Aeva is a technology company that has incurred negative cash flows from operating activities and losses from operations due to continued investments it intends to make in its business. The company expects to continue to incur operating losses unless it can generate sufficient revenue from the sale of its products to cover operating expenses, working capital, and capital expenditures. Any additional equity securities issued may provide for rights, preferences, or privileges senior to those of holders of the company’s common stock. The terms of debt securities or borrowings could impose significant restrictions on Aeva’s operations. The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty and other risks that could impact the availability and cost of equity and debt financing. Aeva recognizes the cost of stock-based awards granted to its employees and directors based on the estimated grant-date fair value of the awards. Revenue from product sales is recognized upon transfer of control of promised products. Revenue is recognized in an amount that reflects the consideration that Aeva expects to receive in exchange for those products and services. For certain custom products that require engineering and development based on customer specifications, the Company recognizes revenue over time using a cost-to-cost measure of progress which the Company believes faithfully depicts the transfer of control of the goods or services to the customer. Changes in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition.
Aeva Technologies, Inc.: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Aeva Technologies, Inc. provides a discussion and analysis of its financial condition and results of operations for the year ended December 31, 2022, in this report. It is recommended that this discussion be read in conjunction with the Consolidated Financial Statements and related notes included elsewhere in the report. The discussion includes forward-looking statements based on current expectations that involve risks and uncertainties.
Aeva Technologies, Inc. was founded in 2017 by former Apple engineers Soroush Salehian and Mina Rezk. The company is led by a team of engineers and operators experienced in the field of sensing and perception. Aeva’s vision is to bring perception to broad applications, and it aims to achieve this through its FMCW sensing technology. The company believes that it is introducing the world’s first 4D LiDAR-on-chip, which, along with its proprietary software applications, has the potential to enable the adoption of LIDAR across broad applications.
The company’s 4D LiDAR-on-chip combines silicon photonics technology, proven in the telecom industry, with precise instant velocity measurements and long-range performance for commercialization. Aeva’s mission is to bring the next wave of perception technology to broad applications, including automated driving, industrial automation, consumer device applications, and security.
It is important to note that the discussion and analysis of the financial condition and results of operations for the year ended December 31, 2021, as compared to the year ended December 31, 2020, is not included in this Form 10-K. This information can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2022.
The actual results of Aeva Technologies, Inc. may differ materially from those anticipated in the forward-looking statements due to various factors, including those set forth under “Risk Factors” or in other parts of this report.
Aeva Technologies, Inc.: Overview of Business Combination and LiDAR Technology
Aeva Technologies, Inc. is a development stage company that provides LiDAR (Light Detection and Ranging) technology solutions. The company has undergone a business combination with InterPrivate Acquisition Corp., its predecessor, which was originally incorporated in Delaware as a special purpose acquisition company. Immediately upon the consummation of the Business Combination, Aeva, Inc. merged with and into InterPrivate Acquisition Corp., with Aeva Technologies, Inc. surviving the merger as a wholly owned subsidiary of InterPrivate Acquisition Corp. The company has since changed its name to Aeva Technologies, Inc.
Aeva’s proprietary FMCW technology measures velocity in addition to depth, reflectivity, and inertial motion. This technology is a major advantage over legacy 3D LiDAR solutions, which only measure depth and reflectivity using Time-of-Flight technology. Moreover, Aeva’s technology is free from interference from other LiDAR and sunlight, allowing autonomous vehicles to see at significantly higher distances of up to 500 meters.
The company believes that it is uniquely positioned to provide a superior solution that has the potential to enable a higher level of automation for vehicles. Aeva’s 4D LiDAR-on-chip is fully integrated onto a chip with superior performance at scale, which has the potential to drive new categories of perception across industrial automation, consumer devices, and security markets.
As a development stage company, Aeva works closely with its customers on the development and commercialization of their programs and the utilization of its products in such programs. The company’s customers have purchased prototype products and engineering services from Aeva for use in their research and development programs. The company is expanding its manufacturing capacity through third-party manufacturers to meet its customers’ anticipated demand for the production of its products.
