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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-12 · 41 added, 37 removed, 114 unchanged (41% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of operations of Aurora should be read together with Aurora’s unaudited financial statements as of and for the three and six months ended June 30, 2022 and 2021, together with related notes thereto, included elsewhere in this Quarterly Report.

The following discussion and analysis of the financial condition and results of operations of Aurora should be read together with Aurora’s unaudited financial statements as of and for the three and nine months ended September 30, 2022 and 2021, together with related notes thereto, included elsewhere in this Quarterly Report.

The discussion and analysis should also be read together with the section entitled “Aurora’s Business” below.

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This level of control is useful during early commercialization as we will define operational processes and playbooks for our partners.

We plan to first launch Aurora Horizon, our driverless trucking product, as we believe that is where we can make the largest impact the fastest, given the massive industry demand, attractive unit economics, and the ability to deploy on high volume highway-focused routes.

We plan to first launch Aurora Horizon, our driverless trucking subscription service, as we believe that is where we can make the largest impact the fastest, given the massive industry demand, attractive unit economics, and the ability to deploy on high volume highway-focused routes.

Future success will be dependent on our ability to execute against our product roadmap to launch Aurora Horizon.

From there, we plan to leverage the extensibility of the Aurora Driver to deploy and scale into the passenger mobility market with Aurora Connect, our driverless ride hailing product, and longer-term the local goods delivery market.

From there, we plan to leverage the extensibility of the Aurora Driver to deploy and scale into the passenger mobility market with Aurora Connect, our driverless ride hailing subscription service, and longer-term the local goods delivery market.

Results of Operations

Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021

Comparison of the Three Months Ended September 30, 2022 to the Three Months Ended September 30, 2021

The following table sets forth a summary of our consolidated results of operations for the periods indicated, and the changes between periods.

Three Months Ended June 30, $ Change % Change

Three Months Ended September 30, $ Change % Change

(in thousands, except for percentages)

Collaboration revenue $ 20,733 $ — $ 20,733 n/m (1)

Collaboration revenue $ 2,897 $ 55,599 $ (52,702) (94.8) %

Operating expenses:

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Selling, general and administrative 32,511 25,898 6,613 25.5 %

Goodwill impairment

1,000,081 — 1,000,081 n/m (1)

Total operating expenses 203,001 184,033 18,968 10.3 %

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Collaboration revenue

Collaboration revenue increased by $20.7 million in the three months ended June 30, 2022 due to progress made during the period under the collaboration framework agreement and project plan signed in August 2021 with Toyota Motor Corporation.

Collaboration revenue decreased by $52.7 million, or 94.8%, to $2.9 million in the three months ended September 30, 2022 from $55.6 million in the three months ended September 30, 2021, due to lower hours incurred toward the completion of the collaboration project plan with Toyota Motor Corporation.

Through September 30, 2022, the Company has recognized cumulative revenue of $148.2 million from the $150.4 million of cash payments received under the agreement.

Research and development

Research and development increased by $24.0 million, or 15.0%, to $183.8 million in the three months ended June 30, 2022 from $159.8 million in the three months ended June 30, 2021, primarily driven by an increase in payroll and hardware development costs.

Research and development increased by $12.4 million, or 7.8%, to $170.5 million in the three months ended September 30, 2022 from $158.1 million in the three months ended September 30, 2021, primarily driven by an increase in payroll and development costs, partially offset by a decrease in stock-based compensation.

Selling, general and administrative

Selling, general, and administrative increased by $11.8 million, or 54.6%, to $33.5 million in the three months ended June 30, 2022 from $21.6 million in the three months ended June 30, 2021, primarily driven by an increase in payroll and insurance costs.

Goodwill impairment

The Company recognized a goodwill impairment of $1,000.1 million during the three months ended June 30, 2022 as a result of an interim goodwill impairment assessment performed due to a significant decline in the market price of the Company’s Class A common stock and its market capitalization during the period.

Selling, general, and administrative increased by $6.6 million, or 25.5%, to $32.5 million in the three months ended September 30, 2022 from $25.9 million in the three months ended September 30, 2021, primarily driven by an increase in payroll, stock-based compensation and insurance costs.

