Aeva Technologies, Inc. Q3 FY2024 earnings call

• Secured a major industrial production win for security applications with The Indoor Lab in a multiyear supply agreement, with initial deployments at JFK and SFO airports and estimated revenue opportunity in the multiple tens of millions over 2-3 years.
• Daimler Truck's subsidiary Torc achieved a critical milestone with fully driverless operations at highway speeds using Aeva 4D LiDAR, with Aeva on track for start of production in 2026 to support Daimler Truck's 2027 market entry.
• Selected for a major European passenger OEM's automated vehicle validation program leveraging Aeva's FMCW technology for velocity data and other advantages.
• Advanced in automotive RFQs, including being down-selected to the final stage of an RFQ for a global top 10 passenger OEM's production program.
• Pulled forward first shipments of Atlas, its next-generation 4D LiDAR, by almost six months to meet growing demand and support production wins.

Revenue in Q3 was $2.3 million, driven by scaling of sensor shipments to automotive and industrial customers, including progress with the Daimler Truck program.

• Expect to scale supply to The Indoor Lab to support deployments and other industrial security applications, with revenue potential up to $50 million in the next few years.
• Continue to support Daimler Truck and Torc's milestones towards SOP in 2026 and market entry in 2027.
• Focus on executing on passenger vehicle RFQs and capitalizing on interest in industrial automation, security, and other applications.

Q: Now that you've got a couple of wins on the security side, and with the ground truth, can you talk a little bit about what's going on with the potential customers in those areas? How many? Or just given a sense of growth in the number of customers and the scope of that opportunity over the next 12 to 24 months for shipments?

A: Yes. This is so obviously as you've seen now over the past number of quarters, we have continued to really build up, and capitalize the momentum that we've seen in the market. Started off the Air Force with the major production win with Daimler Truck. We have since executed on all the milestones that we set out for us, as a company and in the market with customers as well as actually pulling forward the product with Atlas now by nearly six months, which was I think a big deal with the company across the organization to get this scale really in response to the growing demand. So to answer your question, with obviously now this additional production win industrial security within our lab, we're really excited about this. It's a major opportunity for us with the industrial production win, is the leader in the space, around LiDAR-based AI analytics across applications at airports, smart infrastructure, and other large, large venues. This is multiyear production supply deal we have. We're starting first with deployments across airports in the U.S., starting with JFK as well as in San Francisco airport, which we're excited about. And over time going to expand this additional locations over time. So we see now, this plus the national security innovation win that we had earlier, a significant opportunity. So with indoor as well as the other industrial security applications. To get to the bottom of your question, we estimate the revenue potential here to be approximately up to about $50 million in the next few years. So this is something that's obviously we see as the first opportunity and over time, as vendor, lab and other applications continue to grow their platforms and the deployments with new sites, we see the revenue potential today could grow over time. So in a nutshell, we're really excited about the progress we've made. It's not just in automotive, which we're really working well and progressing well, but also industrial and other applications.

Q: And then as you work towards production with Torc, can you talk about the remaining key manufacturing hurdles that you guys are looking at and we'll be able to talk about with public markets over the next couple of years?

A: Yes, sure. So, far we've been really well on track, and really well aligned with Daimler Truck and Torc, our partners for production here. We have hit all the milestones, everything we've been planning on with Daimler Truck and Torc, towards their SOP milestones. And importantly, Torc and Daimler also have been continuing hitting their milestones, right. So with what we've seen and talked about and Torc made a release about in the past few days. This validation of their driverless operations at highway speeds, without a driver in the cab is a critical milestone, not just for Daimler Truck, but also for the industry. And this is further, confidence building towards the timeline of our SOP, which obviously is in 2026, but also Torc Daimler Trucks market entry in 2027, which by the way, they have reiterated even as often past few days. So for what's going on from here from now on, first of all, this year at this point we have now, we continue to scale on sensor shipments to Daimler Truck and Torc. We've actually completed all the sensor shipments deliveries that we need to do for our Aeries II platform with Daimler and Torc this year on time, or ahead of time a little bit. And we're now of course focused on deliveries with Atlas into next year. So that's kind of where the key focus is. And the key milestone is going to be the validation for the rest of the Torc fleets as they scale into next year, as well as some of our automotive qualifications and making sure that, we bring up the scaling production line for our Atlas up to the levels that needed to for mass SOP throughout next year. So that's kind of the focus that we see in the next number of quarters ahead of us, but overall we're really progressing well. We're on track and we actually, because we've been able to pull forward now this Atlas deliveries, we are also using that to capitalize on our momentum in other programs in automotive including other passenger vehicle OEMs.

Q: Hi Soroush, hi Saurabh. Congrats on the progress here. Question on the Tier 1 OEM win that you have here. Just can you give us an update on the progress there and the remaining milestones for that global Tier 1 program? It sounds like it's coming close to a decision point or volume ramp. Any color there would be helpful?