With the advantages of its 4D LiDAR-on-chip technology, Aeva believes it has the potential to provide the first LiDAR solution that is fully integrated onto a chip with superior performance at scale. The company’s technology enables it to provide perception technology solutions across various markets, including automated driving, industrial automation, consumer devices, and security.
Aeva Technologies, Inc. has undergone a business combination with InterPrivate Acquisition Corp., which was originally incorporated in Delaware as a special purpose acquisition company. The company is now positioned to deliver the first LiDAR solution fully integrated onto a chip with superior performance at scale, with potential applications in various markets.
Aeva Technologies, Inc.: Reverse Recapitalization and Key Factors Affecting Operating Results
Aeva Technologies, Inc. underwent a business combination with InterPrivate Acquisition Corp., its predecessor, which was accounted for as a reverse recapitalization in accordance with U.S. GAAP. As a result, the business combination was treated as the equivalent of Aeva, Inc. issuing stock for the net assets of InterPrivate Acquisition Corp., accompanied by a recapitalization. The Company’s financial position and results of the business combination were significantly impacted by an increase in cash of $513.1 million. Non-recurring transaction costs incurred for the transaction were $47.7 million.
Upon the closing of the Business Combination, Aeva Technologies, Inc.’s common stock and warrants began trading on the NYSE under the ticker symbols “AEVA” and “AEVA.WS”. The company anticipates incurring additional annual expenses as a public company, including directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources.
The COVID-19 pandemic has adversely impacted Aeva’s revenue and results of operations, but the extent of this impact remains uncertain. The impact of the pandemic will depend on future developments, including the duration and spread of the outbreak and its impact on customers, suppliers, and employees.
Aeva believes that its future success depends substantially on its ability to capitalize on opportunities, which are subject to significant risks and challenges. Pricing, product cost, and margins are key factors affecting the company’s operating results. Prices and margins vary by market and application due to market-specific product and commercial requirements, supply and demand dynamics, and product lifecycles.
Aeva Technologies, Inc.: Future Performance and Commercialization of LiDAR-based Applications
Aeva Technologies, Inc.’s ability to deliver economies of scale with lower product costs will be a key factor in its future performance and industry adoption. Aeva believes its business model is scalable due to its ability to leverage the same product platform across markets and customer base, and relationships with leading foundries and contract manufacturers. However, success in key markets will depend on the company’s ability to efficiently and reliably produce cost-effective perception solutions that are competitively priced and affordable for its commercial-stage customers.
Macro-economic conditions in the industry and growing competition in advanced assisted driving sensing and software technologies globally could negatively impact pricing, margins, and market share. If Aeva does not generate expected margins upon commercialization of its perception solutions, the company may be required to raise additional debt or equity capital, which may not be available or may only be available on terms that are onerous to Aeva’s stockholders.
As Aeva’s customers reach the commercialization phase and the market for LiDAR solutions matures, the company expects that its results of operations, including revenue and gross margins, will fluctuate on a quarterly basis for the foreseeable future. However, as more customers reach the commercialization phase, these fluctuations may become less pronounced.
Aeva Technologies’ success depends on its ability to deliver on economies of scale with lower product costs, enabling industry adoption while maintaining profitability. Sales volume is a crucial factor that Aeva’s performance relies on, and it is determined by various factors such as market penetration, product capabilities, end-market demand, and our customers’ ability to sell their products. Sales volume also depends on whether our customer is in the development or production phase. For instance, Aeva provides volume discounts or strategic customer pricing on sales of solutions, which may impact gross margins negatively. Aeva’s ability to achieve profitability is reliant upon the progression of existing relationships to production and meeting the required volumes and cost targets.
Revenue consists of sales of perception solutions or sensing systems and non-recurring engineering services. Aeva designs, manufactures, and sells LiDAR sensing systems and related perception and autonomy-enabling software solutions serving customers in the automotive, industrial, and other markets. Sensing system units sold under customer agreements are typically prototypes that are used for research, development, evaluation, pilot, or testing purposes. Non-recurring engineering service arrangements with certain customers are entered into to customize Aeva’s perception solution to meet their specific requirements.