Change in fair value of derivative liabilities

Income recognized for the change in fair value of derivative liabilities was $39.9 million in the three months ended June 30, 2022 primarily due to the change in the market price for the underlying instrument.

Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

The change in fair value of derivative liabilities resulted in a loss of $2.6 million in the three months ended September 30, 2022 primarily due to the change in the market price for the underlying instrument.

Other income (expense), net

Other income, net was $4.5 million in the three months ended September 30, 2022, primarily due to interest income earned on short-term investments.

Other expenses, net was $4.9 million in the three months ended September 30, 2021, primarily due to losses on the disposal of IT equipment.

Comparison of the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021

The following table sets forth a summary of our consolidated results of operations for the periods indicated, and the changes between periods.

Six Months Ended June 30, $ Change % Change

Nine Months Ended September 30, $ Change % Change

(in thousands, except for percentages)

Collaboration revenue $ 62,731 $ — $ 62,731 n/m (1)

Collaboration revenue $ 65,628 $ 55,599 $ 10,029 18.0 %

Operating expenses:

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Collaboration revenue

Collaboration revenue increased by $62.7 million in the six months ended June 30, 2022 due to progress made during the period under the collaboration framework agreement and project plan signed in August 2021 with Toyota Motor Corporation.

Collaboration revenue increased by $10.0 million, or 18.0%, to $65.6 million in the nine months ended September 30, 2022 from $55.6 million in the nine months ended September 30, 2021 due to higher hours incurred toward the completion of the collaboration project plan with Toyota Motor Corporation.

Through September 30, 2022, the Company has recognized cumulative revenue of $148.2 million from the $150.4 million of cash payments received under the agreement.

Research and development

Research and development increased by $19.0 million, or 5.9%, to $337.9 million in the six months ended June 30, 2022 from $318.9 million in the six months ended June 30, 2021, primarily driven by an increase in payroll costs and hardware developments costs, partially offset by a decrease in severance expense and stock-based compensation.

Research and development increased by $31.3 million, or 6.6%, to $508.4 million in the nine months ended September 30, 2022 from $477.1 million in the nine months ended September 30, 2021, primarily driven by an increase in payroll costs and hardware developments costs, partially offset by a decrease in severance expense and stock-based compensation.

Selling, general and administrative

Selling, general, and administrative increased by $10.2 million, or 18.8%, to $64.5 million in the six months ended June 30, 2022 from $54.3 million in the six months ended June 30, 2021, primarily driven by an increase in payroll and insurance costs, partially offset by a decrease in professional services costs.

Selling, general and administrative increased by $16.8 million, or 20.9%, to $97.0 million in the nine months ended September 30, 2022 from $80.2 million in the nine months ended September 30, 2021, primarily driven by an increase in payroll, stock-based compensation and insurance costs, partially offset by a decrease in professional services costs.

Goodwill impairment

The Company recognized a goodwill impairment of $1,000.1 million during the six months ended June 30, 2022 as a result of an interim goodwill impairment assessment performed due to a significant decline in the market price of the Company’s Class A common stock and its market capitalization during the period.

The Company recognized a goodwill impairment of $1,000.1 million during the nine months ended September 30, 2022 as a result of an interim goodwill impairment assessment performed due to a significant decline in the market price of the Company’s Class A common stock and its market capitalization during the second quarter.

Change in fair value of derivative liabilities

Income recognized for the change in fair value of derivative liabilities was $105.7 million in the six months ended June 30, 2022 primarily due to the change in the market price for the underlying instrument.

The change in fair value of derivative liabilities resulted in a gain of $103.1 million in the nine months ended September 30, 2022 primarily due to the change in the market price for the underlying instrument.

Other income (expense), net

Other income, net was $7.6 million in the nine months ended September 30, 2022, primarily due to interest income earned on short-term investments.

Other expenses, net was $4.7 million in the nine months ended September 30, 2021, primarily due to losses on the disposal of IT equipment.

Income tax expense (benefit)

An income tax benefit was recognized in the six months ended June 30, 2021 due to the release of a deferred tax asset valuation allowance as a result of deferred tax liabilities incurred from the acquisition of OURS Technology, Inc.

An income tax benefit was recognized in the nine months ended September 30, 2021 due to the release of a deferred tax asset valuation allowance as a result of deferred tax liabilities incurred from the acquisition of OURS Technology, Inc.

