Aeva Technologies, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Amounts below are in U.S. dollars; financial figures are in millions unless noted.
Business context
Aeva develops FMCW-based 4D LiDAR sensing systems and related software for automotive and other markets. The company describes itself as development-stage: customers primarily purchase prototype products and engineering services for research, development, evaluation, pilot, or testing. It is expanding manufacturing capacity through third-party manufacturers.
Financial performance and liquidity
- Q3 revenue: $1.37 million, down 61% from $3.48 million in Q3 2021. Product revenue rose 18% to $0.63 million, while professional-services revenue fell 75% to $0.75 million.
- Q3 profitability: Gross loss was $1.39 million, versus gross profit of $1.18 million a year earlier; gross margin was approximately negative 101%, versus positive 34%. Operating loss was $37.80 million and net loss was $36.50 million, compared with losses of $27.39 million and $26.61 million, respectively, in Q3 2021. Basic and diluted net loss per share was $0.17.
- Nine-month results: Revenue was $4.00 million, down 37% year over year. Gross loss was $1.13 million, versus gross profit of $2.49 million; gross margin was approximately negative 28%, versus positive 39%. Operating loss was $107.56 million and net loss was $104.63 million, compared with $72.25 million and $70.14 million, respectively, in 2021. Loss per share was $0.48.
- Operating costs: Nine-month R&D expense increased 52% to $77.38 million; general and administrative expense increased 9% to $23.64 million; selling and marketing expense increased 160% to $5.42 million. Stock-based compensation was $18.36 million for the nine-month period.
- Cash flow: Cash used in operations was $83.09 million for the first nine months, versus $57.16 million in 2021. Capital expenditures were $5.97 million. Investing activities provided $134.48 million, primarily reflecting maturities of marketable securities, while financing activities used $0.31 million.
- Liquidity and debt: At September 30, cash and cash equivalents were $117.89 million and marketable securities were $232.93 million, totaling $350.81 million, down from $445.01 million at December 31, 2021. Current assets were $365.40 million and current liabilities $16.46 million. The balance sheet reports no borrowings; lease liabilities totaled $8.19 million. Management expects available cash and securities to fund operating and capital needs for at least 12 months from issuance of the financial statements.
- Other financial items: Interest income rose to $2.03 million for the nine months, from $0.23 million, reflecting higher rates and investment timing. Available-for-sale securities had $4.16 million of unrealized losses for the nine-month period. No income tax provision was recorded.
Material changes, outlook, and risks
- Management attributed lower services revenue to the timing and reduced level of non-recurring engineering work. Product costs rose materially, including inventory impairment of $1.4 million for the first nine months ($0.5 million in Q3) and higher manufacturing overhead as third-party production scaled.
- Management expects continued operating losses and higher R&D, general and administrative, and sales and marketing spending as it invests in product development, grows the business, and meets public-company requirements. The filing provides no specific revenue, earnings, or production-volume guidance.
- The company identifies commercialization timing, customer program delays, achieving production volumes and cost targets, competition, financing availability, and dependence on customers and external manufacturing partners as important risks. It also says COVID-19 may adversely affect revenue and results, but the impact cannot be quantified. Management notes a shift among automakers toward purchasing full-stack hardware and software solutions, which it views as a potential opportunity.
- Revenue and receivables are concentrated: one customer represented 55% of Q3 revenue; two customers represented 67% of nine-month revenue and 82% of accounts receivable at quarter-end. One vendor represented 45% of accounts payable.
- The filing reports ordinary-course legal matters but does not identify a specific material proceeding or quantify a related contingency. It states that there were no material changes to the risk factors disclosed in the 2021 Form 10-K.
Important facts for investors to verify
- Whether prototype and engineering relationships convert into recurring production revenue, and the timing of customer program launches.
- Whether product costs, inventory impairment, and manufacturing overhead improve sufficiently to support positive gross margins at scale.
- The pace of operating cash use and whether the stated liquidity runway remains adequate as planned investment and losses continue.
- Customer and supplier concentration, customer program changes, and the effect of contract timing on quarterly revenue.
- The scale and timing of unrecognized stock-based compensation: $60.2 million in total for options and RSUs, expected to be recognized over weighted-average periods of 1.9 and 3.0 years, respectively.