikon second others continuing to make good progress and we hope to actually continue strengthen those.

But overall the decisions are really around.

The discussion is really around our our progress that we've made with the Oems in terms of delivering areas too.

And at this point.

Of course, the biggest factor has been around can you deliver the technology of such a performance and our answer with everything so far has been yes, and we are seeing that feedback from from the customers.

Of course as I mentioned also.

<unk>.

To call on earlier.

We are also having discussion some of the folks that had made some of the initial decisions around.

Pilot launches with time of flight solutions.

To really upgrade for their next generation sensor technology.

<unk>.

I think just in general is really increasing the recognition for the industry for the fact that what is out there today is not quite sufficient and to achieve higher levels of automation to continue improving our safety and increase overall volumes across the vehicles they need to move on to next generation technologies, such as <unk> and.

With the progress we've made with a number of innovations the patents and also in our ability to deliver on manufacturing, we're further establishing and solidifying our position as of the year and if Im CW technology, and we continue to do that.

And our next question comes from Joe Moore from Morgan Stanley . Please go ahead Joe.

Great. Thank you I wanted to ask about you mentioned in the slide deck.

Our own chip platform for industrial automation by next quarter can you talk about the applications for that is that for the existing couple of customers you've talked about in industrial or does that open up new opportunities for you.

Yeah, Hey, Thanks, Joe for the question. So actually this is <unk>.

Quite interesting we see this lighter on chip technology platform has really a foundational perception platform that go into many different applications in industrial and some of the others. So obviously for example, this is the approach, we're taking and our partnership with with Nikon and which we have now solidified that pass through the milestones.

Ill lead through to production we.

We are making good progress on that they are the applications that we use around.

Inspection and metrology for automotive manufacturing aerospace manufacturing and some of the others.

The same core technology.

Obviously tune algorithms for those applications can achieve micron level precision, which.

Which is not really possible to our knowledge with anytime a flight or <unk> solutions right.

And we continue to see also interest from folks around other applications both around two.

Manufacturing for example volt.

Volume.

Chronic things like that as well as some of the players that are.

Looking to deploy that in some of the other applications in the industrial field. So.

At the end of this year, we're on track to finish the development of the butter on chips from for the industrial applications and we expect to continue expect that completion.

Continue to drive additional inbound and potential new businesses for us that we can use leverage to expand across the industrial fields.

As a reminder, if you would like to ask a question. Please press star one on your phone now and.

And our next question comes from Sam Peterman from Craig Hallum Capital Group. Please go ahead Sam.

Hi, guys. Thanks for taking my question I wanted to ask on the Nikon J D that you talked about.

Can you describe a little more detail just how this differs from.

That's kind of a previous announcement you made about your work with them.

Kind of why you took the path of J.

J D versus maybe other options that were available.

Yes, sure I can take that one so.

Obviously, you have yet announced that initial kind of collaborations framework with Nikon with this joint development agreement, we have now further.

Solidified our our milestones all the way through to production right. So we continue to make good progress with Nikon since announcing of the initial collaboration to JD. It really defines important next steps for development milestones, including.

The sample development validation all the way through the production and that's that's the simplification in that we have done. This also gives us added confidence that we are tracking well to our target of the accelerated Sop from 25 down to 2024 with this JV and the progress we're making as number one number two is <unk>.

With a lighter on chip module development.

<unk> by the end of this year again.

Expense deleverage that to both for the Nikon programming as well as expanding our.

Rich.

Across partners to do that.

Okay.

And our next question comes from Kevin Garrigan from West Park Capital. Please go ahead Kevin.

Yeah, Hey, good afternoon guys.

Just as one part of <unk> questions.

Different way with 25, plus customers that you shipped areas <unk> already you mentioned broad applications, but are a majority of customers kind of more industrial customers or is the customer base kind of split evenly between industrial and automotive.

Yes, that's a good question Kevin So overall actually this is obviously this is the tone of our customers began leadership beyond that but that's actually is more automotive rather than industrial because we had a strong backlog of demand from the automotive customers that we're now fulfilling and continuing to fulfill.

And <unk>.

But at the same time as I said, there is an additional and onerous for industrial from industrial applications that we will continue to also fulfill now because some of the initial deliveries have been made but initially and that was more automotive that's right.

And at this time there are no further questions.

Now concludes today's conference call. Thank you all for attending.

The host has ended this call goodbye.