Aeva Technologies, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited results are for Aeva Technologies and its consolidated subsidiaries. Aeva develops FMCW-based 4D LiDAR and related software; current customer activity primarily involves prototype products and engineering services for customer research and development programs.
Financial performance
- Q2 revenue: $0.7 million, down 50% from $1.5 million in Q2 2022. Management attributed the decline mainly to less non-recurring engineering activity and its timing.
- Q2 gross loss: $1.9 million, versus $0.5 million gross profit a year earlier. Cost of revenue rose 169% to $2.7 million, mainly from increased manufacturing overhead as third-party manufacturing scaled. Approximate gross margin was negative 258%, compared with positive 34% in Q2 2022.
- Q2 operating expenses: $36.3 million, broadly flat year over year; R&D was $27.1 million, general and administrative expense $7.7 million, and selling and marketing $1.5 million.
- Q2 operating loss and net loss: $38.2 million and $36.0 million, respectively, compared with $35.7 million and $35.0 million in Q2 2022. Interest income increased to $2.2 million from $0.6 million.
- First-half revenue: $1.9 million, down 28% from $2.6 million. Management cited lower engineering-services activity, partly offset by increased prototype-unit sales.
- First-half gross loss: $3.3 million, versus $0.3 million gross profit in the prior-year period. Operating expenses rose 3% to $72.1 million; operating loss was $75.4 million versus $69.8 million. Net loss was $71.1 million versus $68.1 million. Approximate gross margin was negative 174%, compared with positive 10%.
- First-half cash flow: $63.4 million used in operating activities, compared with $58.0 million used in 2022. Investing activities provided $30.6 million, principally reflecting $107.1 million of securities maturities, offset by $74.1 million of securities purchases and $2.4 million of capital expenditures. Cash and cash equivalents declined $32.7 million.
- Liquidity and balance sheet at June 30: Cash and cash equivalents were $34.7 million and marketable securities were $226.5 million, totaling $261.2 million. Current assets were $270.7 million and current liabilities $14.5 million. Total liabilities were $18.1 million, including $6.0 million of lease liabilities; the filing reports no material conventional borrowing balance. Stockholders’ equity was $273.6 million.
- Other metrics: Accumulated deficit was $381.4 million. First-half stock-based compensation was $13.0 million. Basic and diluted loss per share was $0.16 for Q2 and $0.32 for the first half. Income tax provision was zero.
Material changes and operating developments
- Revenue mix shifted toward point-in-time product revenue: 69% of Q2 revenue and 77% of first-half revenue, compared with 31% and 26%, respectively, in the comparable 2022 periods. Over-time revenue was primarily non-recurring engineering services.
- Manufacturing overhead and prototype-related costs increased, contributing to a swing from gross profit to gross loss as revenue declined.
- R&D increased modestly, while first-half selling and marketing expense increased 27%, mainly due to marketing costs. Management expects R&D and general and administrative spending to remain near fiscal 2022 levels or increase slightly, and expects continued sales and marketing activity.
- Property, plant and equipment, net, increased to $11.2 million from $9.7 million at year-end 2022, including increased manufacturing equipment.
Outlook, risks and contingencies
- No specific revenue, earnings, or production-volume guidance is provided. Management expects continued operating losses as it invests in product development and states existing cash and marketable securities should fund operating and capital requirements for at least 12 months from issuance of the statements.
- Management says additional capital may be required unless revenue grows enough to cover operating costs, working capital and capital expenditures. It cautions that financing may be unavailable or costly, and could dilute shareholders or impose restrictive terms.
- Key execution dependencies include customers progressing from development to production, meeting required volumes and cost targets, and achieving competitive pricing and margins. Customer-program delays, competition, commercialization timing and manufacturing scale-up may affect revenue and profitability.
- Revenue and receivables are concentrated among a small number of customers. Two customers represented 23% each of Q2 revenue; three customers represented 21%, 14% and 13% of first-half revenue. Two customers accounted for 35% and 23% of accounts receivable at quarter-end.
- The company disclosed ordinary-course legal matters, including potential intellectual-property, contract, warranty and employment claims, but did not quantify a material contingency. It reported no material change to its previously disclosed risk factors and no off-balance-sheet arrangements.
- Disclosure controls were assessed as effective at the reasonable-assurance level; management reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether customer development programs convert to production and what timing, volumes and economics those programs imply.
- Whether rising manufacturing costs and low prototype/service revenue can improve enough to support positive gross margins at scale.
- The pace of operating cash use relative to the stated liquidity runway, including the mix, maturities and realizable value of marketable securities.
- Customer concentration and the potential effect of program delays or changes in engineering-services activity.
- Potential dilution: 60.9 million potential common shares were excluded from diluted loss per share as anti-dilutive, including options, RSUs, performance awards and warrants; the filing also reports substantial unrecognized stock-based compensation expense.
- Lease commitments, any developments in legal contingencies, and the availability and terms of any future financing.