Liquidity and Capital Resources

As of June 30, 2022, our principal sources of liquidity were $549.4 million of cash and cash equivalents and $829.4 of short-term investments, exclusive of short-term and long-term restricted cash of $0.3 million and $16.1 million, respectively.

Cash and cash equivalents primarily consist of money market funds.

As of September 30, 2022, our principal sources of liquidity were $486.6 million of cash and cash equivalents and $750.7 million of short-term investments, exclusive of short-term and long-term restricted cash of $0.6 million and $15.8 million, respectively.

Cash and cash equivalents primarily consist of U.S.

Treasury securities and money market funds.

Short-term investments consist of U.S.

government securities.

Treasury securities.

We have incurred negative cash flows from operating activities and significant losses from operations in the past.

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The following table summarizes our cash flows for the periods indicated (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

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Cash Flows Used in Operating Activities

Net cash used in operating activities was $225.4 million for the six months ended June 30, 2022, a decrease of $57.5 million from $283.0 million for the six months ended June 30, 2021.

During the six months ended June 30, 2022, operating cash flows benefited from $95.4 million of cash received in connection with the collaboration agreement, partially offset by increased incentive compensation payments.

The change in operating cash flows also benefited from professional fees and other expenses paid in connection with the acquisition of ATG in the six months ended June 30, 2021, which did not recur in the current period.

Net cash used in operating activities was $367.8 million for the nine months ended September 30, 2022, a decrease of $53.0 million from $420.9 million for the nine months ended September 30, 2021.

The change in operating cash flows was primarily due to an increase of cash received in connection with the collaboration agreement, partially offset by increased incentive compensation payments and the professional fees and other expenses paid in connection with the acquisition of ATG which did not recur during the current period.

Cash Flows (Used in) Provided by Investing Activities

Net cash used in investing activities increased by $1,123.7 million in the six months ended June 30, 2022 from the six months ended June 30, 2021, primarily due to the purchases of short-term investments, net of maturities, of $833.1 million, and the comparative period including $294.4 million in net cash acquired in acquisitions.

Net cash used in investing activities increased by $1,028.1 million in the nine months ended September 30, 2022 from the nine months ended September 30, 2021, primarily due to the purchases of short-term investments, net of maturities, of $753.8 million, and the comparative period including $294.4 million in net cash acquired in acquisitions.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities decreased by $392.8 million in the six months ended June 30, 2022 from six months ended June 30, 2021, due to the comparative period including net proceeds from the issuance of Series U-2 preferred stock of $397.9 million.

Net cash provided by financing activities decreased by $392.2 million in the nine months ended September 30, 2022 from the nine months ended September 30, 2021, primarily due to the comparative period including net proceeds from the issuance of Series U-2 preferred stock of $397.9 million.

Contractual Obligations, Commitments and Contingencies

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We assess the need to record a liability for litigation and other loss contingencies, with reserve estimates recorded if we determine that a loss related to the matter is both probable and reasonably estimable.

We did not record any material losses for 2021 or 2022.

No material losses were recorded in the three and nine months ended September 30, 2022 and 2021.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with U.S.

Our condensed consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles, or U.S.

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We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements.

Our significant accounting policies are described in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report and in the notes to the consolidated financial statements included in Part II, Item 8 of the Annual Report on Form 10-K for the year-ended December 31, 2021 (the “Annual Report”).

Other than as described below, there have been no material changes to our critical accounting estimates since our Annual Report.

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The Company utilized a market approach valuation method utilizing the observable market price of the Company’s Class A common stock as it represented the best evidence of the fair value of its reporting unit.

Based on the results, the Company recognized a $1,000.1 million goodwill impairment during the three and six months ended June 30, 2022.

As of June 30, 2022, the Company’s carrying value of goodwill was $113.7 million, which approximates its fair value.

Based on the results, the Company recognized a $1,000.1 million goodwill impairment during the nine months ended September 30, 2022.

As of September 30, 2022, the Company’s carrying value of goodwill was $113.7 million.

To the extent there are future entity-specific or macroeconomic conditions that negatively impact the market price of the Company’s Class A common stock and its market capitalization, additional goodwill impairments may be necessary.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis