The CEO Autonomous vehicle developer Aurora Innovations has presented its board with several cost-cutting and cash-generating options, ranging from hiring freezes and divesting assets to smaller capital raises, going private and selling itself to tech giant Apple. and Microsoft.
The plans are aimed at boosting its cash flow and extending its runway in tough market conditions, according to an internal memo first reported by Bloomberg and also seen by TechCrunch. An internal memo intended for the board before the Aug. 3 meeting was mistakenly sent to all Aurora employees, which today number about 1,600 people.
Following the Bloomberg report, Aurora shares jumped as much as 27 percent. Shares closed down 15.17 percent at $2.43.
Aurora has a “cash runway” that will allow it to continue operating through mid-2024, according to a second-quarter letter to shareholders and a memo. However, Aurora is still a pre-revenue company. And the memo, written by co-founder and CEO Chris Urmson, acknowledged a two-fold problem: a challenging financial market that makes it difficult to raise additional capital, and a timeline that delays revenue at its OEM partners.
Aurora, a pioneer in bringing self-driving trucks to market, has pilot partnerships with FedEx, Paccar, Schneider, Werner and Xpress.
After the email was shared, Aurora held a board meeting. An Aurora spokeswoman declined to comment on what was discussed at the meeting. In an emailed statement, the company said,“Given the current macro environment, every company should go through the exercise of evaluating its options and long-term strategy. We think that thinking about things like this is a positive sign and a manifestation of good governance.”
Urmsen noted that market conditions made it unlikely that the company could raise $1 billion. Instead, he listed a long list of options — each with pros and cons, as well as significant risks to maintaining employee morale — and said it would be important to “find a way to raise $300 million over the next year to add around 6 months to our runway.”
Extending the runway
Urmson’s internal memo reads more like a financial and strategic exercise than an action plan. A lengthy memo sent ahead of the Aug. 3 board meeting outlines all of the company’s options for extending its cash position.
Note’s more interesting ideas include selling itself to big tech companies like Apple or Microsoft or a Tier 1 supplier. However, the memo gives zero indication that discussions with either company have even begun.
There are several other options in the note that fall under the cash saving and cash generating measures. Although Urmson cautions against the latter, cash-saving measures run the gamut, including hiring and even layoffs.
“I believe RIF (reduction in force) will hurt morale,” Urmson wrote, noting that teams feel understaffed. Although the board (and I) believe the team will be more efficient if it is smaller, we expect the negative morale impact of using value talent and monitoring will be a challenge. Unless layoffs are high, we should think of this primarily as an improvement efficiency tactic, rather than a significant increase in runway, after considering the costs of severance.
On the human resources front, Urmson recommends two options: “aggressive performance management of poor performance” and “more intensive duplication and prioritization.” In terms of cutting, this can mean firing poor performers and eliminating duplicate positions or filling those positions once they leave.
Those steps, Urmson wrote, may not result in a RIF or ease of hiring, but they will result in meaningful efficiency improvements and cost savings. He estimated savings of $7.5 million.
Other money-cutting measures included in the memo include eliminating CEO equity, cutting software licenses by 20 percent, freezing annual bonuses and ending food service.
Urmsen has laid out a variety of financing options, from test track sales and construction to larger moves like selling its lidar or simulation assets to acquiring other AV companies that trade for cash. Their balance would be “around $150 million to $300 million,” Aurora would take private and sell itself to a large tech company or Tier 1 supplier.
Acquiring another AV company would eliminate another competitor, reduce liquidity in the market, and Aurora would “Reduce the repetitions significantly according to the note. Aurora did not name any companies that may be on that acquisition list. However, a few like Embark, which has a market cap of $204 million, may qualify.
Aurora has hired Allen & Co. to analyze its acquisition pipeline, according to the memo.
Of all the options, Urmson seems interested in testing whether there is a viable way to drive technology, pursue acquisitions, and explore small capital increases.
Urmson said in the memo that he is unwilling to sell the company at this time unless there is a strong offer from a “very compelling strategic buyer.”
Buzzy start to SPAC
Aurora went from a grassroots startup to a publicly traded company in just four years with a SPAC. The company It was founded in 2017 by Sterling Anderson, Drew Bagnell and Urmson, all of whom have a history of working in autonomous vehicle technology.
The three co-founders, who hailed from Uber ATG and Tesla for Google’s self-driving project, helped attract top investors and a stack of capital.
Aurora’s co-founders doubled down in December 2020 when they struck a deal with Uber to buy the ride-hailing company’s self-driving unit. The complex deal, which valued the combined company at $10 billion at the time, helped Aurora double its workforce.
Aurora did not pay Uber ATG under that purchase agreement. Instead, Uber surrendered its equity in ATG and invested $400 million in Aurora. Uber will own a 26 percent stake in the combined company, according to a filing with the U.S. Securities and Exchange Commission.
Aurora has made at least one other acquisition following the Uber deal. In February 2021, Aurora acquired URS Technologies, its second lidar startup in less than two years. Aurora acquired Montana-based lidar startup Blackmore in May 2019.
Against that backdrop, dozens of startups in industries looking to unlock more capital have turned to mergers with special-purpose buyout firms. These SPAC mergers provided a quick, but costly, route to the public marketplace.
Aurora has jumped on the SPAC train and announced it will go public in July 2021 with a merger with Reinvent Technology Partners Y, a special purpose acquisition firm led by LinkedIn founder and investor Reid Hoffman, Zynga founder Mark Pincus and managing partner Michael Thompson. .
A year later, the prospect of a high-flying public marketplace has come crashing back down to earth, forcing frontier tech companies like Aurora to find ways to access their capital runways for commercialization.
Shares of Aurora jumped as much as 27 percent after the Bloomberg report was published.