Cost of revenue includes direct material, direct labor, and allocation of overhead associated with manufacturing operations. It also includes inbound freight charges, depreciation expense, and the direct cost and appropriate allocation of overhead involved in executing non-recurring engineering services. Aeva’s gross profit equals total revenue less total cost of revenue.
Aeva’s research and development efforts are focused on enhancing and developing additional functionality for its existing products and on new product development. Research and development expenses consist primarily of costs incurred in connection with developing and enhancing Aeva’s core technology and new products, including materials and supplies, employee-related expenses, and third-party expenses for design and development.
Aeva recognizes that delays in the progression of its current and future customers’ programs could result in the company being unable to achieve its revenue targets and profitability within the expected time frame. Consequently, the company may need to raise additional debt or equity capital, which may not be available or may only be available on terms that are onerous to Aeva’s stockholders.
Aeva’s Results of Operations
Introduction
Aeva is a design, manufacturing, and sales company that provides LiDAR sensing systems and related perception and autonomy-enabling software solutions for customers in the automotive, industrial, and other markets. In this section, we will look at Aeva’s results of operations data for the year ended December 31, 2022, and compare it with the year ended December 31, 2021.
Components of Results of Operations
Aeva’s revenue consists of sales of perception solutions or sensing systems and non-recurring engineering services. Revenue for the year ended December 31, 2022, decreased to $4.2 million from $9.3 million for the year ended December 31, 2021, primarily due to a decrease in non-recurring engineering services revenue.
Cost of revenue includes direct material, direct labor, and allocation of overhead associated with manufacturing operations, including inbound freight charges and depreciation expense. Cost of revenue also includes the direct cost and appropriate allocation of overhead involved in executing non-recurring engineering services. Aeva’s gross profit equals total revenue less total cost of revenue.
Operating Expenses
Research and Development
Aeva’s research and development efforts are focused on enhancing and developing additional functionality for its existing products and new product development. Research and development expenses consist primarily of personnel-related expenses, including salaries, benefits, and stock-based compensation expense for personnel in Aeva’s research and engineering functions, and expenses related to materials, software licenses, supplies, and third-party services.
General and Administrative
General and administrative expenses consist of personnel and personnel-related expenses, including salaries, benefits, and stock-based compensation expense of Aeva’s executive, finance, information systems, human resources, and legal, as well as legal and accounting fees for professional and contract services.
Selling and Marketing
Selling and marketing expenses consist of personnel and personnel-related expenses, including salaries, benefits, and stock-based compensation expense of Aeva’s business development team as well as advertising and marketing expenses.
Interest Income and Expense
Interest income consists primarily of income earned on Aeva’s cash equivalents and investments in marketable securities. Interest income will vary based on Aeva’s cash equivalents and marketable securities balance and changes in the interest rates.
Other Income and Expense
Other income and expense primarily consist of changes in the fair value of private placement warrants, foreign currency conversion gains and losses, and realized gain/loss on marketable securities.
Sales Volume
Each product program will have an expected range of sales volumes, depending on the end market demand for our customers’ products as well as market application. Aeva expects its research and development costs to remain at the same level as fiscal 2022 or increase slightly in the foreseeable future as it continues to invest in research and development activities to achieve its product roadmap.
Future Expectations
Aeva expects its general and administrative and selling and marketing expenses to remain at the same level as fiscal 2022 or increase slightly in the foreseeable future as it scales headcount with the growth of its business and as a result of operating as a public company. Aeva also expects to increase its sales and marketing activities and expand customer relationships. Interest income will vary based on Aeva’s cash equivalents and marketable securities balance and changes in the interest rates. If Aeva does not generate the margins it expects upon commercialization of its perception solutions, Aeva may require raising additional debt or equity capital, which may not be available or may only be available on terms that are onerous to Aeva’s stockholders. Delays of its current and future customers’ programs could result in Aeva being unable to achieve its revenue targets and profitability in the time frame it anticipates.