A: Yes, Suji, happy to answer that. So obviously, we have been talking about our traction in the passenger car vehicle space in the past couple of quarters. Following our production with Daimler Truck, we have seen an uptick in interest for Aeva and for FMCW technology with the passenger vehicle, and our automotive market. And I think with our ability to actually pull-forward our Atlas deployments, and really hitting all the milestones for our ISO audit and certifications. We have continued over the course of this year across our engagements with multiple top passenger vehicle OEMs. Specifically for the top 10 OEM that you're - I think you're referring to, over the course of this year, we have worked extensively with this OEM, and we continue to do so, and we're on track on that. In a little bit more context, we have been obviously working from evaluation of the technology earlier in the year, throughout really going through all the extensive testing together with this top 10 OEM. We have completed and passed all the critical manufacturing quality audits that helps us to build maturity as a Tier 1 supplier and gotten the approvals for that, leading to our ability to manufacture for them. We have jointly also worked together through their technical teams, aligning on all the requirements, thousands of technical requirements that have been aligned in the past number of months and very close engagement there that we have done. And then more recently, we've been now down-selected the final stages here and are now discussing commercial terms. So that's what I can share. Obviously, we are gaining continued confidence in the OEM as they move towards finalization of the RFQ for this vehicle program, as you mentioned. And obviously, there's many factors that go into the decision and - but we are feeling overall good about the progress that we have had with this OEM. And this is, lastly, the second time that we have done this now, first with Daimler Truck and now with this OEM in the passenger car space.

Q: Okay. Great. And would you be able to share, Soroush, if there are other competitors in the down-select or whether it's just you kind of moving into new milestones?

A: Yes. So look, what I can say, obviously, is we are at the final stages of the RFQ and have been multiple down-selects, right, in that, and we think we're in a good position with this passenger win.

Q: And then switching over to the Indoor Lab partnership, I'm wondering how does the financial opportunity for that play out as you start to develop, I guess, customers together or a pipeline together?

A: Yes, absolutely. So we spoke a little bit about this earlier. But in general, obviously, The Indoor Lab partnership is a multiyear production deal that we have with committed volumes. And we're starting together really to deploy our technology with 4D LiDAR as well as their analytics solution across a number of airports, large venues and transit -- mass transit applications. We're starting with JFK airport and San Francisco airport. And the overall progress of Indoor Lab is really to go after a number of different application installments. With the opportunity here that we're talking about with Indoor as well as some of our other industrial security applications, we estimate that the revenue potential for this to be approximately in the $50 million range, over the next few years. And this is the starting point of what we see with these opportunities. And as there is growing interest for the platforms and new sites and applications, we think the potential revenue opportunity here to grow over time. So this is - we don't think by any means any kind of ceiling here just kind of the first deployment. So hopefully, that answers your question.

Q: This is Tyler Anderson on for Richard Shannon. Thank you for taking my questions. I was wondering if there was any qualitative differences between all of the places that you're looking to get into for indoor and outdoor. And also, what was the pull-forward for the shipment about? Is that something that was a technical or a manufacturing matter? Could you describe that a bit for us?

A: Sure. Yes. So obviously, with our growing interest for our technology with 4D LiDAR and FMCW, we're expanding our applications and really capitalizing on the growing interest in the market. So I think your question around industrial applications, obviously, besides what we talked about in automotive with Daimler and the passenger vehicle OEMs that we have advanced on, besides this European OEM validation program that we won. We have secured a production win with The Indoor Lab on the industrial side. But this actually is for indoor and outdoor applications. So it's not just indoor application. But the key there for them actually has been that they've been looking at obviously different technologies in the space. They have validated different types of technologies and decided that 4D LiDAR is where they're going to go with as they go in terms of production scale. That's the transition they're making. Part of the reason, and we've seen this over and over, is around the advantages of velocity dimension, the advantages of interference immunity, right, not having issues with interference, blooming, as well as, I think, importantly, our ability to show not just superior capability, but also maturity of our Atlas products. And these were kind of some of the key drivers, especially when you talk about monitoring analytics of different behavior. People in different settings inside the airports as well as outside. And to your other question about Atlas and pull-in, this has been obviously a strategic decision that we made earlier in the year. The moment we announced Atlas following the same time with our win with Daimler Truck, we saw a sharp uptick in the interest in the market for our products. And our team has been working together for the past number of months across engineering as well as manufacturing operations to really pull-forward these Atlas deliveries by about six months or so. So that's something that we has taken a significant amount of effort from the team. But in general, of course, with nonautomotive applications, we see the ability to pull this forward because often they don't necessarily need some of those automotive qualifications or certifications to be completed yet, so which is obviously ongoing and on time for our Daimler Truck SOP. So all this, I think, has resulted us in our ability not just to deliver, on the existing programs with production programs that we have, but also win additional programs. And what we're going to do here, what we're planning on forward is continue on capitalizing on this momentum, not just executing on our existing programs, but also converting those additional opportunities to production wins, and then those wins to growing shipments and revenue. So that's kind of how we've been operating.

Q: And then, are there commonalities between the indoor and outdoor opportunities that you're looking at? Is there a population, or a geographical situation that you're looking for when you're entering into a space?

A: You're talking about specific to the industrial sensing, right, Tyler?

Q: Industrial or mass transit and smart infrastructure?

A: Sure. Yes. So first of all, in what we are seeing, the growing interest there in the industrial security, there is - across different regions, our first deployment is starting in the U.S., obviously, with our - this first national security organization program that we have and now with Indoor Lab. And these are actually both indoor facing. So some of these, for example, in the terminals with SFO and JFK are looking at inside the terminal, looking for monitoring of people, wrong behavior or bad behavior, tracking analytics, queue times, things like that. So there's a number of different applications. It's monitoring also on the outside, for example, looking at airplanes and on-time docking and undocking. But also, there is other applications outdoor for just security monitoring around defenses and perimeters, which are some of the different customers. So though from a commonality you're talking about is all the same Atlas product that we have been working on that. Is for automotive that we're providing here for these industrial security applications, be it indoor, be it outdoor, be it for perimeter or mass transit applications, that's some of the, I guess, beauty of kind of the platform that we have built that is highly software configurable and flexible in those applications.