Aeva’s operating expenses increased significantly during the year ended December 31, 2022, compared to the previous year. The increase in expenses was primarily driven by the company’s investments in research and development, general and administrative expenses, and selling and marketing expenses.
Revenue
Aeva’s revenue for the year ended December 31, 2022, decreased by 55%, or $5.1 million, to $4.2 million compared to the previous year. This was mainly due to a decrease in non-recurring engineering services activity and an adjustment of $3.9 million for an existing customer’s contract modification due to customers roadmap revision towards less customization. However, there was an increase in prototype unit sales.
Cost of Revenue
Cost of revenue increased by 45% or $2.6 million, to $8.4 million for the year ended December 31, 2022, compared to the previous year. The increase in cost was mainly due to inventory impairment, manufacturing overhead costs due to scaling of third-party contract manufacturing, and an increase in the number of units sold.
Research and Development
Research and development expense increased by 47%, or $34.8 million, to $109.6 million for the year ended December 31, 2022, compared to the previous year. The increase was mainly due to an increase in employee expenses related to product development headcount, payroll expenses, stock-based compensation expenses, material, software licenses, and service-related expenses, consulting costs, facility expenses, depreciation, and travel-related expenses.
General and Administrative Expenses
General and administrative expenses increased by 9%, or $2.7 million, to $31.1 million for the year ended December 31, 2022, compared to the previous year. The increase was mainly due to the scaling headcount with the growth of its business, additional insurance expenses, legal and accounting fees for professional and contract services, compliance with the rules and regulations of the SEC, and investor relations activities.
Selling and Marketing Expenses
Selling and marketing expenses increased by 59%, or $2.6 million, to $7.0 million for the year ended December 31, 2022, compared to the previous year. This increase was mainly due to an increase in personnel and personnel-related expenses, including salaries, benefits, and stock-based compensation expenses for the business development team, as well as advertising and marketing expenses.
Net Loss
Aeva reported a net loss of $147.3 million for the year ended December 31, 2022, compared to a net loss of $101.9 million for the previous year. This increase in net loss was primarily due to increased operating expenses. Interest income increased by 897%, while other income and expense decreased by 51%, resulting in a net loss before taxes of $147.3 million.
Aeva’s 2022 Financial Performance Overview
Aeva, a company specializing in LiDAR sensing systems and related software solutions, has reported its financial results for the year ended December 31, 2022. The following is an overview of the company’s performance:
Revenue
Aeva’s revenue decreased by $5.1 million, or 55%, to $4.2 million during the year ended December 31, 2022, from $9.3 million for the year ended December 31, 2021. This decrease was primarily due to a decrease in the activity related to non-recurring engineering services and an adjustment of $3.9 million for an existing customer’s contract modification due to customer roadmap revisions. However, the company partially offset the decrease by increasing its sale of prototype units in 2022 as compared to 2021.
Cost of Revenue and Gross Profit
Aeva’s cost of revenue increased by $2.6 million, or 45%, to $8.4 million during the year ended December 31, 2022, from $5.8 million for the year ended December 31, 2021. The increase in costs was primarily due to an inventory impairment of $1.7 million, increase in manufacturing overhead costs due to scaling of third-party contract manufacturing, and increase in the number of units sold during the year. Aeva’s gross profit resulted in a loss of $4.3 million in 2022, compared to a profit of $3.4 million in 2021, due to the increase in cost of revenue.
Operating Expenses
Research and Development
Aeva’s total research and development expense increased by $34.8 million, or 47%, to $109.6 million during the year ended December 31, 2022, from $74.8 million for the year ended December 31, 2021. The increase was primarily due to an increase in employee expenses related to product development headcount, stock-based compensation expenses, material and service-related expenses, consulting cost, facility expenses, depreciation, and travel-related expenses.
General and Administrative
Aeva’s total general and administrative expense increased by $2.7 million, or 9%, to $31.1 million during the year ended December 31, 2022, from $28.4 million for the year ended December 31, 2021. The increase was primarily due to an increase in employee expenses related to headcount, payroll expenses, and other employee expenses, as well as depreciation and amortization expenses, insurance expenses, recruiting and legal expenses, and miscellaneous expenses. However, the increase was partially offset by decreases in stock-based compensation expenses and accounting services expenses.
Selling and Marketing
Aeva’s total selling and marketing expense increased by $2.6 million, or 59%, to $7.0 million during the year ended December 31, 2022, from $4.4 million for the year ended December 31, 2021. The increase was primarily due to an increase in employee expenses related to the growth of its sales force and marketing efforts, as well as marketing program costs, travel expenses, and facility expenses. However, the increase was partially offset by a decrease in conference expenses as the timing of the events was impacted by COVID in the previous year.
Interest Income and Other Income (Expense), Net
Aeva’s interest income increased by $3.3 million during the year ended December 31, 2022, due to the timing of the investment and increase in the interest rate. The company’s other income (expense), net decreased by $1.0 million in 2022 primarily due to a decrease in the fair value of private placement warrant
Aeva expects to have sufficient cash to fund its operating and capital expenditure requirements through at least 12 months from the date of issuance of its financial statements. However, if Aeva is unable to generate sufficient revenue from product sales to cover its expenses, it may need to raise additional capital. This could involve issuing equity securities, which could give holders senior rights, preferences, or privileges over common stockholders. Alternatively, Aeva could issue debt securities, which would also have senior rights, preferences, and privileges over common stockholders. Any debt securities or borrowings may come with restrictions on Aeva’s operations. The credit market and financial services industry may also experience periods of uncertainty that could impact the availability and cost of financing.
Cash Flows
During the year ended December 31, 2022, Aeva used $109.9 million in operating activities, compared to $82.1 million in the prior year. Aeva provided $110.9 million in cash from investing activities, compared to using $388.6 million in the prior year. Aeva used $0.4 million in financing activities, compared to providing $512.9 million in the prior year. As a result, Aeva had a net increase in cash and cash equivalents of $0.6 million during the year ended December 31, 2022, compared to a net increase of $42.2 million in the prior year.
Aeva’s Cash Flow Summary
Aeva, a leading provider of high-performance sensing and perception systems, reported net cash used in operating activities of $109.9 million in 2022, primarily due to a net loss of $147.3 million. However, this was partially offset by a net change in the company’s operating assets and liabilities of $5.9 million and non-cash charges of $31.5 million.
Non-Cash Charges
Aeva’s non-cash charges amounted to $31.5 million, primarily consisting of $24.3 million in stock-based compensation and $3.3 million in depreciation and amortization of intangibles. Other non-cash charges included $2.9 million in amortization of right-of-use assets, $1.7 million in inventory impairment, and $0.4 million in accretion of discount on available for sale securities. However, the non-cash charges were partially offset by a $1.0 million change in the fair value of warrant liabilities.
Net Change in Operating Assets and Liabilities
The change in Aeva’s net operating assets and liabilities was primarily due to a $2.6 million increase in inventory and a $0.5 million increase in accounts receivable due to timing of billing and cash collections. Additionally, a $5.0 million increase in accrued liability, a $1.3 million increase in accounts payable resulting primarily from expansion in our operating activities, and a $2.5 million increase in accrued employee cost were the other major factors contributing to the change. However, this was partially offset by a $3.6 million decrease in other current assets, a $2.9 million decrease in lease liability, and a $0.5 million decrease in other current liabilities.
Investing Activities
During the year ended December 31, 2022, Aeva reported net cash provided by investing activities of $110.9 million, primarily due to the sale of available-for-sale investments, resulting in $328.5 million cash received. However, this was partially offset by cash used in purchasing investments of $210.1 million and $7.4 million used for the purchase of property, plant, and equipment.
Financing Activities
Net cash used in financing activities during the year ended December 31, 2022, was attributable to a $0.7 million payment of taxes withheld on net settled vesting of restricted stock units, partially offset by $0.4 million of proceeds from stock option exercises.
Off-Balance Sheet Arrangements
As of December 31, 2022, Aeva reported that it has not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Estimates
The preparation of Aeva’s financial statements requires the company to make estimates, assumptions, and judgments that can significantly impact the amounts reported as assets, liabilities, revenue, costs, and expenses and the related disclosures. Aeva bases its estimates on historical experience and other assumptions that it believes are reasonable under the circumstances. However, the company’s actual results could differ significantly from these estimates under different assumptions and conditions. Aeva believes that the accounting policies discussed in its financial statements are critical to understanding its historical and future performance as they involve a greater degree of judgment and complexity.
Aeva’s Critical Accounting Policies and Estimates
Aeva, like many other companies, makes several estimates, judgments, and assumptions when preparing financial statements in accordance with the U.S. GAAP. These estimates can significantly impact the amounts that Aeva reports as assets, liabilities, revenue, costs, and expenses.
Stock-Based Compensation
Aeva recognizes the cost of stock-based awards granted to its employees and directors based on the estimated grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. The fair value of the RSUs is equal to the closing price of the Company’s common stock on the grant date. The fair value of each stock option grant was determined by the Company using the Black-Scholes option-pricing model.
Revenue Recognition
The most critical accounting policy estimate and judgment required in applying ASC 606, Revenue Recognition of Contracts from Customers, and our revenue recognition policy relate to the identification of performance obligations and accounting for certain contracts recognized over time.
Revenue from product sales is recognized upon transfer of control of promised products. Revenue is recognized in an amount that reflects the consideration that Aeva expects to receive in exchange for those products and services. Product sales to certain customers may require customer acceptance, in which case revenue recognition is deferred until acceptance takes place.
For service projects, revenue is recognized as services are performed and amounts are earned in accordance with the terms of the contract at estimated collectible amounts.
Assumptions Impacting Stock-Based Compensation
Several assumptions, including expected term, expected volatility, expected dividend yield, and risk-free interest rate, impact the fair value of each stock option grant. The expected term is the length of time the grant is expected to be outstanding before it is exercised or terminated. The volatility is based on a benchmark of comparable companies within the automotive and energy storage industries. The dividend rate used is zero as Aeva has never paid any cash dividends on its common stock and does not anticipate doing so in the foreseeable future. The interest rates used are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.
Operating Activities
During the year ended December 31, 2022, Aeva reported a net cash used in operating activities of $109.9 million. This amount was primarily attributable to a net loss of $147.3 million, partially offset by a net change in our net operating assets and liabilities of $5.9 million and by non-cash charges of $31.5 million.
The non-cash charges primarily consisted of $24.3 million in stock-based compensation, $3.3 million in depreciation and amortization of intangibles, $2.9 million in amortization of right-of-use assets, $1.7 million in impairment of inventory, $0.4 million in accretion of discount on available for sale securities, partially offset by $1.0 million change in the fair value of warrant liabilities.
The change in net operating assets and liabilities was primarily due to a $2.6 million increase in inventory, a $0.5 million increase in accounts receivable due to the timing of billing and cash collections, a $5.0 million increase in accrued liability, a $1.3 million increase in accounts payable resulting primarily from expansion in our operating activities, and a $2.5 million increase in accrued employee cost, partially offset by a $3.6 million decrease in other current assets, a $2.9 million decrease in lease liability, and a $0.5 million decrease in other current liabilities.
Financing and Investing Activities
Net cash provided by investing activities during the year ended December 31, 202
Aeva recognizes revenue over time for certain custom products that require engineering and development based on customer specifications, using a cost-to-cost measure of progress. The Company includes amounts billed to customers for shipping and handling in revenue. Promises to update the Company’s software represent immaterial promises in contracts with customers, and taxes collected from customers and remitted to governmental authorities are excluded from revenue. Changes in judgments with respect to assumptions and estimates could impact the timing or amount of revenue recognition. The Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” provide a full description of recent accounting pronouncements, including their respective expected dates of adoption and estimated effects, if any, on the Company’s Consolidated Financial Statements.
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